JPMorgan Chase is currently under a class-action lawsuit concerning its management of forfeited 401(k) funds. The primary plaintiff claims that the institution violated its fiduciary responsibilities as dictated by the Employee Retirement Income Security Act (ERISA). The allegations suggest that JPMorgan utilized forfeited plan assets to offset future contributions owed to other employees.
The plaintiff contends that these assets should have been allocated to decreasing costs for all participants in the plan. This legal rationale gained traction last year following a comparable lawsuit against Qualcomm, which successfully navigated a motion to dismiss for the first time.
A number of plan fiduciaries have expressed surprise regarding these lawsuits, having adhered to the guidelines provided by the Treasury Department and the IRS for an extended period.
401(k) asset lawsuit against JPMorgan
“This practice has long been deemed lawful,” stated Daniel Aronowitz, president of Encore Fiduciary. “Plan sponsors are acting in accordance with what the plan documentation permits. Some judicial rulings are now suggesting that there is a choice involved – and with choice comes fiduciary responsibility.”
Aronowitz highlighted that plan documents which allow discretion to the 401(k) sponsor regarding the use of forfeited assets may create potential liability issues.
JPMorgan Chase has refrained from commenting on the ongoing lawsuit, which was lodged in the U.S. District Court for the Central District of California. According to reports filed with the Department of Labor, the assets managed under the company’s plan exceeded $44 billion by the close of 2023. Following developments in the Qualcomm case, many legal analysts believe that this situation could trigger additional litigation.
Should the plaintiffs prevail in court or through settlements, it may lead to an extensive number of claims, reminiscent of the prominent lawsuits regarding 401(k) fees. To reduce these potential liabilities, some legal professionals recommend that plan fiduciaries craft plan documents that limit discretion over the management of forfeited assets. An alternative strategy could involve the removal of vesting timelines, ensuring plan participants gain immediate full ownership of the contributions from the company.
