Washington – The ERISA Industry Committee (ERIC) and coalition partners filed an amicus brief with the U.S. Court of Appeals for the Ninth Circuit, supporting AT&T in Hernandez v. AT&T Services, Inc. The brief urges the court to affirm a district court ruling that AT&T did nothing wrong by using forfeited 401(k) contributions to offset the company’s future contributions to the plan.
When a worker leaves before fully earning an employer’s 401(k) contributions, the unvested portion is left in the plan. Federal law bars returning that money to the employer but has long let administrators use it for upcoming contributions, plan expenses, or restoration if the employee returns.
The former employee’s attorneys argued AT&T should have used the funds for administrative expenses instead of future contributions, though nothing in the plan, ERISA, or regulations requires that. A federal district court in California dismissed the case in full, without leave to amend, finding the theory contrary to ERISA and settled law, as other courts have held in numerous nearly identical suits.
“Retirement plans work because employers can rely on the rules they wrote into them and what the regulators say is permissible,” said Doug Hinson, Executive Director of the ERIC Legal Center. “AT&T’s plan spells out exactly how forfeited funds can be used, and the company followed those terms. Plaintiffs want the court to rewrite that bargain after the fact, using a new theory that’s inconsistent with what every administration for decades and courts nationwide have allowed. This case, and the many others like it, are totally wrong about what the law requires regarding forfeited contributions. The district court got it right. So should the appellate court.”
Read the brief here.