Providence Health & Services has agreed to a $42.7 million settlement over claims it mishandled its 401(k) Savings Plan. The dispute arose from accusations that Providence failed to use forfeited funds to lower administrative costs. Now, over 202,000 plan participants will receive distributions from more than $21 million held in forfeiture accounts.
The settlement case, known as Halter v. Providence Health & Services, took place in the U.S. District Court for the Western District of Washington. As part of this agreement, Providence will also cover recordkeeping and plan expenses from 2026 to 2028, an estimated $15.3 million.
Additionally, Providence has set aside $6 million for attorney fees and other settlement costs. Plaintiffs’ lawyers are requesting around 14% of the total settlement value. The claim focused on a breach of fiduciary duty under the Employee Retirement Income Security Act, alleging that Providence didn’t follow guidelines regarding forfeiture funds.
Under these guidelines, forfeiture funds are meant to first cover plan expenses, then restore any lost payee accounts, and finally offset future employer contributions if funds remain. Since 2024, there have been about 67 forfeiture lawsuits against plan sponsors, but only a few have reached settlements, according to Encore Fiduciary.
The Department of Labor has emphasized the importance of using these forfeitures appropriately within plans. This case serves as a reminder that fiduciary responsibility in managing retirement plans is critical. Legal representation for the plaintiffs came from Creighton & Rose P.C., Geist Law Group LLC, the Sharman Law Firm LLC, and Terrell Marshall Law Group PLLC, while Morgan Lewis & Bockius LLP defended Providence.
A spokesperson for Providence noted that the terms of the settlement prevent further comments. However, they expressed confidence in the compliance of their retirement plans, emphasizing their commitment to the financial well-being of their staff.
As the retirement landscape evolves, similar cases may surface. With the growing scrutiny of fiduciary duties, plan sponsors should ensure they adhere closely to regulations to avoid potential legal issues. Understanding the rules around forfeiture funds not only helps maintain trust but also supports the overall financial health of retirement plans.
For a deeper understanding of complex retirement plan regulations, you might consider checking resources from the Department of Labor.
