DOL Files Amicus Brief in Support of Defendant in Ninth Circuit Appeal

On July 9, 2025, the U.S. Department of Labor (DOL) filed an amicus brief in the Court of Appeals for the Ninth Circuit in support of the defendant in Hutchins v. HP Inc., Case No. 5:23-cv-05875-BLF (9th Cir.). Hutchins is an appeal of a dismissal of a purported class action lawsuit brought in the District Court for the Northern District of California alleging that HP violated ERISA by failing to utilize forfeited 401(k) plan contributions towards the plan's administrative fees. The plaintiff, representing the putative class, originally filed this lawsuit in November 2023 asserting claims for: (1) breach of the fiduciary duty of loyalty; (2) breach of the fiduciary duty of prudence; (3) violation of ERISA's anti-inurement provision; (4) prohibited transactions; (5) self-dealing; and (6) failure to monitor fiduciaries. The district court dismissed the lawsuit with leave to amend, holding that the plaintiff's theory that a fiduciary is always required to choose to pay administrative costs over reducing employer contributions failed to state a plausible claim. Following the dismissal, the plaintiff filed an amended complaint asserting only claims for: (1) breach of the fiduciary duty of loyalty; (2) breach of the fiduciary duty of prudence; and (3) prohibited transactions, which was also dismissed, but without leave to amend. 

In its brief, the DOL supports the district court's dismissal, agreeing that the "Plaintiff's bare allegations [did] not support an inference that the fiduciary acted improperly." The DOL's brief begins by noting that "[t]he established understanding for several decades has been that defined contribution plans, such as the Plan (as defined below), may allocate forfeited employer contributions to pay benefits for remaining participants rather than using those funds to defray administrative expenses." 

In addressing the substantive arguments raised in the appeal, the DOL agrees with the district court that the funding of a plan is a settlor decision and that the decision made by HP in a fiduciary role to use the plan's "forfeitures to fund matching contribution benefits—an option explicitly granted by the Plan document and the proposed Treasury regulation—does not state a plausible claim for breach." The DOL also agrees that the plaintiff's allegations of a conflict of interest between HP and the participants in deciding how to utilize plan forfeitures and that HP's fiduciary process was deficient were not enough to "move the needle on his claim from 'speculative' to 'plausible' because they ignore other considerations relevant to the fiduciary's decision to use forfeitures to fund contributions." The DOL noted that in dealing with "the decision to either ensure the participants timely received the matching contributions they were owed under the Plan, or to risk a funding shortfall and a potentially protracted legal dispute with the Plan sponsor, a prudent fiduciary may appropriately choose to ensure participants timely received the benefits guaranteed by the Plan document."

The DOL's brief is particularly noteworthy, as the agency had not previously taken a position in this area of class action litigation. The DOL not only agrees that the plaintiff's claims are insufficient as pled, but also explains that scenarios like that in Hutchins, where forfeiture decisions are made in accordance with plan terms — terms established by plan sponsors in a settlor capacity — do not serve as a basis for fiduciary breach claims. The DOL's brief will be well-received by other defendants facing similar claims and will likely be cited in cases with facts like those in Hutchins. 

ERISA Class Action Against AT&T Progresses to Trial 

On July 9, 2025, the District Court for the Northern District of California denied summary judgment to defendants AT&T Inc., the AT&T Defined Benefit Plan, and AT&T Services, Inc. (AT&T) as to every ERISA claim alleged, except for an ERISA breach of fiduciary duty claim, in Scott v. AT&T Inc., No. 20-cv-07094-JD (N.D. Cal.), an ERISA class action involving the requirement under ERISA that there must be "actuarial equivalence" between joint survivor annuities (JSAs) and single life annuities (SLAs). 

The two putative classes allege that AT&T's Defined Benefit Plan "failed to treat JSA and... SLA participants in an actuarily equivalent fashion by using 'mortality assumptions' that are 'fifty years out of date,' which resulted in the 'payment of a benefit that is less' than the JSA beneficiaries were entitled to." The plaintiffs brought four ERISA claims against AT&T: Counts I and III allege violations of ERISA's actuarial equivalence standards, 29 U.S.C. §§ 1054(c)(3), 1055(d)(1)(B); Count II alleges an unlawful forfeiture of vested benefits in violation of 29 U.S.C. § 1053(a); and Count IV alleges breach of fiduciary duty in violation of 29 U.S.C. § 1104(a)(1)(A). AT&T moved for summary judgment on all claims, but the court only granted summary judgment as to Count IV, the fiduciary breach claim. 

