Forfeitures and Fund Underperformance Claims Dismissed in Texas

On November 13, 2025, the U.S. District Court for the Northern District of Texas dismissed the purported class action lawsuit filed in Del Bosque, et al., v. Coca-Cola Southwest Beverages LLC, No. 3:25-cv-01270 (N.D. Tex. 2025). The plaintiffs alleged that Coca-Cola violated ERISA by (1) breaching the fiduciary duty of prudence under ERISA § 404(a)(1)(B), 29 U.S.C. § 1104(a)(1)(B), by selecting and retaining high-cost and underperforming investment options, and (2) breaching the fiduciary duty of loyalty under ERISA § 404(a)(1)(A), 29 U.S.C. § 1104(a)(1)(A), by utilizing forfeiture funds in the company's 401(k) plan to decrease its voluntary contributions to the plan. Coca-Cola moved to dismiss the plaintiffs' complaint for failing to state a claim. The five plaintiffs who brought the litigation are former employees of Coca-Cola and participants in the plan.

The court rejected the plaintiffs' breach of fiduciary duty claims in their entirety. In dismissing the prudence claims, which focused on Coca-Cola's alleged selection and retention of the plan's target date funds, the court found the benchmarks used by the plaintiffs for fund comparison purposes to be flawed. The court noted that in determining whether a benchmark is meaningful, "courts distinguish between actively and passively managed accounts and investment strategies." Because the plan's target date funds, which were a blend of passive and active managed funds, and the plaintiffs' actively managed comparator funds "are managed differently, the Court conclude[d] that the alleged comparators are not meaningful benchmarks." The court also rejected the plaintiffs' prudence claims involving the target date funds' fee because they failed to allege "any imprudence processes in choosing these fees." As to the plaintiffs' underperformance prudence claims, the court concluded that "it is not sufficient to simply allege that cheaper options existed."

With respect to the plaintiffs' loyalty claims, the court, relying on Estay et al, v. Ochsner Clinic Foundation, et al., No. 25-507, 2025 WL 2644782 (E.D. La. Sept. 15, 2025), reasoned that the plaintiffs' forfeitures theory could not stand where the forfeitures were used to reduce the employer's voluntary contributions consistent with the terms of the plan. The court noted that the use of forfeitures to reduce an employer's contribution instead of to defray administrative costs does not violate the duty of loyalty. Consistent with other courts that dismissed similar claims, the court agreed that "(1) ERISA does not require the fiduciary to maximize profits, only to ensure that participants receive their promised benefits; (2) both ERISA and the terms of the plans themselves authorize the use of forfeiture funds for employer contribution matching; and (3) the plaintiffs' theory would effectively require forfeiture funds to be used for administrative expenses and would create an additional benefit to participants not contemplated in their plans." The court found the plaintiffs' reliance on Bussian v. RJR Nabisco, 223 F.3d 286 (5th Cir. 2000), to be tenuous because, unlike in Bussian, the plaintiffs here did not allege "that they did not receive their benefits—they simply allege that Coca-Cola shouldn't have used the forfeited funds to provide those benefits." In dismissing the loyalty claim, the court stated that "ERISA and the Plan do not guarantee Plaintiffs the additional benefits they were never promised but nonetheless seek."

The court dismissed the plaintiffs' complaint without prejudice and granted the plaintiffs leave to file an amended complaint within 28 days. 

Use of Forfeiture Funds to Offset Employer Contributions Permissible Under ERISA and Plan Terms in Mississippi

On November 14, 2025, the court in Brown v. Peco Foods, Inc., No. 3:25-ccv-491-TSL-RPM (S.D. Miss. 2025), dismissed the plaintiff's purported class action complaint alleging Peco Foods, Inc., violated ERISA with respect to Peco's use of its 401(k) plan's forfeiture funds. Specifically, the plaintiff alleged "that Peco violated the terms of the Plan and its fiduciary duties under ERISA by using forfeitures to reduce its future matching contribution obligation rather than to defray the Plan's administrative expenses, as a result of which these administrative expenses were borne by Plan participants." In his complaint, the plaintiff asserts claims against Peco for: (1) breach of the duty to follow the terms of the plan in violation of ERISA § 404(a)(1)(D), 29 U.S.C. § 1104(a)(1)(D); (2) breach of the fiduciary duty of loyalty in violation of ERISA § 404(a)(1)(A), 29 U.S.C. § 1104(a)(1)(A); (3) breach of the fiduciary duty of prudence under ERISA § 404(a)(1)(B), 29 U.S.C. § 1104(a)(1)(B); and (4) engaging in prohibited transactions and self-dealing under ERISA § 406(a) and (b), 29 U.S.C. § 1106(a) and (b). Peco moved to dismiss for lack of standing and failure to state a claim.

While the court found the plaintiff had standing to bring his claims, it held that those claims could not stand as pleaded. With respect to the plaintiff's claim that Peco failed to follow plan terms, the court reasoned that because it is a "fair and reasonable interpretation" of the plan document that Peco could either pay administrative expenses or offset employer contributions, Peco's "use of the forfeitures to offset employer contributions did not violate the terms of the Plan." 

As to the plaintiff's loyalty claim, the court, following the lead of "over a dozen courts to date," rejected the plaintiff's position "that a fiduciary breaches the duty of loyalty by allocating forfeitures to matching contributions rather than applying them to administrative expenses despite compliance with the terms of the [p]lan document." The court concluded, "that where the plan gives the defendant fiduciary the discretion as to how to allocate forfeitures, the fiduciary does not breach its duty of loyalty by choosing to apply them to employer contributions." 

Similarly, the court rejected the plaintiff's prudence "theory as it would impose categorical liability any time a [fiduciary] choses to use forfeitures to reduce its own contributions." Like in Del Bosque, the court in Peco did not find the plaintiff's reliance on Bussian v. RJR Nabisco, 223 F.3d 286 (5th Cir. 2000), compelling because the plaintiff did not allege he did not receive "the full benefits to which he/she was entitled under the plan."

Lastly, in concluding that the plaintiff's prohibited transaction claim could not stand, the court stated that "Peco's alleged allocation of forfeitures to employer contributions is merely an interplan reallocation of plan assets which functions as a benefit to the plan and, therefore, is not a transaction within the contemplation of § 1106."

The court dismissed the plaintiff's complaint in full and with prejudice. 

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