A participant in a 401(k) plan offered by Baker Hughes Holdings LLC has sued the company accusing it of violating ERISA due to "excessive and unreasonable compensation" for record keeping.
"Instead of leveraging the plan's assets and tremendous bargaining power to benefit plan participants, defendant caused the plan to pay unreasonable and excessive compensation for record-keeping and other administrative services," said the lawsuit, Espinoza vs. Baker Hughes Holdings LLC.
"To the extent that defendant made any prudent attempt to control the plan's expenses and to ensure the expenses were not excessive, defendant employed flawed and ineffective processes," said the lawsuit filed April 25 in a U.S. District Court in Houston, Texas.
The plaintiff, who is seeking class-action status, alleged that plan executives "failed to ensure that the fees and expenses charged to plan participants were reasonable, and that the compensation the record-keeper received from the plan was reasonable."
The complaint focuses on role of float compensation to the record keeper.
"Defendant agreed to compensate the plan's record-keeper by allowing the record-keeper to receive compensation via 'float' on plan participant money," the lawsuit said. "Float is money in transit in or out of the plan. Defendant agreed that anytime plan participants deposit or withdraw money from their individual accounts in the plan, that money will first pass through the record keeper's clearing account."
Pointing out that Baker Hughes "has agreed any investment returns and/or interest earned on plan participant money while it is in the record keeper's clearing account shall belong to the record keeper," the plaintiff argued that is indirect compensation.
"Defendant has not tracked, monitored, negotiated, or even substantively recognized that the plan's record-keeper receives as compensation millions of dollars from float compensation," the lawsuit said. "It was imprudent for the defendant, as noted by the Department of Labor, to ignore millions of dollars in compensation received by the record keeper from the plan."
A company representative did not respond to a request for comment. The Baker Hughes Company 401(k) Plan, Houston, had assets of $3.82 billion as of Dec. 31, 2021, according to the latest Form 5500.