Amazon.com Inc. and the administrative committee overseeing its 401(k) savings plan have been hit with a class-action lawsuit alleging improper management of employee forfeiture funds. The lawsuit, Curtis v. Amazon.com, was filed in the U.S. District Court for the Western District of Washington and claims that Amazon fiduciaries engaged in self-dealing by using forfeited plan assets to reduce the company’s own contributions rather than lowering administrative fees for participants.
According to plaintiff Cory Curtis, who is being represented by Terrell Marshall Law Group PLC, Amazon misappropriated millions of dollars in forfeited 401(k) assets between 2018 and 2023. The complaint argues that instead of using the funds to offset administrative expenses—such as recordkeeping fees, investment management fees, and transaction fees—or redistributing them to eligible participants, Amazon applied them toward its future employer contributions, effectively saving the company millions.
Amazon’s 401(k) plan is among the largest in the country, with over $17 billion in assets and more than 1.3 million participants, according to its 2022 Form 5500 filing. The plan was previously administered by Vanguard Fiduciary Trust Co. until January 7, 2020, when it transitioned to Fidelity Investments, which remains the recordkeeper as of the end of 2023. In 2023, the plan also incurred administrative expenses by paying Strategic Advisors—an affiliate of Fidelity—direct compensation for plan-related services.
The lawsuit claims that Amazon's plan agreement permits fiduciaries to utilize forfeited funds in one of three ways: to restore forfeited accounts, to pay administrative costs, or to lower future matching payments. However, rather than reducing participant fees, the complaint argues that Amazon largely utilized the money to offset its own contributions.
The use of 401(k) forfeitures is the subject of a larger wave of litigation, including this case. Since 2023, over 30 similar lawsuits have been brought against large companies, including Qualcomm Inc., HP Inc., and Honeywell International Inc. Courts have ruled in favor of plan sponsors, such as BAE Systems Inc., Thermo Fisher Scientific Inc., and Clorox Co., dismissing many of these lawsuits.
Legal and industry experts have expressed skepticism about the lawsuit’s merits. Daniel Aronowitz, president of fiduciary insurance firm Encore Fiduciary, argues that these cases are attempts to exploit ERISA regulations. He points out that Amazon’s plan offers some of the lowest fees in the country, recordkeeping fees are only $21 per participant, and Vanguard target-date funds cost between three and four basis points, significantly lower than industry averages. “This is just plaintiff law firms trying to weaponize ERISA, and that’s what’s happening in the modern era with the surge of cases in the second half of 2024,” Aronowitz says. “We find [it] really offensive for Amazon plan fiduciaries to be accused of somehow harming participants. They’ve done everything to ensure the lowest possible fees for their participants.”
In 2023, the IRS reiterated that 401(k) forfeitures may be utilized for participant allocations, plan costs, or employer contributions. In spite of this, the lawsuit demands that Amazon disgorge all profits it allegedly made from managing forfeited cash, fire fiduciaries who are believed to have violated their obligations, and take additional corrective action.
Amazon spokesperson Montana MacLachlan responded to the lawsuit, stating, “While we’re still reviewing the details of this case, we believe these allegations lack merit. We look forward to proving that through the legal process.”
The growing number of forfeiture-related lawsuits has raised concerns about regulatory oversight. Aronowitz criticized the Department of Labor (DOL) for allowing what he calls “regulation by litigation,” arguing that the agency should step in to clarify its position. “The Department of Labor and the IRS have regulations that have blessed this practice [of allocating forfeitures to employer contributions] for years and years,” he says. “What needs to happen is they need to consolidate these cases before one judge and get one ruling.”
As the legal battle unfolds, the case against Amazon could set a precedent for how courts interpret the use of forfeited funds in large retirement plans. If the lawsuit proceeds, it may influence fiduciary practices across the industry and prompt further regulatory scrutiny.
Sources:
https://www.plansponsor.com/amazon-accused-of-mismanaging-millions-of-401k-forfeiture-funds/ |
The Ultimate Guide to Tax Savings
As tax laws evolve and personal financial situations change, it's essential to stay informed about strategies that can help minimize your tax burden. Here are several tips to consider:
1. Maximize Retirement Contributions
Contributing to retirement accounts like 401(k)s and IRAs can reduce your taxable income. For 2025, the IRS has increased the 401(k) contribution limit to $23,500, while the IRA contribution limit remains at $7,000. If you're 50 or older, you may be eligible for additional catch-up contributions. These contributions not only bolster your retirement savings but also offer immediate tax benefits.
2. Consider a Roth IRA Conversion
Converting a traditional IRA to a Roth IRA involves paying taxes on the converted amount now, but it allows for tax-free withdrawals in retirement.* This strategy can be advantageous if you anticipate being in a higher tax bracket in the future or if your current IRA investments have decreased in value, potentially reducing the tax impact of the conversion.
3. Harvest Investment Losses
To balance capital gains from other investments, think about selling any investments that have lost value. Tax-loss harvesting is a method that can lower your taxable income. The "wash-sale" rule, which forbids buying the same or a nearly identical security again within 30 days of the sale, should be kept in mind.
4. Leverage Health Savings Accounts (HSAs)
If you're enrolled in a high-deductible health plan, contributing to an HSA can provide triple tax benefits: contributions are tax-deductible, growth is tax-free, and withdrawals for qualified medical expenses are tax-free. For 2025, the contribution limits are $4,300 for individuals and $8,550 for families, with an additional $1,000 catch-up contribution allowed for those aged 55 and older.
5. Optimize Charitable Giving
You can avoid capital gains taxes by donating appreciated assets, like stocks, directly to charitable organizations, or you can create a donor-advised fund, which enables you to make a charitable contribution, receive an immediate tax deduction, and then distribute funds to charities over time.
6. Plan for Gift and Estate Tax Changes
After December 31, 2025, the existing exemptions from the federal gift and estate taxes will be reduced. Consider tactics like giving assets to heirs now to lower the taxable value of your estate if it’s above these limits. To learn more about possibilities like trusts or other estate planning tools, speak with a tax advisor.
7. Stay Informed on Tax Law Changes
Tax laws are subject to change, and staying informed can help you take advantage of new opportunities or adjust your strategies accordingly. Regularly consult with a tax professional to ensure your tax planning strategies remain effective and compliant with current laws.
Implementing these strategies can help you manage your tax liability more effectively. Always consult with a qualified tax advisor to tailor these tips to your specific financial situation.
*Withdrawals from Roth IRAs are tax free if taken after age 59½ and at least five years after the conversion.
This content is for informational purposes only and not tax, legal, or financial advice. Please consult a professional for guidance on your specific situation.
Sources:
https://www.ml.com/articles/tax-tips-that-could-save-you-money.html
https://turbotax.intuit.com/tax-tips/tax-pro/6-tax-saving-strategies-and-tips-from-turbotax-experts/L7x25ralu
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