What Are 401(k) Forfeitures?
When employees leave a job before becoming fully vested in employer retirement plan contributions, the unvested portion may be forfeited. These forfeitures remain plan assets. Subject to applicable rules and the plan’s terms, they may be used to pay eligible plan expenses, reduce employer contributions, or provide additional benefits to participants. Forfeitures are a lawful feature of many 401(k) plans, but legal disputes may arise over how plan fiduciaries decide to use them.
ERISA Fiduciary Duties and the Forfeiture Issue
The Employee Retirement Income Security Act of 1974 (ERISA) requires plan fiduciaries to act prudently and loyally in the interests of participants and beneficiaries when performing fiduciary functions. Recent lawsuits challenge whether decisions to use forfeitures to reduce employer contributions, rather than pay plan expenses, violate those duties.
Recent 401(k) Forfeiture Litigation
United Rentals — In Forrest v. United Rentals (North America), Inc., the plaintiff, in a complaint filed on October 20, 2026, alleges that plan fiduciaries used substantially all of more than $14.3 million in forfeitures from 2020 through 2025 to offset employer matching contributions, while participants paid more than $8.68 million in plan expenses. According to the complaint, those forfeitures could have covered all participant-paid plan expenses, leaving more than $5.6 million available to reduce employer contributions. The complaint also challenges a December 2024 plan amendment, retroactive to January 2024, requiring forfeitures to be used first to offset employer contributions. Separately, the plaintiff alleges excessive recordkeeping fees of approximately $55 to $61 per participant annually, compared with an average of approximately $40 among identified comparable plans.
Providence Health & Services — In Halter v. Providence Health & Services, the court granted final approval in an October 21, 2026 Order of a class-action settlement involving retirement plan forfeitures. The court described the settlement’s approximate total monetary value as $42.7 million and found the settlement fair, reasonable, and adequate. The settlement resolved the litigation without a judicial finding that the defendants violated ERISA.
Why This Matters
These cases illustrate how decisions about forfeited contributions and retirement plan expenses can affect participants’ savings. They do not establish that using forfeitures to reduce employer contributions is always unlawful.
Questions About Your 401(k) Plan?
If you believe your 401(k) plan may have charged excessive fees or improperly used forfeited contributions, contact Kehoe Law Firm, P.C. to discuss your concerns and potential legal claims.
For a free, no-obligation legal evaluation, contact:
Michael Yarnoff, Esq.
(215) 792-6676, Ext. 804
[email protected]
[email protected]
About Kehoe Law Firm, P.C.
Kehoe Law Firm, P.C. is a nationally-recognized, plaintiff-side class action law firm representing investors and consumers in matters involving securities fraud, corporate misconduct, mergers and acquisitions, antitrust violations, whistleblower claims, data breaches, consumer fraud, employment law violations, as well as ERISA and retirement plan litigation. Its attorneys have served as lead or co-lead counsel in major securities cases, recovering more than $10 billion for institutional and individual investors.
Kehoe Law Firm’s class action legal services are provided on a contingency-fee basis, meaning plaintiffs are not responsible for attorneys’ fees or litigation expenses. Any request for attorneys’ fees and expenses will be subject to court approval.
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