Compliance January 3, 2025

Amazon Employees File 401(k) Plan Forfeiture Complaint in Federal Court

The online retail giant joins more than 30 plan sponsors accused of mismanaging participant forfeitures for its own gain.

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Amazon.com Inc. and the administrative committee of its 401(k) savings plan have been served with the latest 401(k) forfeiture lawsuit—the largest company to be accused of mismanaging employee forfeiture funds among a growing list of defendants.  

In Curtis v. Amazon.com, filed in U.S. District Court for the Western District of Washington, participant Cory Curtis alleges that Amazon fiduciaries engaged in self-dealing by allocating millions in forfeited plan assets to offset the company’s own contributions, rather than reducing administrative fees for more than 20,000 participants, between 2018 and 2023. The plaintiffs were represented by law firm Terrell Marshall Law Group PLC. 

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Amazon’s 401(k) plan has more than $17 billion in assets and more than 1.3 million participants, according to its most recent Form 5500 filing in 2022.  

The plaintiff allege that by using the forfeited funds toward future employer contributions, Amazon saved millions of dollars in contribution expenses.  

The plan was previously administered by Vanguard Fiduciary Trust Co., but assets were transferred to Fidelity Investments on January 7, 2020. As of the end of 2023, Fidelity is still the plan’s recordkeeper. Also in 2023, the plan incurred administrative expenses by paying Strategic Advisors—an affiliate of Fidelity—direct compensation to provide plan administrative services to the plan. 

Amazon’s plan document gives the plan fiduciaries discretion to use plan assets that have been forfeited by participants for one of three purposes: to (1) reduce future matching contributions; (2) pay plan administrative expenses; or (3) restore forfeited accounts, according to the complaint. 

The lawsuit alleges that Amazon continued to use forfeited funds to offset its company contributions instead of allocating forfeitures to pay the plan’s administrative expenses (such as recordkeeping fees, investment management fees and transaction fees) or returning the forfeitures back to eligible plan participants. 

Daniel Aronowitz, president of Encore Fiduciary, a fiduciary insurance firm unrelated to the case, notes that more than 30 other forfeiture lawsuits have been filed since 2023, including against other large plans like Qualcomm Inc., HP Inc. and Honeywell International Inc. He argues that the Amazon lawsuit shows that new plaintiff law firms are going to continue to enter the fray and “try to capitalize and monetize this potential liability.”  

Aronowitz further argues that the claim that Amazon fiduciaries did not act in the best interest of the plan is “particularly ludicrous,” because the recordkeeping fee for the plan is only $21, which Aronowitz says is one of the lowest fees in the U.S. The plan also offers Vanguard target-date funds for between three and four basis points, which he says is significantly lower than what Vanguard offers to other plans. 

“This is just plaintiff law firms trying to weaponize ERISA, and that’s what’s happening in the modern era with the surge of cases in the second half of 2024,” Aronowitz says. “We find [it] really offensive for Amazon plan fiduciaries to be accused of somehow harming participants. They’ve done everything to ensure the lowest possible fees for their participants.”  

The IRS reaffirmed its position in 2023 that 401(k) plan forfeitures can be used to pay plan expenses, reduce future employer contributions or to make an additional allocation to participants.  

The plaintiff in the Amazon case is seeking that the judge order the disgorgement of all assets and profits secured by the company as a result of the violations of the Employee Retirement Income Security Act, as well as remove fiduciaries who have breached their fiduciary duties, among other requests.  

Montana MacLachlan, an Amazon spokesperson, said in a statement: “While we’re still reviewing the details of this case, we believe these allegations lack merit. We look forward to proving that through the legal process.” 

Many forfeiture lawsuits have been dismissed by district judges in recent months, including those against BAE Systems Inc., Thermo Fisher Scientific Inc. and Clorox Co.   

Aronowitz argues that the Department of Labor is “asleep at the wheel” and allowing “regulation by litigation.” 

“The Department of Labor and the IRS have regulations that have blessed this practice [of allocating forfeitures to employer contributions] for years and years,” he says. “What needs to happen is they need to consolidate these cases before one judge and get one ruling.” 

Aronowitz believes it is time for the DOL to step in and confirm that using forfeited funds toward employer contributions is a proper way to handle the excess money.  

Client Service January 2, 2025

Crossmark’s Doll Projects Fewer Tailwinds and More ‘Tail Risks’ in 2025

Anticipate slower economic growth, persistent inflation and widening credit spreads, says market forecaster Bob Doll.

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Bob Doll

Crossmark Global Investments’ chief investment officer, Bob Doll, has revealed his annual 10 market predictions for 2025, which include: slowing economic growth, inflation remaining sticky and credit spreads widening.

Reviewing 2024, Doll said that last year saw strong consumer spending, a resilient early labor market and upbeat economic data, all of which contributed to boosting equities. However, a mid-year labor market slowdown led the Fed to cut interest rates by 50 basis points in September to prevent rising unemployment. While equity gains were driven by earnings growth and mega-cap tech performance, labor market trends for the full year suggest a soft landing is not yet guaranteed for the U.S. economy, he concluded.

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In his 2024 forecast, Doll stated that central banks were aiming to prevent a crash or recession, a “Goldilocks” scenario—neither too hot nor too cold—with expectations of a gentle economic landing. However, in the 2025 forecast, Doll asserted that “Goldilocks remains a fairytale.”

“The financial and geopolitical world changed on November 5 with [Donald] Trump’s election victory and Republican sweep in Congress,” Doll wrote. “The outlook is now far from business as usual, opening up a wide range of outcomes for the global economy and financial markets.”

According to Doll, investors are benefiting from the bull market but remain cautious about high valuations. Policy uncertainty is elevated, driven by the simultaneous implementation of numerous policy changes. President-elect Donald Trump’s agenda combines economically supportive measures, like tax cuts and deregulation, with potentially disruptive actions, such as tariffs and deportation.

“It is with this backdrop that we proceed as usual with fear and trepidation (and hopefully some good, educated guesses) to unveil our prognostications for 2025 in the form of 10 predictions,” Doll wrote.

Doll’s 10 predictions:

  • Economic growth slows as the unemployment rate rises past 4.5%;
  • Inflation remains sticky, fails to reach the Fed’s 2% target and causes the fed funds rate to once again fall less than expected by markets;
  • Treasury 10-year yields trade primarily between 4% and 5% as credit spreads widen;
  • Earnings fail to achieve consensus a) 14% growth and b) every sector seeing increased earnings;
  • Equity volatility rises (VIX average approaches 20 for only the third time in 14 years);
  • Stocks experience a 10% correction as stocks fail to keep up with earnings (i.e., P/Es contract);
  • Equal-weighted portfolios beat cap-weighted portfolios (average managers beat indexes), and value beats growth;
  • Financials, energy and consumer staples outperform health care, technology and industrials;
  • Congress passes the Trump tax cut extension and reduces regulation, but tariffs and deportation are less than expected; and
  • Department of Government Efficiency efforts make progress but fall woefully short of $2 trillion per year of savings.

Doll evaluated that seven of his 10 annual investment predictions for 2024 came true, which falls within his average of 7.0 to 7.5 correct predictions.

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