Compliance April 27, 2023

Oilfield Services Company Baker Hughes Faces ERISA Lawsuit  

A class action complaint filed in Texas alleges fiduciary breaches by the company’s 401(k) plan.   

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A class action complaint, Jesus Espinoza et al. v. Baker Hughes Holdings LLC, claims the Baker Hughes Co.’s 401(k) plan did not adhere to fiduciary best practices to control plan fees and expenses, alleging one count of breaches of the fiduciary duty of prudence under the Employee Retirement Income Security Act. 

The lawsuit, filed in U.S. District Court for the Southern District of Texas, Houston Division, claims the Baker Hughes Co. caused the plan to pay excessive fees and unreasonable compensation to the plan’s recordkeeper—specifically by allowing the recordkeeper to receive compensation via “float” on plan participant money—resulting in high costs to plan participants, according to the complaint.

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“Defendant did not adhere to fiduciary best practices to control Plan fees and expenses,” the complaint states. “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, which failed to ensure that: (a) the fees and expenses charged to Plan participants were reasonable, and (b) that the compensation the recordkeeper received from the Plan was reasonable.”

The lawsuit asks the court to certify the class, to approve the plaintiff’s requested class period and for compensation to retirement plan participants, the court filing shows.

“The Plan suffered millions of dollars in losses caused by Defendant’s fiduciary breaches and remains exposed to harm and continued losses, and those injuries may be redressed by a judgment of this Court in favor of Plaintiff,” attorneys for the plaintiff wrote in the complaint.  

The plaintiff asked the court to find and declare that the defendant breached its fiduciary duties to participants; to find the defendant personally liable to restore all losses to the plan resulting from the breach of fiduciary duties; to determine the method for calculating plan losses and to order the defendant to provide all accounting necessary to determine the amounts the defendant must make good to the plan under ERISA, among other relief requested.

“Plaintiff and the putative class members are entitled to receive benefits in the amount of the difference between the value of their individual Plan accounts currently, or as of the time their accounts were distributed, and what their accounts are or would have been worth, but for Defendant’s breaches of fiduciary duty,” the complaint states.

The complaint asks for the court to certify the class period between April 30, 2017, and the present, applying to all persons except the defendants’ fiduciaries and their immediate family members, who were participants or beneficiaries of the plan, the filing shows.

The Baker Hughes Co. 401(k) retirement plan held $3,815,191,486 in assets for 24,098 participants with account balances at the end of 2021, the court filing shows.

“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 recordkeeping and other administrative services to the Plan’s recordkeeper, Empower Retirement,” the complaint states. “[The] Defendant agreed to compensate the Plan’s recordkeeper by allowing the recordkeeper to receive compensation via “float” on Plan participant money.”

Float is money in transit in or out of the plan. Baker Hughes agreed that anytime plan participants deposited or withdrew money from their individual accounts in the plan, that money would first pass through the recordkeeper’s clearing account, according to the complaint.

“Defendant breached its fiduciary duty of prudence by permitting Empower and/or Alight Solutions to receive excessive compensation via float,” the complaint states.

Empower has served as the recordkeeper for the plan, with Alight Solutions in the role from 2017 to 2020, according to the complaint.

Baker Hughes is an oilfield services company that provides products and services for oil well drilling, formation, evaluation, completion, production and reservoir consulting. The company is organized as a corporation in Delaware and headquartered in Houston. 

A request for comment to Baker Hughes was not retuned.

The class of plaintiffs is represented by the law office of Chris Miltenberger PLLC, based in Southlake, Texas; attorneys from Wenzel Fenton Cabassa PA, based in Tampa Bay, Florida; and McKay Law LLC, based in Scottsdale, Arizona. The complaint did not include an attorney for the defendant.

Data and Research April 27, 2023

A Plan Design to Drive Retirement Savings Equity

Plan sponsors can use this plan design to support African American and Latino retirement plan participants to save more for retirement.   

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Plan sponsors can increase the retirement plan participation rates, savings rates and average account balances of African American and Latino employees by implementing  plan designs like automatic features, new Voya Financial data shows.

African American and Latino workers have lower retirement plan participation rates, savings rates and average account balances compared to white and Asian American workers but the gap closes significantly in plans that offer automatic enrollment, argues a thought leadership paper based on the research.

Data shows that African American and Latino employees have added financial challenges which lessen plan participation and savings rates and lower average balances for retirement. African American and Latino workers also face greater barriers when saving, which can negatively impact retirement outcomes, according to the Voya report. 

Voya data shows the average African American and Latino worker reported lower retirement plan participation, at a rate of 53% for African American workers and 45% for Latino employees, compared to a participation rate at 66% for white employees and 62% for Asian Americans.

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The average retirement plan account balance is similar, with White and Asian American workers with higher average account balances saved than their African American and Asian American counterparts: the average account balance for whites was $99,000, Asian Americans $86,000, African Americans $45,000 and Latinos $43,000.

The Voya data also show African American and Latino employees have lower levels of financial confidence: 59% of white employees and 56% of Asian American employees expressed feeling financial confidence, compared to 43% of Latino and 37% of African American employees.

“Inclusion does not happen organically; organizations must be intentional at every level and apply a DEI lens to savings and benefits solutions to ensure all communities have the access, support and tools to clear the path to financial confidence and a more fulfilling life,” states Angela Harrell, senior vice president, chief diversity and corporate impact officer at Voya Financial, in the paper.

Savings Falter

Asian American workers had the highest average retirement savings rate at 9.5%, followed by white workers at 8.4%. The average savings rate for African American employees was 7.1% and the average savings rate for Latino workers was 6.9%, data shows.

Demographics are a factor for how employees manage their emergency savings as well as 40% of Asian American, 45% of white, 69% of Latino and 70% of African American employees said they were off track with their emergency savings.

Employer Strategies

The paper argues that proven employer strategies cam help close the retirement savings gaps for African American and Latinos by including automatic features in plan designs. Voya found that while African and Latino employees have lower plan participation rates, “the gap closes significantly in plans that offer automatic enrollment,” Voya states in a press release with findings.

“Over the last several years, employers have increased their focus on driving greater inclusivity, which has led to positive outcomes in the recruitment and retention of a more diverse workforce,” states Rob Grubka, CEO, workplace solutions at Voya. “Our research has found that employers can take this a step further by now focusing on opportunities to create greater value out of their benefits and savings programs by understanding and acting upon the unique needs of their employees,” sHowever, despite the efforts supported by many employers today to drive greater outcomes, the dimensions of a strong retirement plan, such as participation and savings rates that can drive these outcomes, still remain a challenge for many individuals today, particularly among certain employee communities.”

Plan sponsors that use automatic features like automatic enrollment can boost the savings rates of African Americans and Latinos, finds Voya. 

Black and Latino employees “have a two to three times higher participation rate” compared to their peers at employers who do not offer automatic enrollment, states the paper. 

Voya conducted the analysis in June 2022. The research examined retirement plan participant data from six Voya plan sponsors representing over 163,000 employees.

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