As we first reported several weeks ago, plaintiffs’ lawyers are filing a wave of class-action lawsuits against major corporations alleging that their 401(k) plans charge excessive and undisclosed fees. (See “A Frontal Assault on 401(k) Fee Practices.”)
The latest suit—bringing the total to ten—is against Illinois-headquartered Kraft Foods, which has more than $5 billion in its 401(k) plan.
In similar fashion to the previously filed suits, plaintiffs claim that Kraft and various committee members breached their fiduciary duties by permitting the 401(k) plan to directly pay unreasonable fees from a master trust arrangement. However, plaintiffs do not allege that the Kraft plan made excessive indirect payments via revenue sharing arrangements.
The most important claim in the previous complaints appeared to be that the defendants permitted investment vehicles to charge excessive, undisclosed fees that were then shared with plan service providers. Plaintiffs claimed that this revenue sharing created the illusion that the plan expenses were minimal, when in fact participants were being charged for these expenses indirectly through higher management fees.
It is unclear why the new suit against Kraft does not contain allegations of improper revenue sharing. A likely explanation, however, is that plaintiffs omitted these allegations for lack of presently available evidence, but hope to add them as more information surfaces during discovery. This “shoot first, ask questions later” approach may indicate that the instigator of these suits, the St. Louis-based Schlichter, Bogard & Denton, is rushing to sue its intended targets before other firms can join in.