September 1, 2011
Authored by: benefitsbclp
Earlier this year, a split Seventh Circuit panel reversed, in part, summary judgment previously granted in favor of Kraft Foods Global, Inc. (“Kraft”) in a class action ERISA breach of fiduciary duty case involving “excessive fees” claims in connection with Kraft’s 401(k) plan. The majority opinion was authored by Judge Adelman, an Eastern District of Wisconsin judge sitting by designation in the Seventh Circuit, and was joined by Judge Rovner.
This entry provides a high-level summary of the issues reversed by the court:
- The Company Stock Fund Issue: In 2003, Kraft’s then-parent company, Altria Group, Inc. (formerly Philip Morris), made the decision to move the company stock fund in its 401(k) plan from the unitized stock fund (which generally employs a cash buffer) model to “real time” trading where each participant owned shares of the relevant stock rather than units of a fund that invested in the stock. Kraft plan fiduciaries considered similarly moving away from the unitized stock fund mode; however, at that time, Hewitt (the Kraft plan recordkeeper) did not offer real time trading. The court also noted that the unitized model offered advantages (e.g., faster trades and lower transaction costs by “netting” participant transactions). Based on the Court’s review of the record, the Kraft plan fiduciaries considered, but never actually made a decision regarding, whether to retain the unitized fund or move to real time trading. On remand, the Seventh Circuit majority ruled that Kraft must offer evidence that its plan fiduciaries made a decision