US Department of Labor files amicus brief supporting fiduciary discretion in use of forfeited funds under ERISA
WASHINGTON – The U.S. Department of Labor today filed an amicus brief urging the Fourth Circuit to affirm a district court’s decision dismissing the claims in Stana v. SAS Institute Inc., No.
The Department of Labor has weighed in on a quiet but consequential question in retirement plan administration: what must a fiduciary actually do with forfeited contributions? By filing an amicus brief in Stana v. SAS Institute, the agency is signaling that discretion, not a rigid formula, governs the use of those funds.
The case itself is narrow. SAS Institute's plan vests matching contributions after five years. Employees who leave early forfeit the unvested portion. For years, SAS used those forfeitures to offset future employer contributions. In 2022, it allocated roughly $222,000 toward plan expenses instead. A group of participants sued, arguing that forfeitures should default to paying plan expenses whenever the plan is solvent, because that would lower costs for remaining participants.
The district court dismissed the claims. The Labor Department's brief, filed in the Fourth Circuit, backs that outcome. Its argument is straightforward: ERISA requires loyalty, not a specific accounting choice. A fiduciary that routes forfeitures to reduce employer contributions is not, by that act alone, disloyal to participants. The plan document gave the administrator discretion, and exercising that discretion within ERISA's framework does not breach fiduciary duty.
The structural point is worth noting. Forfeitures are a small line item in most plans, but the legal theory matters. If courts adopted the plaintiffs' framing, every plan administrator would face litigation risk whenever forfeitures were used for any purpose other than defraying plan expenses. That would compress fiduciary judgment into a single mechanical rule.
The department's warning about unintended consequences is the real headline. It argues that aggressive judicial expansion of fiduciary obligations could discourage employers from offering plans at all. The brief is not just defending SAS. It is defending the latitude that makes defined contribution plans workable in the first place.
For plan sponsors, the takeaway is procedural as much as substantive. Document the reasoning. Use the discretion the plan grants, and record why. The Labor Department has now publicly endorsed the principle that such choices, made in good faith, fall within ERISA's loyalty requirement. That endorsement narrows the surface area for future litigation of the same kind.