A federal judge in San Diego rejected Qualcomm Inc.’s motion to dismiss a lawsuit by a 401(k) plan participant over forfeitures.

The key issue here is whether Qualcomm could use forfeitures to reduce employer contributions.

The Internal Revenue Code allows 401(k) plans to use forfeitures to reduce employer contributions to the plan or reduce plan expenses. Qualcomm chose to reduce employer contributions, according to Antonio Perez-Cruet vs. Qualcomm Inc. et al.

The plaintiff, a former employee sued in October 2023 claiming ERISA’s guidelines say plan executives’ fiduciary duty is to reduce plan expenses. The plaintiff claims that ERISA trumps the IRS.

With a motion to dismiss rejected, a settlement is quite possible.