Schlichter Joins 401(k) Forfeiture Suit Fray

Law firm Schlichter Bogard LLC has added to the litany of 401(k) asset forfeiture lawsuits with a complaint filed against Charter Communications Inc. on Friday.

In O’Donnell et al. v. Charter Communications Inc. et al., three participants in the Charter Communications Inc. 401(k) Savings Plan, which maintains approximately $7.9 billion in assets, are suing the telecommunications giant for using forfeited plan assets toward reducing the employer’s future matching contributions to the plan.

This is the first forfeiture case in which attorney Jerome Schlichter has been involved, as he is most known for representing plaintiffs in excessive fee lawsuits and, more recently, pension risk transfer-related suits.

Forfeiture lawsuits have picked up steam in the last year, with more than 30 cases filed against employers. JPMorgan Chase & Co, BMO Financial Corp., Capital One and Amazon.com Inc. are among the major employers that have faced scrutiny for their management of forfeited funds.

In the Charter Communications case, the plaintiffs allege that the company’s “misuse” of forfeitures was “contrary to the plan’s plain terms.” According to the complaint, from January 1, 2017, to December 31, 2024, the plan mandated how plan forfeiture assets would be used by Charter. Specifically, plan forfeiture assets were first required to be used to pay plan administrative expenses, the complaint states.

Only if the forfeiture assets “exceed administrative expenses,” could the remaining assets then be used to offset Charter’s required employer matching contributions, the plan documents state.

“In direct violation of these terms of the plan, during the class period, Charter used plan forfeiture assets to reduce its employer matching contributions instead of paying plan administrative expenses,” the complaint states.

According to the lawsuit, in 2019, Charter used $16.3 million in forfeiture assets to reduce its employer matching contributions, but in the same year, it reported that participants were charged $7.3 million in allocated administrative expenses paid by the plan.

Charter has 126,016 participants in its 401(k) plan, as per its 2023 Form 5500 filing.

As of January 1, 2025, Charter amended its plan. It now mandates that forfeiture assets be used to reduce the company’s required employer matching contributions, according to the lawsuit. Any remaining forfeiture assets are then to be used to pay “any expenses of administration not allocated” to a plan participant’s account.

While using forfeited funds toward future employer contributions is permitted under IRS rules, Title 1 of the Employee Retirement Income Security Act of 1974 requires that fiduciaries administer their plans in accordance with the terms laid out in the plan documents. ERISA attorneys have previously noted that plan sponsors should ensure they are managing forfeiture funds as authorized by the plan’s language.

The plaintiffs in the Charter lawsuit are asking the U.S. District Court for the Eastern District of Missouri, where the case was filed, to find and declare that Charter has breached its fiduciary duty to follow the terms of the plan documents and that the company engaged in “prohibited conduct.” They also ask the court to make Charter restore to the plan all losses resulting from each ERISA violation alleged in the suit, among other demands.

Charter Communications did not immediately respond to a request for comment.