A former participant in a Tetra Tech Inc. 401(k) plan has sued the company and plan fiduciaries claiming they violated ERISA by misusing forfeiture funds.
The lawsuit, filed Feb. 21 in a U.S. District Court in Los Angeles, is the seventh similar lawsuit filed by the same law firm, Hayes Pawlenko.
Other cases remain pending against Honeywell International Inc., Clorox Co., Thermo Fisher Scientific Inc., Qualcomm Inc., Intuit Inc. and HP Inc.
The lawsuit said plan executives used 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 Tetra Tech, a participant must be employed for five years to become fully vested for company contributions.
The IRS allows a company to use forfeited funds to reduce company contributions or reduce plan expenses. As with other forfeiture lawsuits filed by the law firm, the plaintiff accused the defendants of violating ERISA's duty of loyalty, which covers self-dealing and actions that place participants secondary to a plan's interests.
"Instead of acting solely in the interest of plan participants by utilizing forfeited funds in the plan to reduce or eliminate the administrative expenses charged to their individual accounts, defendants used these plan assets for the purpose of reducing its own contributions to the plan, thereby saving the Company millions of dollars at the expense of the plan," the lawsuit said.
"Defendants failed to engage in a reasoned and impartial decision-making process to determine that using the forfeited funds in the plan to reduce the company's own contribution expenses, as opposed to the administrative expenses charged to participant accounts, was in the best interest of the plan's participants or was prudent," the lawsuit said.
A company representative did not respond to a request for comment.
Tetra Tech Inc. and Subsidiaries Retirement Plan, Pasadena, Calif., had $1.4 billion in assets as of Sept. 30, 2022, according to the latest Form 5500.
