US Department of Labor files amicus brief supporting fiduciary discretion in use of forfeited funds under ERISA

WASHINGTON - The U.S. Department of Labor today filed an amicus brief urging the Fourth Circuit to affirm a district court's decision dismissing the claims in Stana v. SAS Institute Inc., No. 26-1305, that the employer breached its fiduciary obligations by not using forfeited funds for plan expenses.

In the amicus brief, the department asserted that the district court appropriately determined the plan fiduciary did not violate its duty of loyalty to plan participants. The plaintiffs' argument that forfeitures should be allocated to pay plan expenses does not allow for the fact that the plan at issue gave the fiduciary that allocated the forfeitures discretion over them under the Employee Retirement Income Security Act.

The department has primary authority to interpret and enforce provisions of Title I of ERISA to ensure fair and impartial administration and compliance with its requirements.

The plaintiffs in the case were employed by the SAS Institute and participated in its retirement plan that allowed employees to be fully vested after five years of employment. If a participant left the company before completing five years of employment, the employee would forfeit the balance of the company's unvested matching contributions. As the plan manager, SAS has the power to determine how forfeited funds are distributed, the brief said.

Between 2018 and 2023, SAS generally opted to use the forfeited funds to reduce its matching contributions. However, in 2022, SAS chose to allocate $222,320 in forfeitures toward plan expenses. Plaintiffs claimed that unless the plan was on the verge of insolvency, SAS should have used all forfeitures to pay plan expenses to reduce costs for participants.

Under ERISA, retirement plan administrators must act loyally. They do not act disloyally by choosing to use forfeitures for employers' plan contributions rather than plan expenses, the department said. The brief also contended that continued litigation of this type could have the unintended effect of disincentivizing employers from creating retirement plans.

Read the department's amicus brief in Stana v. SAS Institute.