Cigna employees have filed a lawsuit against the company for allegedly violating its fiduciary duties under the Employee Retirement Income Security Act (ERISA). The claims stem from Cigna allegedly using forfeited funds from the company's 401(k) plan to reduce its contributions to the plan rather than to reduce or eliminate participant administrative costs. The case is Reven et al. v. The Cigna Group 401(k) Plan Retirement Plan Committee, filed in the U.S. District Court for the Eastern District of Pennsylvania.
The workers claim that Cigna's breach of its fiduciary duties cost them millions in investment losses. They also allege that plan administrators selected certain stable value investments, which resulted in significantly lower rates of return compared to other stable value investments with higher crediting rates.
Guidance by the Internal Revenue Service (IRS) states that companies may only use forfeited 401(k) funds from employees who leave the plan before being fully vested for three purposes: payment of plan expenses, reduction of future employer contributions, or additional allocations to participants.
The Cigna case is only one of a recent deluge of lawsuits concerning the disposition of forfeited 401(k) funds. Workers have uniformly accused their companies of using forfeited assets for their own gain rather than to benefit plan participants as required by ERISA. The trend began with a lawsuit filed by the U.S. Department of Labor (DOL) against a tech company, which ultimately settled in 2023. In that case, the plan language required the company to contribute forfeited assets to lower the plan's administrative expenses before reducing employer contributions to the plan.
Courts dismissed forfeiture lawsuits against Clorox, Thermo Fisher, and Honeywell in 2024. Similar lawsuits against Bank of America, Nordstrom, Wells Fargo, Intuit, and AT&T remain pending. Recently, a judge dismissed a lawsuit of this type against Kaiser Foundation Health Plan but allowed workers to amend their complaint for a second round against Kaiser.
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