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Another Big Retailer Beset with Excessive Fee Suit


The latest target of an excessive fee lawsuit? A $5.9 billion 401(k).

Targeted this time is the Kroger 401(k) Retirement Savings Account Plan by participant Lisa A. Sigetich (a Customer Service Representative at a Kroger in Wisconsin, currently on disability leave). She is represented by Walcheske & Luzi, LLC[i] and Strauss Troy Co., LPA, in her suit brought on behalf of the 90,000 participants in that plan. 

At a high level, the suit (Sigetich v. Kroger Co., S.D. Ohio, No. 1:21-cv-00697, complaint 11/5/21) claims that the fiduciaries “breached the duties they owed to the Plan, to Plaintiff, and to the other participants of the Plan by, among other things: (1) authorizing the Plan to pay unreasonably high fees for recordkeeping services; and (2) failing to disclose to Plan Participants fees associated with the Plan.”

More specifically, they are alleged to have paid $30/participant for recordkeeping services when, by the plaintiff’s reckoning (relative to what the suit asserts are comparable plans), a reasonable amount would be $20/participant. In a short table included in the filing the $3 billion Kaiser Permanente plan is shown to be paying $27/participant to Fidelity’s $14/participant—on their way to asserting that the reasonable fee for the Kroger plan would have been $20/participant, “if not lower.” 

 “Defendants did not engage in a prudent decision-making process, as there is no other explanation for why the Plan paid these objectively unreasonable fees for recordkeeping and investment management,” the suit asserts. The plan’s recordkeeper throughout the period was Merrill Lynch, which is not a party to the suit.

In fact, the brief (33-page) filing is remarkably short on specifics, and conclusory in its accusations. Among them:

  • “Defendants, however, 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.”
  • “Over the past twenty years, the fees that recordkeepers have been willing to accept for providing retirement plan services has significantly decreased. Recordkeepers are willing (or competitively required) to accept a lower and more competitive fee as a result of, among other things, the competitive pressures created by greater information becoming available to plan fiduciaries and the reduction in opaque fee structures.”
  • “The underlying cost to a recordkeeper of providing recordkeeping to a defined contribution plan is primarily dependent on the number of participant accounts in the Plan rather than the amount of assets in the Plan.”
  • “The fees were also excessive relative to the recordkeeping services received since the same services are generally offered to Plans of this size on an “all you can eat basis,” regardless of the number of services selected by the Plan.”
  • “Prudent plan fiduciaries ensure they are paying only reasonable fees for recordkeeping by soliciting competitive bids from other recordkeepers to perform the same services currently being provided to the Plan. This is not a difficult or complex process and is performed regularly by prudent plan fiduciaries.”
  • “Prudent plan fiduciaries can easily receive a quote from other recordkeepers to determine if the current level of recordkeeping fees is reasonable.”
  • “A benchmarking survey alone is inadequate. Such surveys skew to higher “average prices,” that favor inflated recordkeeping fees. To receive a truly “reasonable” recordkeeping fee in the prevailing market, prudent plan fiduciaries engage in some form of solicitation of a competitive bid on a regular basis.”
  • “…Based on information contained in the 5500 Form, each of the comparable plans above received all the standard and virtually identical recordkeeping services that the Kroger Plan received.” 
  • “These recordkeeping fees were also excessive relative to the RPS services received, since such services are standard for very large 401(k) plans like the Plan here.” 
  • “In other words, any difference in recordkeeping fees between comparable Plans are not explained by the different services each recordkeeper may have provided.”

Ultimately, the plaintiff argues that “…as compared to other plans of similar sizes with similar amounts of money under management, receiving a similar level and quality of services, the Plan actually cost its Participants (when accounting for compounding percentages) a total, cumulative amount in excess of $5,882,580 in recordkeeping fees.”

The suit also claims that the defendants failed to properly disclose the fees charged to Participants in the Plan in their 404a-5 participant fee disclosure documents. “Plaintiff and Plan Participants have been damaged through Defendants’ incomplete, inconsistent, and erroneous Plan disclosures by not being able to fully understand the fees associated with Plan investments they selected,” the suit alleges.

Will the short, assumptive on the fact suit survive the inevitable motion to dismiss? We shall see.

NOTE: In litigation there are always (at least) two sides to every story. However factual it may turn out to be, the initial lawsuit in any action is only one side, and one generally crafted toward a particular result. In our coverage you'll see descriptions of events qualified with statements such as “the suit says,” or “the plaintiffs allege”—and those qualifiers should serve as a reminder of that reality.

[i] They’re also represented plaintiffs in similar cases involving Juniper NetworksInfinity Healthcare PhysiciansKimberly ClarkNestle’s and Costco.