A federal district court issued a mid-trial ruling in favor of the defendants regarding their use of forfeitures in Stephan v. Trader Joe’s Company, No. 1:25-cv-10212 (D. Mass.).

The Stephan case is one of nearly 100 lawsuits filed in the last few years challenging how 401(k) plan sponsors and fiduciaries use the unvested contributions of former plan participants, commonly referred to as “forfeitures.”  These lawsuits generally allege that while forfeitures may be used to offset employer contributions and/or cover plan-related administrative expenses, ERISA requires plan sponsors and fiduciaries to prioritize the latter over the former.  Motion to dismiss decisions have largely favored defendants, but multiple cases have been allowed to proceed, and appeals are pending in four federal courts of appeal.

The forfeiture claim in Stephan is the first to proceed to trial.  The Stephan plaintiffs – former participants in the Trader Joe’s Company Retirement Plan (“Plan”) – alleged that the company, its board of directors, and the Plan investment committee violated ERISA by using Plan forfeitures to only offset employer contributions from 2019 through 2023.  They also alleged that the committee caused Plan participants to pay excessive recordkeeping fees and failed to remove an imprudent investment from the Plan, and that the company and its board of directors failed to properly monitor the committee.

The case ultimately proceeded to trial.  After the plaintiffs finished presenting their evidence, the defendants moved for judgment on all claims against them.  The court granted defendants' motion on the forfeiture claim from the bench (without issuing a written opinion) but otherwise allowed the trial to continue on the other claims, which remain under consideration by the court after the six-day trial concluded on May 11, 2026.