Jerry Schlichter built the largest ERISA plaintiff's practice in the country by reading one sentence most plan sponsors skip. That sentence sits in the forfeiture clause of a 401(k) plan document. It spells out what happens to money left behind when employees quit before their match vests. After a unanimous Supreme Court ruling in April 2025, that clause is the first page a class-action attorney turns to.

"Let the lawyers handle the plan documents." If you sponsor a retirement plan, or co-sign one, you have heard this line. It sounds right. It is not.

The research on this is clear. Schlichter, founding partner of Schlichter Bogard, has won three unanimous Supreme Court ERISA decisions. His firm has earned more than $1.5 billion in total relief for plan participants. He did not build that record on fraud. He built it on plan documents that said one thing while the fiduciary did another.

Here is the mechanism. When an employee leaves before their employer match fully vests, those unvested dollars become forfeitures. The IRS allows three uses: pay plan expenses, give the money back to other participants, or reduce the employer's future contributions. Each one is legal. But the choice between them is a fiduciary decision under ERISA. The person who picks must act in the best interest of participants, not the company.

Most plans chose the third option. They used forfeitures to cut the company's own costs. For 60 years, starting with Treasury rules from 1963, that looked safe. An analysis of 909 single-employer 401(k) plans found that forfeitures used in 2022 alone totaled roughly $1.5 billion. The bulk went to reduce employer contributions.

The practice was standard. Standard is not the same as safe. "Let the lawyers handle the plan documents" does not fail people. It fails the system they are trying to run.

Schlichter's work made the gap visible. The flaw is not that companies used forfeitures to lower their own costs. The flaw is that the plan document recorded that choice in writing, and the person who signed it took on fiduciary duty the moment they did.

In April 2025, the Supreme Court ruled in Cunningham v. Cornell. The vote was unanimous. The Court did not say forfeitures are against the law. It said something more precise: if you want to claim an exemption from ERISA's prohibited-transaction rules, you, the defendant, must prove the exemption applies. Before this ruling, the burden sat with the plaintiff. Now it sits with the plan fiduciary.

The Court itself noted this would likely increase lawsuits. It called the concern "serious." Then the numbers proved it. More than 80 forfeiture suits have been filed since the first one landed in late 2023. Thirty came in 2024. Forty-three came in 2025. The pace is rising, even though plan defendants have won more than 70 percent of early dismissal motions.

That number is worth sitting with. Plaintiffs do not need to win most motions. They need the economics to favor filing. The ruling made that math work.

One case shows how. Schlichter's firm sued Charter Communications over its 401(k) plan: $7.87 billion in assets, 102,013 participants. The court denied Charter's motion to dismiss. It found that plaintiffs had shown the plan documents plausibly required forfeitures to cover expenses first, but the company used them to cut its own contributions instead. Every forfeiture case settled in plaintiffs' favor so far turned on the same gap. The document said one thing. The practice did another.

The document is the evidence.

The better principle is short. Read the document before someone else reads it for you.

Once that is clear, three moves follow from it.

Open the plan document. Find the section that governs how forfeited funds are used. Look for the exact sentence that directs the split. It will say "shall," "may," or "at the discretion of." Each word carries a different weight. "Shall" is a mandate. "May" is permission. "At the discretion of" is an assignment of duty.

This is the part that requires you to sit with the language, not skim it. Most plan sponsors have never read this clause. The attorneys filing suits read it before anything else.

Pull the numbers for the past three plan years. How much in total forfeitures? How much went to reduce employer contributions? How much went to pay plan expenses? How much went back to participants? The split tells you where the exposure lives. If 90 percent went to offset the company's costs and 10 percent went to expenses, that ratio is now a data point in a potential filing.

Put the clause next to the audit. Does the document say "shall be used to pay plan expenses" while the books show the money went to cut contributions? That gap, document versus practice, is the exact gap the Charter case survived dismissal on. It is the gap the settled cases turned on. If the language matches the practice, the exposure drops. If it does not, that is what a plaintiff's attorney will find first.

Running this over three plan years does something the old advice never did.

It makes four things visible: where the dollar exposure actually sits, whether the document mandates or merely permits the current use, whether the fiduciary choice can be defended on paper, and whether a single clause change would close the gap before someone else finds it.

At the end of the audit, ask three things.

→ What does the forfeiture clause actually require?

→ What has the plan done with forfeiture dollars in practice?

→ Where is the gap between the two, and how long has it been open?

That is the difference between advice that sounds right and a system that proves itself.

Aligned shows you the other half. See what buyers actually do between meeting. See what they open, revisit, and share; so you know the exact next step to move things forward. And your champion gets everything they need to win internally when you're not in the room.

Win More Deals With Aligned

The clause is still in the plan document. It says what it says. Sixty years of standard practice do not change the words on the page. The only question is whether the person who signed it knows what those words cost now.