Trader Joe’s did not violate federal employee-benefits law by using forfeited retirement-plan contributions to offset its own future payments into the plan, a US federal judge has ruled in a closely watched ERISA case.
US District Judge William G. Young rejected claims that the grocery retailer improperly benefited from money forfeited by workers who left its retirement plan before becoming fully vested.
The Workday AI Hiring Bias Case Seeks Class Status | LM was brought on behalf of more than 40,000 plan participants and challenged several aspects of Trader Joe’s management of its employee retirement plan.The case forms part of a wider body of workplace litigation in which BlueCrest Loses HMRC Supreme Court Case — Lawyer Monthly and employee entitlements can have substantial financial consequences.
The central forfeiture dispute concerned contributions that employees lost when they left the company before obtaining full rights to them.
Trader Joe’s used those forfeited amounts to reduce future contributions it otherwise would have made to the plan.
The plaintiffs argued that the money should instead have been used to reduce expenses charged to participants and alleged that Trader Joe’s choice breached its fiduciary duties under the Employee Retirement Income Security Act.
Young rejected that theory during a six-day bench trial.
He found that the forfeited money went back into the retirement plan and continued to benefit plan participants rather than being improperly diverted for Trader Joe’s own use.
The ruling is significant because similar forfeiture claims have been filed against dozens of major US employers, including Amazon, Wells Fargo, JPMorgan Chase and Northrop Grumman.
The Trader Joe’s case was the first of a recent wave of roughly 100 such lawsuits to reach trial.
Those cases test whether an employer can breach ERISA fiduciary duties when plan documents permit forfeited contributions to be used to reduce future employer contributions.
The Trader Joe’s decision provides an important trial-level rejection of that theory, although the ruling is tied to the facts and plan structure before the Massachusetts federal court.
Trader Joe’s did not, however, prevail on every part of the lawsuit.
Young found that the company failed to take adequate steps to minimise recordkeeping fees paid by participants.
On September 28, the court awarded approximately $1.2 million in damages and interest on that claim, substantially below the more than $9 million the plaintiffs had sought.
The mixed result therefore separates two distinct ERISA duties.
Trader Joe’s successfully defended its treatment of forfeited contributions, but the court found shortcomings in the company’s oversight of administrative costs associated with the plan.
That distinction matters for retirement-plan fiduciaries.
ERISA requires those responsible for Employee Benefits Strategy for Law Firms: What to Review to act prudently and in the interests of participants, including when monitoring fees charged for services such as recordkeeping.
At the same time, Young’s forfeiture ruling indicates that using plan forfeitures to reduce future employer contributions does not automatically amount to an improper diversion of retirement assets where those funds remain within the plan and continue to benefit participants.
The decision could therefore become an important reference point in the growing number of lawsuits challenging corporate use of forfeited 401(k) contributions.
It does not resolve those other cases, which may involve different plan language, fiduciary processes and factual circumstances.
The case is Stephen et al. v. Trader Joe’s Company et al., No. 1:25-cv-10212, in the US District Court for the District of Massachusetts.