On the shop floor of any auto body center, trust is everything. Drivers who’ve already been in a stressful accident trust the technicians to repair their car correctly. Those employees, in turn, trust their company to take care of them. That includes safeguarding the money they’re setting aside for retirement. Well, “broken trust” is now at the center of a federal lawsuit against Caliber Collision.

Caliber Collision accused of mishandling millions of dollars from its workers’ 401(k) plan

The company is the largest collision repair chain in the United States. According to its “Our Story” page, it operates around 1,800 locations in 41 states.

The lawsuit, filed by participants in Caliber’s retirement plan, claims the company and 10 unnamed fiduciaries mishandled more than $4 million in plan assets from 2019 to 2022.

Allegedly, these funds went to shrink Caliber’s own required contributions.

That, according to the complaint, is a serious violation of federal law under the Employee Retirement Income Security Act (ERISA), which requires companies to act solely in the best interests of plan participants.

Here’s how a 401(k) is supposed to work

Employees choose to contribute part of their paycheck, expecting that money to grow and support them later in life.

Typically, the company offers a match. Say, a dollar for every dollar an employee contributes up to a small percentage of their salary, like 3%. After that, the match reduces. It’s common for employers to then match 50% of the next, say, 2% of an employee’s salary.

That’s treated as part of the employee’s earned compensation. If a company offers this type of plan, changing how funds are used is not optional for the company. And it’s certainly not money the company can redirect back to itself.

ERISA also sets clear rules about what happens to forfeited plan assets. This is money left behind by employees who leave before their contributions vest. Those funds must be used to benefit participants, either by paying plan expenses or enhancing benefits. The lawsuit claims Caliber instead used them to cut its own costs, while employees continued paying millions in plan fees.

The numbers laid out in the complaint paint an unflattering company image

In 2019, Caliber Collision allegedly used $621,634 in forfeited assets to offset its contributions. In 2020, it was $625,248. That jumped to nearly $1.5 million in 2021 and another $1.36 million in 2022.

At the same time, plan participants paid more than $6 million in expenses over those four years. Less than 2% of forfeited funds were used to pay those costs, the lawsuit says.

Even more, significant amounts of forfeited money sat untouched at the end of each year. Over $634,000 in 2019 and more than $1.19 million in 2020. ERISA requires that those funds be used “as soon as administratively practicable,” not left idle while employees foot the bill.

The suit argues that the pattern suggests either poor oversight or a deliberate choice to put the company’s interests first, Repairer Driven News shared.

Only one former employee is specifically named as a class representative

They worked as a vehicle damage estimator at a Caliber Collision shop in Maryland for nine months in 2023. So far, it seems they’ve declined to comment publicly. His attorneys said the case is about making sure fiduciaries follow their legal duties and that the courts provide the relief workers are owed.

The legal fight comes as the company is preparing for a possible initial public offering and expanding its operations, including a recent acquisition of Car Body Lab, a mobile repair company operating in seven states.

If the allegations hold up in court, Caliber could face steep penalties

And more importantly, a serious blow to the trust of thousands of employees who believed their retirement money was in safe hands. In the car accident business, trust is a vital part of every ticket. The same should be true when it comes to workers’ futures.

MotorBiscuit reached out to Caliber Collision via its Contact Us page for comment.