Kroger 401(k) Plan Breach of Fiduciary Duty on Fees ERISA Class Action

Like many large companies, the Kroger Company has a retirement plan for its employees. The Kroger 401(k) Retirement Savings Account Plan is governed by the Employee Retirement Income Savings Act (ERISA), which is meant to protect the beneficiaries of the plan. This class action brings suit against Kroger and its Board of Directors, alleging they have breached their fiduciary duties to the plan in not working to keep fees and expenses low and monitoring the investment options chosen for the plan.

The class for this action is all participants and beneficiaries of the Kroger Company 401(k) Retirement Savings Account Plan, from November 5, 2015 through the date of judgment in this case.

Kroger and its Board of Directors are fiduciaries for the plan, because they have discretionary authority or control over plan, the complaint alleges, but breached that duty “by, among other things: (1) authorizing the Plan to pay unreasonably high fees for recordkeeping services; and (2) failing to disclose to the Plan Participants fees associated with the Plan.”

The complaint quotes ERISA itself as saying that fees can significantly reduce the amounts in an account “by decreasing its immediate value, and by depriving the participant of the prospective value of funds that would have continued to grow if not taken out in fees.” It is therefore important for those who have charge of the plan to reduce fees.

The plan has nearly $6 billion in assets and more than 92,000 members, which the complaint alleges means it had significant bargaining power over the fees and expenses charged to the plan. However, the complaint claims, Kroger and its Board “did not sufficiently attempt to reduce the Plan’s expenses or exercise appropriate judgment to monitor its recordkeeper to ensure it was a prudent choice.”

The first category of fees that the fiduciaries must pay attention to are recordkeeping fees. These cover things like processing transactions, consulting with participants over investment choices, accounting and auditing services, and so on. Recordkeeping fees for plans as large as the Kroger one are generally priced on a per-participant basis. The complaint alleges that recordkeeping fees have decreased and become competitive, because of efficiencies of scale.

The complaint alleges that the Kroger plan’s recordkeeping fees were excessive compared to other plans of a similar size. Tables in the complaint show Kroger recordkeeping fees as being around $30 per participant, and compare them with other plans that pay $14-27 per participant.

The second category of fees that fiduciaries must pay attention to are fees charged by plan investments. The complaint alleges that the yearly fee disclosure for the plan lists there fees as “.00,” an amount that the complaint claims is clearly inaccurate.

Article Type: Lawsuit
Topic: Employment

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