Employer, Business Groups Back Northrop Grumman in 4th Circuit 401(k) Forfeiture Appeal

Employer and business groups are urging the U.S. 4th Circuit Court of Appeals to uphold the dismissal of an ERISA lawsuit challenging Northrop Grumman Corp.’s use of 401(k) forfeitures, arguing that the Employee Retirement Income Security Act and other longstanding federal guidance has consistently permitted employers to use forfeited retirement plan assets to offset future employer contributions rather than pay plan expenses. 

The amicus brief, filed July 14 by the U.S. Chamber of Commerce, the American Benefits Council and the ERISA Industry Committee, adds to growing employer support in one of a wave of retirement plan forfeiture cases now before federal appeals courts. The appeal comes after the U.S. District Court for the Eastern District of Virginia dismissed the participants’ claims, finding that Northrop Grumman’s plan documents gave the company discretion over how forfeitures could be used.  

It also follows a lengthy dispute over how forfeitures should be used, which led to 48 new lawsuits being filed in 2025, according to Encore Fiduciary. 

The 4th Circuit hears federal appeals from district courts in Maryland, Virginia, West Virginia, North Carolina and South Carolina. The case stems from a challenge brought by participants in the Northrop Grumman Savings Plan who allege the company improperly used roughly $70.8 million in forfeitures from 2019 through 2023 to reduce employer contributions instead of first restoring participant accounts or paying plan expenses.

In their filing, the business groups argue that the plaintiffs’ theory would upend decades of established retirement plan practice. They contend that Department of the Treasury regulations, IRS guidance and congressional action have long recognized that defined contribution plans may use forfeitures to reduce employer contributions, pay administrative expenses or restore participant benefits, depending on plan terms. They also argue that ERISA should not be interpreted to prohibit conduct expressly permitted under Treasury regulations.  

The brief further argues that Northrop Grumman’s plan expressly granted administrators discretion in allocating forfeitures among the permissible uses and that the plaintiffs are seeking benefits beyond those promised in the plan documents. The business groups assert that adopting the plaintiffs’ position would disrupt settled expectations for employers sponsoring retirement plans.  

The filing followed a favorable district court ruling for Northrop Grumman. U.S. District Judge Anthony Trenga concluded the plan language allowed the company discretion to allocate forfeitures among restoring participant accounts, paying plan expenses or reducing employer contributions.

The Department of Labor has consistently sided with employers in forfeiture litigation despite the surge of participant lawsuits. According to the department’s recent filings, the DOL has now filed amicus briefs in four forfeiture cases, each arguing that using forfeitures to offset future employer contributions does not, by itself, violate ERISA. Those filings include appeals involving HP Inc., Siemens Corp. and Honeywell International, with the agency describing the Honeywell brief as its fourth forfeiture amicus briefs. Those briefs have been filed twice in the 9th Circuit and twice in the 3rd Circuit, but not yet in the 4th Circuit.