ALERT: Use of Retirement Plan Forfeitures Saga Continues: the DOL Files Amicus Brief Supporting Plan Fiduciaries

On January 30, 2026, the United States Department of Labor (DOL) filed a comprehensive amicus brief in the U.S. Court of Appeals for the Third Circuit, urging the court to affirm a lower court’s dismissal of claims in Barragan v. Honeywell International Inc. that alleged fiduciary breaches over the use of forfeited 401(k) plan funds. Such forfeitures typically arise when a participant leaves employment before employer contributions vest — allowing the plan to reallocate those funds to other participants, use them to pay administrative expenses or use them to reduce employer contributions, such as a matching contribution in a 401(k) plan or other non-elective contribution in a 401(k) plan.

The case centers on whether a plan fiduciary violated its duties under the Employee Retirement Income Security Act of 1974, as amended (ERISA) by choosing to use forfeitures to offset future employer contributions rather than to defray plan administrative expenses to the detriment of plan participants.

In its brief, the DOL argues that the district court correctly found the lead plaintiff’s allegations insufficient to state a fiduciary breach because the plan at issue explicitly permitted fiduciaries’ discretion in how forfeitures could be used. The DOL emphasized that merely alleging a different allocation preference — without showing harm to participants or a breach of process — does not fail to meet ERISA’s standards for loyalty or prudence.

By submitting the brief, the DOL reaffirmed its authority to interpret and enforce ERISA and to promote clarity and uniformity in how fiduciary standards apply in forfeiture cases. The brief explains the Secretary of Labor’s view that these cases have caused confusion with respect to the roles of a plan settlor and the plan fiduciary, explaining that the lead plaintiff’s “trouble is his confusion about the interplay between the settlor and fiduciary decisions.” It has been clearly established that while settlors are responsible for plan design, fiduciaries are responsible for carrying out the administrative terms of the plan in a prudent manner, consistent with ERISA.

Dilworth Paxson LLP attorneys have been closely monitoring these cases, advising clients in real time, and lecturing on this topic around the region. The Honeywell appeal is one of several similar cases nationwide in which courts are wrestling with competing interpretations of ERISA’s fiduciary duty provisions and the proper use of forfeited plan assets. While this amicus brief is good news for plan sponsors and fiduciaries, it does not close the chapter on these cases – fiduciaries, ideally plan committees, should continue to carefully administer their plans in a prudent manner.

Contact Stephanie Vogel or Matthew Whitehorn for more information or if you have questions about this issue or other ERISA matters.

LINK TO AMICUS BRIEF: EBSA20260176.pdf