Yet another plan has been sued for breaching its fiduciary duties by using forfeitures to offset company contributions, rather than allocating those to remaining participant accounts.
The target this time is Tetra Tech Inc. The suit filed on behalf of participant-plaintiff Tamara Yagy by Hayes Pawlenko LLP—the same firm behind a half-dozen such suits in the Central District of California—alleges that, “while Defendants’ reallocation of the forfeitures in the Plan’s trust fund to reduce its contributions benefitted the Company by reducing its own contribution expenses, it harmed the Plan, along with its participants and beneficiaries, by reducing Company contributions that would otherwise have increased Plan assets and by causing participants to incur deductions from their individual accounts to cover administrative expenses that would otherwise have been covered in whole or in part by utilizing forfeited funds.”
The suit (Yagy v. Tetra Tech, Inc., C.D. Cal., No. 2:24-cv-01394, complaint 2/21/24) claims that Tetra Tech saved more than $18 million between 2018 and 2021 by handling forfeitures this way—while nearly $4 million in administrative expenses were charged to some 13,000 plan participants.
The suit also alleges prohibited transactions, in that they claim the use of forfeitures to the benefit of the company (a party-in-interest).
Similar Suits
Similar (if not identical) claims have been filed by this law firm against Honeywell, Thermo Fisher Scientific Inc. 401(k) Retirement Plan, Clorox, Intel, Qualcomm, Intuit and HP.
Intuit, Clorox, and Qualcomm have already filed motions to dismiss these suits—primarily arguing that the participant-plaintiffs suffered no injury (having received all the benefits/contributions required by the plan), and that the decision to offset employer contributions was a settlor, non-fiduciary decision in accordance with the plan document.
Of course, it’s not yet known whether those same arguments would apply here.
NOTE: In litigation there are always (at least) two sides to every story. However factual it may turn out to be, the initial lawsuit in any action is only one side, and one generally crafted toward a particular result. In our coverage you'll see descriptions of events qualified with statements such as “the suit says,” or “the plaintiffs allege”—and qualifiers should serve as a reminder of that reality.
