A former employee of Mattel has sued the company and its plan fiduciaries alleging the company’s 401(k) plan violated ERISA by misusing funds forfeited by participants who leave the plan before they are fully vested to reduce company contributions.
The lawsuit by the former employee who is still a plan participant was filed April 1 in a U.S. District Court in Los Angeles. It is the eighth similar forfeiture complaint filed by the same law firm, Hayes Pawlenko. Like the other forfeiture lawsuits, the plaintiff in Prattico vs. Mattel Inc. et al. is seeking class-action status.
Other cases remain pending against Honeywell International Inc., Clorox Co., Thermo Fisher Scientific Inc., Qualcomm Inc., Intuit Inc., HP Inc. and Tetra Tech Inc.
Like the other lawsuits, the plaintiff in the Mattel case accused plan executives of using forfeiture funds to reduce company contributions to the plan rather than to reduce plan expenses. When a participant leaves a plan before the company contribution vesting period is complete, the remaining company money not already vested — not the participant's contribution — is forfeited.
At Mattel, individual contributions are immediately vested; but it takes three years for a participant to be fully vested for the corporate contributions to the Mattel Inc. Personal Investment Plan.
The lawsuit noted that defendants “exercise discretionary authority” over how forfeited funds are spent. The Internal Revenue Service allows a company to use forfeited funds to reduce company contributions or reduce plan expenses. The lawsuit said the defendants violated ERISA because reducing company contributions put the interests of the company ahead of participants who could have benefited from the company using the forfeited funds to reduce plan expenses.
The lawsuit claims more than 7,000 participants and beneficiaries could be affected for the period starting April 1, 2018, and running through the date of judgment.
A company representative did not respond to a request for comment.
Mattel Inc. Personal Investment Plan, El Segundo, Calif., had $1.1 billion in assets as of Dec. 31, 2022, according to the latest Form 5500.
