Judge Tosses RTX 401(k) Forfeiture Complaint

A federal judge in Virginia has dismissed a proposed class-action lawsuit accusing RTX Corp. of improperly using forfeited retirement funds, dealing a setback to a growing wave of legal challenges targeting how companies manage unvested 401(k) contributions.

The ruling, issued on January 22 by U.S. District Judge Leonie Brinkema, rejected claims brought by two former employees who alleged RTX violated federal retirement law by using forfeited employer contributions to reduce its own future payments, rather than offset plan administrative fees. The decision reinforces recent court trends favoring employers and could shape dozens of similar lawsuits nationwide. It also follows two amicus briefs filed by the Department of Labor siding with employers in plan forfeiture disputes.

The case stemmed from a lawsuit filed by former RTX workers Melissa Jacob and Thomas Miller, who argued that the aerospace and defense giant breached its fiduciary duties under the Employee Retirement Income Security Act by how it handled forfeited employer contributions in its 401(k) plan.

Under RTX’s retirement plan, unvested funds are retained by the plan and may be reallocated in several ways, including restoring benefits to rehired workers, paying plan expenses, or reducing future employer contributions.

Plaintiffs claimed RTX favored itself by using roughly $18.6 million in forfeitures to lower future company contributions, while plan participants paid more than $25 million in administrative fees out of pocket.

But Brinkema ruled that RTX’s actions were permitted by both the plan documents and ERISA. The court found that the retirement plan explicitly allows forfeitures to be used either for administrative expenses or to reduce future employer contributions—without prioritizing one over the other.

The judge also rejected the plaintiffs’ argument that forfeitures must be fully used by the end of each year, noting that neither the plan nor federal law imposes such a deadline.

The ruling also dismissed broader claims that RTX violated ERISA’s duties of loyalty and prudence, with the court emphasizing that the law does not require employers to maximize financial returns for workers beyond what the plan guarantees.

In rejecting the plaintiffs’ “anti-inurement” claim—which bars plan assets from improperly benefiting employers—the judge said the forfeited funds never left the plan and were still used for participant-related purposes, even if RTX indirectly benefited.

The decision also dismissed allegations of prohibited transactions and failure to monitor fiduciaries, finding those claims legally unsupported and dependent on the dismissed counts.

According to law firm Holland & Knight, since fall 2023, plaintiffs have filed more than 30 class action lawsuits claiming that using 401(k) forfeitures to offset future employer contributions violates ERISA.

Current EBSA Head Daniel Aronowitz has pledged to limit the number of ERISA cases filed, likely evidenced by the DOL’s two recent amicus briefs filed in forfeiture complaints in favor of employers.