In support of summary judgment on Counts I and III, AT&T argued that "ERISA permits the use of tabular factors for calculating benefits and does not require the use of 'reasonable' or 'up-to-date' assumptions to generate those tabular factors in this context," and that "'actuarial equivalence is viewed as a range' which can be 'achieved using different methodologies.'" In response, the plaintiffs argued that "a JSA benefit is the actuarial equivalent of a SLA benefit when it is 'determined on the basis of consistently applied reasonable actuarial assumptions.'" When interpreting the term "actuarial equivalence," the court observed that it is a term of art undefined by ERISA and that the statute does not indicate whether the term "connotes an implicit reasonableness requirement of the sort plaintiffs advance." The court summarized the parties' dispute as the plaintiffs arguing that the actuarial assumptions need to be reasonable and AT&T arguing that only the actuarial results need to be reasonable. 

The plaintiffs also argue that a Department of the Treasury regulation, 26 C.F.R. § 1.401(a)-11(b)(2), that states that a "qualified joint and survivor annuity must be at least the actuarial equivalent of the normal form of life annuity" and that "[e]quivalence may be determined, on the basis of consistently applied reasonable actuarial factors, for each participant or for all participants or reasonable groupings of participants," supports their interpretation of "actuarial equivalence." The court commented that "[t]his regulation does not do all the work plaintiffs ask of it because it speaks of 'actuarial factors,' not 'assumptions.'" 

The court also referred to statements from the plaintiffs' expert supporting the proposition that actuarial equivalence requires the identification of reasonable assumptions. According to the court, "[i]t does not take a leap of faith to conclude that 'actuarial equivalent' would be understood by an actuary skilled in the art to connote the necessity of using reasonable assumptions," and that "[t]o that end, plaintiffs have adduced evidence from which a reasonable factfinder could conclude that an actuary would deem two values to be the 'actuarial equivalent' of one another only if reasonable assumptions were used." 

The court ultimately found, however, in rejecting summary judgment as to the claims pertaining to ERISA's actuarial equivalence provisions, that "[o]verall, there are material disputes of fact about a reasonable actuary's understanding of 'actuarial equivalence' with respect to underlying assumptions" as well as "fact disputes about the reasonableness of the assumptions underlying the conversion factors used by the Plan."

As to Count IV, the court granted summary judgment in favor of AT&T, rejecting the theory that AT&T "'acted as a fiduciary when, in its absolute discretion, it failed to ensure that the Plan's conversion factors produced benefits that complied with ERISA.'" In support of this claim, the plaintiffs analogized "'[t]he ongoing duty to monitor a plan's JSA conversion factors and update them if necessary'" with "'the ongoing duty to monitor plan investments.'" The court rejected the plaintiffs' theories on the basis that the setting of conversion factors was a function of a settlor rather than a fiduciary. The court also rejected the plaintiffs' claim that AT&T breached its fiduciary duties when it administered the plan including "follow[ing] allegedly unlawful Plan terms to calculate JSA benefits pursuant to the challenged conversion factors" because the court did not see "how following clear and mandatory Plan terms for the calculation of benefits is an act which involves the exercise of discretionary authority or control."

We've previously discussed actuarial equivalence cases, including a case brought by the same plaintiffs' counsel currently pending on appeal to the Eleventh Circuit, Drummond v. Southern Company Services, No. 24-12773 (11th Cir. Aug. 28, 2024), which similarly sought support for an interpretation of the statutory phrase "actuarial equivalent" through the same Treasury regulation, but the plaintiffs in that case, as pointed out by the court in Scott, "'[did] not allege that the industry practice is to apply reasonable assumptions to determine actuarial equivalence.'" Instead, the actuarial equivalence claim in Drummond, among other claims, is that the defendants violated 29 U.S.C. §§ 1053 and 1055 when converting participants' SLAs to JSAs and when imposing charges on participants' SLAs. 

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