Sean Brennan
Monday, May 5, 2025
Intuit announced on April 29 that it had settled a lawsuit relating to its unlawful use of forfeited 401(k) retirement plan funds for the company’s personal benefit. The proposed settlement comes nearly two years after Intuit employees filed a class action lawsuit against the financial software giant, accusing Intuit of misappropriating forfeited funds to offset their own plan contributions. The case is Rodriguez v. Intuit, Inc., Case No. 23-cv-05053-PCP, and it is pending in the Northern District of California.
ERISA – The Federal Law Protecting Private Sector Workers’ Retirement and Health Plans
ERISA is a federal law that protects workers by requiring most voluntarily established retirement and health plans in private industry to comply with minimum standards, including providing information to participants, requiring plan managers who control plan assets to meet fiduciary obligations and avoid self-dealing, and giving participants the right to challenge adverse benefits decisions. At issue in Rodriguez, ERISA also requires that “the assets of a plan shall never inure to the benefit of any employer” and instead must be held exclusively for the benefit of plan participants and their beneficiaries, or for defraying reasonable administrative costs.
Forfeiture of Retirement Funds
Intuit’s retirement plan consisted of, in part, wage withholdings by plan participants. But like many retirement plans, Intuit also matched employees’ contributions to the plan, up to a certain percentage of employee pay. Despite coming from different sources, both wage withholdings and matching contributions became plan assets upon their deposit into the plan’s trust fund.
Although these different sources of funds are treated the same when considering what counts as a “plan asset,” they have important differences when it comes to employees’ ownership of the funds. Plan participants immediately vest in their own contributions, made through wage withholdings. That means that from day one, an employee owns any contributions they make to their plan, as well as the accompanying income or losses on those contributions. In contrast, many retirement plans—such as Intuit’s—do not allow participants to become vested in the company’s matching contributions immediately. Instead, those funds will vest only after the plan participant has remained employed by the company for a certain period of time.
So, what happens if a plan participant’s employment with the company ends before these matching contributions are fully vested? The participant forfeits all unvested matching contributions from their individual retirement account. Critically, though, these forfeited funds remain plan assets, subject to ERISA’s requirements.
Rodriguez Plaintiffs’ Claims
The plaintiffs in Rodriguez alleged that Intuit violated ERISA by using forfeited plan funds for the company’s personal benefit.
As discussed above, Intuit could have permissibly used these forfeited funds to defray the costs of administering the plan. Instead, the plaintiffs alleged that, over the course, of several years, Intuit used the forfeited funds to offset its own matching contributions. Denying a motion to dismiss the case, Judge P. Casey Pitts explained that Intuit’s use of the forfeited funds allegedly “sav[ed] the Company millions of dollars each year at the expense of the Plan which received decreased Company contributions and its participants and beneficiaries who were forced to incur avoidable expense deductions to their individual accounts.”
What Comes Next?
While the Rodriguez v. Intuit, Inc. parties have reached a settlement, that settlement is not will not take effect until approved by the federal judge in the Northern District of California who has presided over the case. On May 16, 2025, the parties will convene for a “fairness hearing,” where the judge will determine whether the terms of the proposed settlement is fair, reasonable, adequate, and not based on collusion.
Rodriguez is one case in a wave of litigation involving similar litigation, in which plaintiffs allege that using contribution forfeitures to offset employer contributions violates ERISA’s duties of loyalty and prudence, and its anti-inurement provision, and constitute a prohibited transaction under the law. To date, the results of these cases have been mixed.
What Workers Can Do to Protect Their Retirement Benefits
It can be difficult to figure out whether your retirement plan is being administered lawfully, and even large, reputable companies and universities, like Intuit, have been accused of administering their retirement plans in ways that violate ERISA. If you think you are experiencing an issue similar to the one involved in this lawsuit, please reach out to us for a free consultation. MSE can help you understand your rights and options.
