401(k) Forfeiture Case Against Honeywell Dismissed, Plaintiffs Appeal

Plan sponsor Honeywell International has had a 401(k)-plan forfeiture complaint dismissed for a second time. This time plaintiffs are appealing to the U.S. 3rd Circuit Court of Appeals.

The complaint Luciano Barragan v. Honeywell International Inc. et al., originally filed in February 2024 in U.S. District Court for the District of New Jersey, was dismissed by U.S. District Judge Evelyn Padin in December 2024. The plaintiff, Luciano Barragan, representing participants of Honeywell’s plan, amended their initial complaint, which alleged that Honeywell breached its fiduciary duties of loyalty and prudence and engaged in self-dealing by using 401(k) forfeiture funds to offset contributions rather than to pay down plan expenses.

The amended complaint was dismissed with prejudice by Padin on August 18, meaning that, this time, the complaint could not be amended. Instead, the plaintiffs appealed the ruling in the 3rd Circuit on August 19.

In dismissing the complaint, Padin stated that the plaintiffs once again failed to allege that Honeywell breached its fiduciary duties because participants had not received reduced plan contributions due to the plan sponsors’ use of plan forfeitures.

“Barragan’s second bite at the apple, therefore, turns on a slight variation of the same legal theory,” Padin wrote, noting that the refiled complaint did not indicate that Honeywell uses forfeitures in a way that damages plan participants.

Padin further found that Honeywell did not act in a “conflict of interest” by merely having options to reallocate plan forfeitures as it saw fit. Claims of prohibited transactions were also dismissed.

Plaintiffs have continued to file complaints that plan sponsors should reallocate plan forfeitures to defray administrative costs, not to offset future plan sponsor contributions, which they argue does not benefit participants, even if the plan document says the plan sponsor has the option to choose how it reallocates forfeitures.

District courts have issued mixed opinions, both before and after the Department of Labor sided with employers in an amicus brief on this topic in July. 

The plaintiff in the Honeywell case is represented by Lawrence Hersh, who has offices in New York and New Jersey. Morgan, Lewis & Bockius LLP represented the defendants.

The Honeywell 401(k) Plan had nearly $15.4 billion in assets with 61,515 plan participants as of 2023, according to its latest Form 5500.