District Judge Dismisses Plan Forfeiture Case Against Liberty Mutual

A federal judge in California granted a motion Tuesday to dismiss a 401(k) forfeiture case against global property and casualty insurance company Liberty Mutual Group Inc.

In the order, U.S. District Judge Haywood Gilliam, presiding in U.S. District Court for the Northern District of California, stated that the plaintiff in Lester Perez v. Liberty Mutual Group Inc. et al. has leave to amend his charges. Yet Gilliam wrote that the claim that Liberty Mutual, by using forfeited employer contributions to offset future employer contributions, violated the Employee Retirement Income Security Act of 1974 “appears to fail as a matter of law.”

Perez, a former participant in the Liberty Mutual 401(k) plan, alleges that Liberty Mutual and its retirement committee are at fault for not using unvested employer contributions funds for the benefit of plan participants from 2020 through 2024. The case, initially filed in October 2025, accuses Liberty Mutual of breach of fiduciary duty, inurement, prohibited transactions violating ERISA and failure to monitor fiduciaries.

Gilliam dismissed all four claims, stating that Liberty Mutual’s use of forfeited employer contributions complied with the retirement plan documents and that the plan’s terms grant “fiduciary discretion to allocate forfeitures in multiple permissible ways.”

The judge also ruled that there was no breach of fiduciary duty, as the use of forfeited contributions did not deprive Perez of any promised benefits, and there was no inurement since the contributions remained plan assets. Gilliam also dismissed the claim of “failure to monitor fiduciaries,” stating that the plan administrators did not delegate their fiduciary responsibility.

Perez was granted 21 days to amend his complaint but was told he could not add any new defendants or claims.

Gilliam’s order matches arguments stated in five amicus briefs filed by the Department of Labor in similar cases since July 2025. The DOL has backed employers in forfeiture cases, arguing that repurposing 401(k) plan forfeitures is a settlor function and routine plan design choice, rather than a fiduciary decision governed by ERISA. The agency has also argued that ERISA does not mandate particular outcomes.

The DOL’s legal opinions reflect the broader agenda of Daniel Aronowitz, assistant secretary of labor and head of the Department of Labor’s Employee Benefits Security Administration, who said the agency’s amicus briefs counter plaintiffs in “meritless” cases.

According to analysis by Encore Fiduciary, a law firm founded and formerly led by Aronowitz, 48 ERISA forfeiture cases were filed in 2025, up from 29 in 2024.

Perez is represented by Haffner Law Group and Setareh Law Group and Liberty Mutual is represented by Mayer Brown LLP. PLANSPONSOR sister publication PLANADVISER reached out to both parties for comment.