UBS Faces Latest 401(k) Forfeiture Lawsuit

UBS has joined the list of companies facing lawsuits over their management of forfeited funds in their 401(k) plans.

In Czakoczi v. UBS AG et al, filed Thursday in U.S. District Court for the District of New Jersey, the investment bank is accused of acting in its own self-interest by using forfeitures to reduce its employer contributions, as opposed to allocating forfeited funds toward paying plan expenses.

This same argument has been made in the slew of other Employee Retirement Income Security Act lawsuits against plan sponsors. Most recently, Cigna Group was sued for its treatment of forfeitures, while software company Intuit Inc. reached a settlement after its motion to dismiss the case was denied in 2024.

Carol Czakoczi, a participant in the UBS 401(k) Plan, claimed in the complaint that UBS’s use of the forfeitures to reduce employer contributions is “not in the best interest of participants, as participants then pay all of the plan’s expenses out of their individual accounts, leaving participants with less assets for distribution or investment.”

According to the lawsuit, the plan’s documents state that “forfeitures shall be applied to either reduce succeeding company contributions by the employers, or pay plan expenses, as determined by the plan Administrator in its sole discretion.”

However, Czakoczi’s complaint argues that because UBS is not at risk of satisfying its contribution obligations, it should have allocated forfeited funds to pay plan expenses.

The lawsuit further accuses UBS of failing to undertake any reasoned and impartial decisionmaking process to determine which use of the plan’s forfeited funds was in the best interest of participants.

The plaintiff, represented by Dicello Levitt LLP, asks the court to declare that UBS fiduciaries breached their ERISA duties and to require UBS to make good “plan losses” resulting from such alleged breaches.

According to its most recent Form 5500, the UBS 401(k) plan has more than $9 billion in assets and 32,447 participants.

UBS declined to comment on the lawsuit.

Several forfeiture cases have been dismissed in the last year, including one earlier this month that was filed against the Kaiser Foundation Health Plan. In that case, the district court judge found that the plaintiff’s claims were insufficient, adding that ERISA does not impose a broader duty to maximize participant balances beyond what the plan terms require.