Complaint Alleges ERISA Breaches by Siemens Energy

A former Siemens Energy Inc. employee filed a complaint in U.S. district court alleging the company’s 401(k) savings plan breached the Employee Retirement Income Security Act in four unique ways.

Babinski v. Siemens Energy Inc., filed in U.S. District Court for the Southern District of Texas, accused Siemens Energy’s retirement plan of breaching ERISA by charging excessive recordkeeping fees, levying expensive managed account charges, offering poor-performing funds and offsetting employer contributions with forfeitures. The plaintiffs are represented by Ward + White PLLC and Capozzi Adler P.C.

According to the complaint, Siemens Energy retained in its plan underperforming investment options, including its proprietary stable value fund that delivered lower returns than comparable plans available on the market.

The complaint also accuses Siemens Energy of engaging in prohibited transactions by using the services of Alight Financial Solutions—an affiliated service provider—to handle recordkeeping and managed account services. Alight provided the plan with administrative and recordkeeping services, which the complaint alleges were excessive. The plaintiff alleges these services were overpriced, with plan participants charged fees significantly higher than market rates—up to $205 per person annually, compared with the $30 average for similar plans, according to the complaint.

The complaint also alleges misuse of plan forfeitures. Rather than using forfeited non-vested employee contributions to offset plan administration costs for participants, the complaint claims Siemens used the funds to reduce its own required employer contributions—violating its fiduciary duty of loyalty.

The Department of Labor recently issued an amicus brief siding with plan sponsors, indicating the DOL’s support for employers using forfeited funds to offset contributions. The IRS also issued guidance in 2023 specifying plan sponsors’ ability to do so, although, both instances are examples of sub-regulatory guidance and are not legally binding.

Following the 2024 repeal by the U.S. Supreme Court of the so-called Chevron deference in Loper Bright Enterprises et al. v. Raimondo, Secretary of Commerce et al., federal courts are no longer required to rely on the judgment of federal agencies when federal law is unclear. As a result, the DOL and IRS opinions carry less legal weight, although ERISA lawyers have deemed the DOL’s recent brief a “significant” development.

Nonetheless, the complaint against Siemens Energy and associated plan committees lists five counts, including breach of the fiduciary duties of prudence and loyalty; violations of ERISA’s anti-inurement and prohibited transaction provisions; and failure to monitor fiduciaries.

As of 2023, Siemens Energy’s 401(k) savings plan had about $3.5 billion in assets with nearly 14,000 plan participants, according to its latest Form 5500 filing.

A company spokesperson said Siemens Energy does not comment on pending litigation.