Judge Allows 401(k) Forfeitures Case Against Bank of America to Proceed

A federal judge in the Western District of North Carolina on Tuesday denied Bank of America’s motion to dismiss a complaint alleging that the company improperly used forfeited retirement plan assets to offset its own contributions, allowing the case to move forward.

In Becerra v. Bank of America Corp. et al., originally filed on August 9, 2024, and amended in March, the plaintiffs allege that Bank of America used millions of dollars in forfeited plan assets to offset future contributions, rather than pay plan expenses, which the plaintiffs argue constituted a breach of fiduciary duty under the Employee Retirement Income Security Act.

U.S. District Judge Max Cogburn Jr. noted that courts have “come to different conclusions” on what constitutes a fiduciary breach under ERISA. He rejected Bank of America’s argument that its decisions were made in a “settlor capacity” and, thus, were not subject to ERISA’s fiduciary standards. Instead, Cogburn noted that Becerra had adequately alleged the bank “breached their fiduciary duties by using Plan assets to lower new employer contributions,” despite several recent case rulings that oppose that theory. Furthermore, the Department of Labor recently issued an amicus brief arguing in favor of employers in such cases.

He also greenlighted two other alleged violations of ERISA provisions: the statute’s anti-inurement clause and its prohibited transactions rule.

Cogburn ruled that the alleged violation of ERISA’s anti-inurement provision should remain, since the assets were not used “for the exclusive benefit of plan participants.”

The court also declined to dismiss the prohibited transactions claim, noting that the claim concerns “the exchange of plan assets to offset future employer contributions,” and therefore, the plaintiffs plausibly alleged that the fiduciaries engaged in self-dealing.

Because the court allowed all other claims to remain, Becerra’s failure-to-monitor claim against Bank of America and its Corporate Benefits Committee will also proceed.

The Bank of America 401(k) Plan had almost $63 billion in assets covering 254,477 plan participants in 2024, according to its most recent Form 5500.

The plaintiffs are represented by Essex Richards and Haffner Law P.C. The defendants are represented by Morgan, Lewis & Bockius LLP and McGuireWoods LLP.

Bank of America did not return a request for comment by press time.