Kellogg Retirement Plan Saddled with Excessive Recordkeeping Fees, Class Action Claims

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A proposed class action alleges Kellogg Company has caused participants in its 401(k) plan to pay excessive recordkeeping fees since at least 2016.

According to the 43-page suit, Kellogg Company, its board of directors and two committees that help manage the company’s defined contribution pension plan have failed to act as prudent fiduciaries with regard to the plan’s recordkeeping fees and managed account services. As a result, the case says, plan participants have lost millions in retirement savings that instead went to “high-cost recordkeepers” Transamerica Retirement Solutions and Fidelity Investments.

Per the lawsuit, Kellogg, who employs more than 31,000 people worldwide, has violated the federal Employee Retirement Income Security Act (ERISA) by failing to act as a prudent fiduciary of its employee 401(k) plan.

The case relays that the Kellogg Company Savings and Investment Plan, with nearly 12,250 participants and over $1.9 billion in assets in 2020, qualifies as a mega plan whose size should have given Kellogg the bargaining power necessary to negotiate relatively low fees for recordkeeping and managed account services.

According to the suit, however, the company has “unreasonably” failed to leverage the plan’s size to lower fees and has instead allowed plan participants to be charged excessive amounts that “cannot be contextually justified.”

The case says that although comparable 401(k) plans with a similar number of participants and amount of assets paid an annual average of $35 per participant for recordkeeping fees between 2016 and 2020, the Kellogg 401(k) plan paid roughly $137 per participant per year for the same services in that timeframe.

Similarly, the plan paid annual fees for managed account services that were well above the fees offered by other providers whose services are “virtually identical” to those provided to plan participants, the lawsuit argues.

The only way to determine what is a reasonable amount of fees for recordkeeping and managed account services is to periodically solicit bids for those services and “stay[] abreast of the market rates,” the lawsuit asserts. Kellogg, the suit says, failed to do so even though the process of soliciting competitive quotes is not “cumbersome or expensive.”

The suit contends that a prudent plan fiduciary would never have agreed to pay the excessive amounts of fees paid by the Kellogg plan during the relevant timeframe.

The plaintiff, who worked as an accountant for Kellogg from 2006 to August 2019, claims Kellogg’s failure to act as a prudent fiduciary has cost plan participants more than $9,949,786 in excessive recordkeeping fees between 2016 and 2020.

The lawsuit looks to represent all participants in and beneficiaries of the Kellogg Company Savings and Investment Plan from June 28, 2016 through the date of judgment in the case.

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