Wells Fargo was sued last week by a former employee for allegedly misusing forfeited funds in its 401(k) plan, in a recent uptick of forfeiture lawsuits continuing the trend of employers facing scrutiny for using 401(k) plan forfeitures to reduce employer contributions.

Former employee Thomas Matula, Jr. is alleging the Wells Fargo & Company 401(k) Plan violated the Employee Retirement Income Security Act and "wrongfully and consistently" misused 401(k) plan assets for the company's own benefit instead of its participants, in a proposed class action lawsuit in California federal court. Plan assets "have been wrongfully diverted out of the Plan," according to the suit.

Wells Fargo used $2,020,000 in forfeited plan assets – those forfeited by employees leaving the company before becoming fully vested in the plan – to reduce its own contributions for year ended December 31, 2022, citing a Form 5500 filing in the suit. The lawsuit further alleges a breach of fiduciary duty and a failure to monitor plan fiduciaries.