Kroger Faces ERISA Recordkeeping Fee Lawsuit

Fiduciaries of the grocery chain’s 401(k) plan are accused of allowing unreasonably high fees for recordkeeping services and failing to disclose to plan participants fees associated with the plan.


Plaintiffs have filed a new Employee Retirement Income Security Act (ERISA) complaint in a division of the U.S. District Court for the Southern District of Ohio, naming as defendants The Kroger Co. and its board of directors.

The grocery chain is accused of various fiduciary breaches under ERISA, including authorizing its 401(k) retirement plan to pay unreasonably high fees for recordkeeping services and failing to disclose to plan participants fees associated with the plan.

“These objectively unreasonable recordkeeping fees cannot be justified,” the complaint states. “The defendants’ failures breached the fiduciary duties they owed to the plaintiff, plan participants and beneficiaries. Prudent fiduciaries of 401(k) plans continuously monitor fees against the market rates, applicable benchmarks and peer groups to identify objectively unreasonable and unjustifiable fees. The defendants did not engage in a prudent decisionmaking process, as there is no other explanation for why the plan paid these objectively unreasonable fees for recordkeeping and investment management.”

The Kroger Co. has not yet responded to a request for comment about the lawsuit.

According to the lawsuit, the Kroger 401(k) plan currently has nearly $6 billion in assets entrusted to the care of the plan’s fiduciaries. The plaintiffs say this demonstrates that the plan had substantial bargaining power regarding the fees and expenses that were charged against participants’ investments. However, the plaintiffs claim the defendants 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.

Similar claims have been filed against numerous other large and midsized employers across the United States over the past several years, meeting various degrees of success depending on the facts and circumstances underpinning each case. Broadly speaking, the success of such suits ties back to the ability (or lack thereof) of the plaintiffs to demonstrate that the payment of allegedly high fees or the provision of underperforming investments was likely the result of fiduciary breaches. In other words, merely stating that a plan paid fees that were higher than many of its peers or offered investments that underperformed other possible investment options is not enough to establish standing under ERISA.

Here, the plaintiffs suggest that recordkeepers generally offer the same bundles and combinations of services as their competitors. As a result, they allege, the market for defined contribution (DC) retirement plan services has become increasingly price competitive, particularly for large plans that, like the Kroger plan, have a sizable number of participants and a large amount of assets.

“From the years 2015 through 2019 and based upon the best publicly available information, which was equally or even more easily available to the defendants during the class period, and as also compared to other plans of similar sizes with similar amounts of money under management, receiving a similar level and quality of services, had the defendants been acting in the best interests of the plan’s participants, the plan actually would have paid on average a reasonable effective annual market rate for recordkeeping of approximately $1,740,192 per year in recordkeeping fees, which equates to approximately $20 per participant per year,” the complaint states. “During the entirety of the class period, a hypothetical prudent plan fiduciary would not agree to pay 50% more than what they could otherwise pay for recordkeeping.”

The plaintiffs allege the plan cost its participants (when accounting for compounding percentages) a total, cumulative amount in excess of $5.8 million in recordkeeping fees.

The lawsuit further alleges that the defendants failed to properly disclose the fees charged to participants in the plan in their 404a-5 participant fee disclosure documents.

“In the participant fee disclosure documents, the performance data as of July 21, 2021, shows that the ‘annual gross expense ratio’ for all plan investments was 0.00 as a percentage, or $0.00 per $1,000,” the complaint states. “Clearly, this is inaccurate as in participant quarterly disclosures, including the plaintiff’s quarterly statements from 2021, the same funds show a higher than zero gross expense ratio percentage. For instance, the plaintiff invested in the Retirement Date Fund 2030, which shows a 0.26 gross expense ratio percentage on her 2021 quarterly statements. On the other hand, the 2021 participant fee disclosure states that the gross expense ratio percentage for the exact same fund at the same exact same time is 0.00. As a result of inconsistent fee disclosures, the plaintiff and plan participants are not able to determine how much they actually paid for plan investments provided by Merrill Lynch, nor can plan participants calculate the net fee they paid for designated investment alternatives.”

The full text of the complaint is available here.

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