Siemens Forfeiture Case Dismissed 

A federal judge in New Jersey dismissed on July 31 a plan forfeiture suit targeting Siemens Corp. that accused the company of using plan forfeitures to reduce employer contributions. 

The complaint in Cain v. Siemens Corp., originally filed in U.S. District Court for the District of New Jersey in August 2024, alleged that Siemens violated the Employee Retirement Income Security Act by using forfeitures “in its own interest,” rather than in the interests of participants. Siemens Energy, a subsidiary of the company, had a separate ERISA complaint filed against it last week that includes allegations of the misuse of forfeitures. That case is ongoing.  

Siemens 401(k) plan documents allow the company to use forfeitures to reduce the company’s contributions to the plan or to pay plan expenses. The 2024 complaint alleged that the latter was more favorable to plan participants, while the former only benefited the plan sponsor. The complaint alleged that the options worked as a “conflict of interest,” since Siemens had an incentive to use forfeited funds to offset future contributions.  

The Department of Labor recently filed an amicus brief in support of plan sponsors’ ability to use forfeitures to offset future contributions if they wish to. While significant, according to attorneys, the brief holds less weight than it would have two years ago, following the 2024 decision in Loper Bright Enterprises et al. v. Raimondo, Secretary of Commerce, et al. by the U.S. Supreme Court, overturning the Chevron standard of deference to agency interpretations. Based on Loper Bright, federal courts are no longer required to rely on the judgment of federal agencies when federal law is unclear. As a result, DOL and IRS opinions carry less legal weight than they would have.  

In last week’s dismissal, U.S. District Judge Claire C. Cecchi cited Hutchens v. HP, the case on which the DOL weighed in, as she stated that ERISA “does not mandate what benefits an employer must provide under a plan and does no more than protect the benefits which are due to an employee under a plan.” 

Cecchi wrote that the plaintiffs’ complaint—which alleged that fiduciaries must always use forfeitures to pay down plan expenses, rather than offset future contributions—was “too broad to be plausible.” 

She therefore dismissed the case, stating that the plaintiffs did not present a valid ERISA complaint. However, she dismissed the case without prejudice, meaning the plaintiffs can amend their complaint and refile.  

On August 3, the plaintiffs’ lawyer, Lawrence C. Hersh, whose practice includes offices in New York and New Jersey, filed a notice that the plaintiffs plan to appeal the dismissal, rather than amend the complaint and refile it.