The JPMorgan Chase & Co. headquarters on Park Avenue in New York City. Photo: Katherine Welles/Adobe Stock
JPMorgan Chase is the latest employer to face a class-action lawsuit over misuse of 401(k) funds. The suit alleges that the company breached its fiduciary duty under the Employee Retirement Income Security Act (ERISA) by using retirement plan contributions forfeited by departing employees who were not yet fully vested in the plan to “offset its employer contributions,” according to the class-action complaint, Wright v. JPMorgan Chase & Co. et al.
Rather than using forfeited funds to reduce the 401(k) plan’s administrative fees for participants, JPMorgan mismanaged the plan by using the funds “for its own benefit,” according to the complaint filed last Tuesday in the U.S. District Court for the Central District of California. The funds from 401(k) forfeitures lowered the employer contributions JPMorgan would otherwise need to make to its employees’ retirement plan, according to plaintiff Daniel Wright. The banking giant saved “millions of dollars in contribution costs” by failing to act in the “best interest of the plan’s participants,” according to the suit.
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The JPMorgan Chase 401(k) Savings Plan had more than $44 billion in assets and 292,458 participants, according to its 2023 Form 5500 filing. Employees are fully vested in the “employer contributions after three years,” according to the complaint.
Since 2023, more than 30 class-action 401(k) lawsuits have been filed by plan participants over misuse of forfeited assets from former employees, according to law firm Holland & Knight. Earlier this month, Amazon was sued by participants who alleged that the online retailer violated its ERISA fiduciary duties by using $350 million in forfeited funds to offset the company’s own contributions instead of reducing administrative fees for over 20,000 participants. In 2024, Bank of America, Wells Fargo, Siemens, and Nordstrom were hit with similar lawsuits.
Starting in 2024, the IRS began requiring that retirement plans use 401(k) plan forfeitures before the end of a vesting schedule; they can use the funds to pay plan expenses, reduce future employer contributions, or make an additional allocation to participants.
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From: BenefitsPRO
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Lynn Cavanaugh
Lynn Varacalli Cavanaugh is Senior Editor, Retirement at BenefitsPRO. Prior, she was editor-in-chief of the What's New in Benefits & Compensation newsletter. She has worked for major firms in the employee benefits space, Vanguard and Willis Towers Watson, as well as top media companies, including Condé Nast and American Media.
