In a legal clash with stakes as high as a telecom tower, AT&T has moved to toss a lawsuit challenging its use of forfeited 401(k) contributions, asserting in a Friday filing that the Employee Retirement Income Security Act (ERISA) simply doesn’t apply to its plan-related actions.
The motion to dismiss, lodged in California federal court, comes in response to a proposed class action from Luis Hernandez, a former or possibly current AT&T employee whose retirement account allegedly suffered when the company reallocated unvested funds instead of using them to benefit participants.
But according to AT&T, the entire case hangs on a misinterpretation of ERISA, claiming that the contested decision was made in its role as a “settlor” — not a fiduciary — thereby placing it outside ERISA’s reach.
Fiduciary or Settlor?
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AT&T’s argument hinges on the distinction between its role as a fiduciary and its authority as a plan sponsor. Under ERISA, only fiduciary actions fall under legal scrutiny. The telecom giant asserts that the use of forfeited funds — those contributions lost by employees who left before vesting — was a settlor function tied to plan design, not plan management.
“Plaintiff is ultimately attacking the plan design decision to permit forfeitures to be applied to employer contributions — but that is a settlor decision, not a fiduciary one,” AT&T’s attorneys wrote.
The company added that its approach fully aligns with the U.S. Treasury Department’s guidance, which for decades has allowed plan sponsors to use forfeited funds to reduce future employer contributions or cover administrative costs.
