In the latest Cigna suit, Adams et al. v. the Cigna Group et al., the plaintiffs allege Cigna and its retirement plan committee misused more than $17 million in 401(k) plan assets over several years to offset company costs, in violation of the Employee Retirement Income Security Act. Cigna Group’s 401(k) has $13 billion in assets.

Cigna “consistently and reflexively” chose to use 401(k) forfeitures to reduce the amounts it would otherwise have to contribute to the plan, instead of using this money to reduce the administrative expenses charged to workers, alleged in the lawsuit.

According to the IRS, 401(k) forfeited funds from departing employees who are not fully vested in the plan can be used for any of three permitted purposes: to pay plan expenses, to reduce future employer contributions or to make an additional allocation to participants.

Beginning in 2019, Cigna used “forfeited” plan assets—funds from employee accounts of departed workers who left the company before becoming fully vested in employer contributions—to reduce its own matching contributions, as the plaintiffs claim is required. The complaint also alleges that Cigna failed to prudently monitor the use of plan assets, resulting in millions in lost investment gains and additional out-of-pocket expenses for its 93,000 participants, in this class action lawsuit.

In May, a very similar 401(k) lawsuit was filed against Cigna in the same district court in Pennsylvania. In Reven et al. v. The Cigna Group 401(k) Plan Retirement Plan Committee, former employees accused Cigna of allocating forfeited 401(k) funds to reduce employer contributions to the plan instead of using the funds to reduce or eliminate the amounts charged to plan participants for administrative costs. As a result, the cost participants millions of dollars in returns.

Related: Cigna employees file a 401(k) lawsuit, alleging misuse of forfeited funds

In this Reven lawsuit, employees also alleged that Cigna fiduciaries breached their duty by selecting and maintaining a certain stable value investment with “significantly lower rates of return” when compared with similar stable value funds with higher crediting rates, which is the guaranteed rate of return for the investment fund.

There have been 50+ class action lawsuits filed in the past two years by employees challenging how employers use the “forfeited funds” from departing employees who leave before they are vested in the retirement plan. This recent spate of forfeiture suits began with a Department of Labor lawsuit against a tech company, which challenged how the plan sponsor used plan forfeitures. The case was settled in 2023, however, the plan terms required using forfeitures to lower plan expenses before using them to reduce employer contributions, according to the DOL's complaint.

Last month, another major health insurance company, Kaiser Foundation Health Plan, saw its 401(k) “forfeited funds” lawsuit dismissed, while courts seems split on these lawsuits.