Overview: The U.S. District Court for Northern California dismissed a novel ERISA fiduciary-breach claim in Paul Hutchins v. HP Inc., rejecting the theory that fiduciaries must always use forfeitures to reduce administrative expenses rather than employer contributions. The court upheld the primacy of plan documents and long-established fiduciary practices.
Key Takeaways:
ERISA’s Primary Goal: ERISA exists to ensure participants receive the promised benefits, not to mandate minimization of plan fees at every decision point.
Settled Forfeiture Use Upheld: The court affirmed that plan fiduciaries can rely on decades of settled practice and Treasury guidance that permits using forfeitures to offset employer contributions, so long as plan terms allow.
Fiduciary vs. Settlor Functions: The ruling emphasized that design decisions (settlor function) are distinct from administration (fiduciary function). Discretionary choices in plan documents do not inherently impose fiduciary liability if benefits are delivered as promised.
Charter Communications – A Different Case: Unlike HP, the pending Charter Communications case alleges that plan fiduciaries violated their plan document, which prioritized using forfeitures to pay administrative expenses. If proven, this could establish a valid claim, distinguishing it from HP.
The Parting Glass
This decision is a critical reaffirmation of ERISA’s structure: plan design is voluntary, fiduciary duties are rooted in plan promises, and litigation cannot redefine settled law (but it won't stop folks from trying!).