District Court Allows Some ERISA Claims to Proceed in Amentum-DynCorp 401(k) Lawsuit

A federal judge ruled that portions of an Employee Retirement Income Security Act complaint against Amentum Parent Holdings LLC and DynCorp International LLC over the management of employee retirement plans can move forward, while dismissing several claims tied to the use of forfeited plan funds.

The complaint, Middleton v. Amentum Parent Holdings LLC, filed by former employees Jay Middleton and George Lawrence on behalf of participants in the Amentum 401(k) Retirement Plan and the DynCorp International Savings Plan, alleges that plan fiduciaries failed to act prudently by offering high-cost investment options instead of lower-cost, but substantially identical, alternatives, and by mishandling plan forfeitures.

In a 36-page order, U.S. District Judge Eric F. Melgren, of the U.S. District Court for the District of Kansas, held that the plaintiffs plausibly alleged breaches of the fiduciary duty of prudence related to most of the challenged investment practices. Those included the alleged failure to use lower-cost share classes, comparable collective investment trusts and certain lower-cost index and actively managed options. However, Melgren dismissed claims comparing actively managed funds to passive index funds, finding the strategies too different to serve as a “meaningful benchmark.”

Melgren also rejected all claims relating to the alleged misuse of forfeited funds, citing HP v. Hutchins, a crucial forfeitures case in which the Department of Labor recently argued in favor of plan sponsors. The plaintiffs in Middleton argued that Amentum and DynCorp should have applied forfeitures to offset participant administrative expenses, rather than reduce company contributions. Melgren found that the plans’ terms explicitly allowed either use and that both Treasury regulations and long-standing federal policy permit the use of forfeitures to reduce employer contributions.

“Plaintiffs impermissibly seek to create a new benefit,” Melgren wrote, dismissing the fiduciary duty, prohibited transaction and anti-inurement claims tied to forfeitures.

The IRS issued guidance in 2023 that stated plan sponsors could use forfeitures to either pay down plan expenses or offset future contributions if the plan’s Form 5500 explicitly stated the sponsor would use forfeitures as such.  

The ruling means the case can proceed on investment-related claims related to both the pre-merger and post-merger retirement plans.

The Amentum 401(k) Retirement Plan had almost $2.2 billion in assets at year–end 2023 with 32,523 plan participants, according to its most recent Form 5500.