🗞️ DOL Rejects "Regulation by Litigation" in 401(k) Forfeiture Dispute

The U.S. Department of Labor filed an amicus brief with the Third Circuit Court of Appeals on January 30, 2026, urging affirmance of a lower court's dismissal of claims in Barragan v. Honeywell International Inc. The case challenges whether employers breach ERISA fiduciary duties by using forfeited 401(k) funds to offset future employer contributions rather than paying plan administrative expenses.

In the brief, DOL argues that the district court correctly held that plaintiff Luciano Barragan's "bare allegation" that forfeitures should always be used for plan expenses—despite plan documents granting fiduciary discretion—fails to state a viable claim. DOL emphasizes that a prudent fiduciary could reasonably conclude that using forfeitures to ensure timely matching contributions serves participant interests, particularly when forcing expense payments might lead employers to reduce future contribution levels.

The brief establishes two key principles: First, ERISA's fiduciary duties focus on process over outcomes—"the means Honeywell employs" matter more than "the ends on which it settles," provided decisions serve participants' exclusive benefit. Second, there is no per se rule requiring forfeitures to offset administrative costs, as such a mandate would retroactively override plan terms and discourage employers from offering flexible benefit structures.

DOL Solicitor Jonathan Berry characterized the filing as part of an effort "to stop regulation by opportunistic litigation," noting the Department advanced identical legal analysis in Wright v. JPMorgan Chase & Co. and Hutchins v. HP Inc.—cases where district courts similarly dismissed claims. Assistant Secretary for Employee Benefits Security Daniel Aronowitz stated that "the mere allegation that a fiduciary used forfeitures for something other than fees cannot support a claim for fiduciary breach."

The brief distinguishes between "settlor" decisions (plan design and funding, which are non-fiduciary) and fiduciary decisions (plan administration). Because decisions about whether to cover plan expenses are settlor functions, DOL argues that plaintiffs' theory improperly attempts to use fiduciary duties to create contractual entitlements that don't exist in plan documents. The Department warns that endorsing such theories would "limit the flexibility of employers and disincentivize them from creating plans for their employees."

This represents DOL's third amicus filing in the wave of forfeiture litigation that has swept through federal courts since 2023, with approximately 80 cases filed challenging the longstanding practice of using forfeitures to offset employer contributions. District courts have granted motions to dismiss in approximately 25 of these cases, while denying dismissal in 5. Appeals are currently pending in the Third, Eighth, Ninth, and Eleventh Circuits.

Key Points

• DOL Position: No per se rule requires fiduciaries to use forfeitures for administrative expenses rather than offsetting employer contributions
• Process Over Outcomes: ERISA focuses on prudent fiduciary process, not mandating specific results when plan documents grant discretion
• Settlor vs. Fiduciary: Plan funding and design decisions are non-fiduciary "settlor" functions not subject to ERISA's fiduciary standards
• Practical Concerns: Requiring forfeitures to pay expenses could force fiduciaries into disputes with sponsors who might reduce future contributions
• Litigation Context: Part of 80+ lawsuits filed since 2023; district courts have dismissed approximately 25 cases while denying dismissal in 5
• DOL Consistency: Third amicus brief on this issue, following similar filings in Hutchins v. HP Inc. and Wright v. JPMorgan Chase & Co.
• Policy Rationale: Flexible plan design encourages employers to offer retirement benefits; restrictive liability theories discourage plan creation

Primary Source Author: U.S. Department of Labor Employee Benefits Security Administration

Primary Source: U.S. Department of Labor Employee Benefits Security Administration

Primary Source Link: https://www.dol.gov/newsroom/releases/ebsa/ebsa20260130

Supplemental Links

• DOL Amicus Brief (PDF)
• Barragan v. Honeywell District Court Opinion
• DOL Amicus Brief in Hutchins v. HP Inc.
• Current State of ERISA Forfeitures Cases - Mayer Brown
• Evolution of Defined Contribution Plan Class Action Litigation in 2025
• 2025 ERISA Litigation: Forfeitures Take Center Stage
• Gibson Dunn Update on ERISA Forfeiture Litigation
• Key Issues to Watch in 2026 - Mayer Brown
• Winston & Strawn January 2026 Forfeiture Update
• DOL's Product Self-Knowledge Skill (Background on EBSA)