HP Employees’ 401(k) Plan Forfeiture Challenge Dismissed Again in 2025.

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HP Employees’ 401(k) Plan Forfeiture Challenge Dismissed Again in 2025
In 2025, HP Inc. successfully fended off yet another legal challenge regarding its 401(k) plan forfeiture practices. A lawsuit filed by employees accused the tech giant of mishandling 401(k) funds forfeited by employees who left the company. However, a federal judge, Beth Labson Freeman, dismissed the proposed class action for the second time, finding that HP’s actions did not violate the Employee Retirement Income Security Act (ERISA).

The Core of the Lawsuit
The employees’ lawsuit centered around HP’s decision to use 401(k) forfeitures—funds from employee accounts that are not fully vested when employees leave the company—to offset the employer’s own required contributions to the retirement plan. Essentially, these forfeited funds are repurposed to benefit the company, a practice that some plan participants argued violated ERISA’s fiduciary standards.

ERISA imposes strict duties on plan fiduciaries, requiring them to act in the best interest of participants and beneficiaries, and to ensure that retirement funds are managed prudently and loyally. The plaintiffs contended that HP’s use of the forfeitures to fund its employer contributions undermined these principles, particularly the idea that fiduciaries must “maximize pecuniary benefits” for employees.

Judge Freeman’s Ruling
Judge Freeman rejected the plaintiffs’ arguments, asserting that their legal theory ignored “decades of settled law.” She emphasized that ERISA does not obligate fiduciaries to maximize financial gains at every opportunity. Instead, the law allows for reasonable decisions that are in line with established plan practices, and HP’s use of forfeitures to reduce its employer contribution obligations did not violate those guidelines.

The judge’s dismissal reinforced the notion that fiduciaries are not required to operate under a rigid obligation to maximize the financial benefits of the retirement plan in all situations. Freeman stated that the plaintiffs were attempting to stretch the fiduciary duties of loyalty and prudence beyond the boundaries of established law.

Mixed Outcomes in Forfeiture Litigation
This dismissal is part of a broader trend in forfeiture-related 401(k) litigation, where decisions have been mixed. In some instances, courts have sided with employees, finding that certain forfeiture practices may violate ERISA’s fiduciary standards, while in others, employers like HP have been able to successfully defend their actions. The outcome of these cases often hinges on whether the plan’s actions align with ERISA’s broad fiduciary principles, which are sometimes open to interpretation.

For HP, this victory marks a significant win, as the company has faced growing scrutiny over how it manages employee retirement funds. However, with the complexities of ERISA litigation and differing opinions in similar cases, the legal landscape surrounding 401(k) forfeiture practices remains fluid, and further challenges to companies like HP may arise.

HP’s latest legal triumph highlights the difficulty employees face in challenging corporate 401(k) plan practices. The court’s decision suggests that, at least for now, companies have a significant degree of leeway when it comes to how they handle 401(k) forfeitures. Nevertheless, this case underscores the ongoing debate over the interpretation of ERISA fiduciary duties, especially as they relate to employer practices regarding employee retirement funds. For now, though, HP’s handling of its 401(k) forfeitures remains in line with the law, at least according to Judge Freeman’s ruling.

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February 6, 2025 at 3:32 PM