Ameriprise Financial hasagreed to settle a 401(k) excessive fees claim for $27.5million.

The settlement – the latest in a string of 401(k) cases in whichthe plaintiffs were represented by St. Louis-based Schlichter,Bogard and Denton – will affect about 24,000 current and formeremployees.

The case had been set to go to trial next month. Insettling the claim, Ameriprise denied wrongdoing, contending thatthe fees to the plan were reasonable and that the plan compliedwith all aspects of ERISA and that it did not commit any fiduciarybreaches.

Also read: Supreme Court taking interest in fiduciarycases

The plaintiffs in Krueger vs. Ameriprise Financial, filed infederal court in Minnesota in 2011, alleged otherwise, noting thatAmeriprise’s 401(k) plan invested “hundreds of millions of dollars”in mutual funds managed by RiverSource Service Corp. and ColumbiaManagement Investment Services Corp., both Ameriprisesubsidiaries.

About 25 of the subsidiaries’ proprietary mutual funds andtarget-date funds were offered to participants, who contributed anaverage of $500 million in assets a year between 2005 and 2012,according to court documents.

Those funds generated millions of dollars in fees for thesubsidiaries, all of which “ultimately provided a financial benefitto Ameriprise,” the plaintiffs alleged in their first amendedcomplaint, filed in 2012.

The plaintiffs also claimed that the plan’s fiduciaries choseAmeriprise Trust Co., Ameriprise’s recordkeeper subsidiary, astrustee to the plan without exercising a competitive biddingprocess, providing a financial benefit to Ameriprise. ATC was soldto Wachovia in 2006.

The proprietary funds Ameriprise offered were“significantly higher (in cost) than the median fees for comparable mutual funds in 401(k) plans,” andwere “significantly higher than the fees available from alternativemutual funds, including Vanguard Institutional Funds,” argued theplaintiffs.

According to the court documents, the cost of one of theproprietary funds was 94 basis points higher than a comparable fundoffered by Vanguard.

Moreover, the proprietary funds had “poor or nonexistent”performance history when fiduciaries selected them, theplaintiffs alleged.

In one specific case, the plaintiffs’ complaint shows that theRiverSource Balanced Fund had a 1-star rating from Morningstar in2005, when the fund was added, while an equivalent Vanguard fundheld a 4-star rating.

MyPlan IQ, a web-based investment analytics tool, ratedAmeriprise’s 401(k) in the bottom 2 percent of plans with respectto fund quality, the plaintiffs’ attorneys said.

“Prudent investors also fled RiverSource Funds. In 2005RiverSource stock and bond funds had outflows of $9.3 billion. In2006, an additional $6.9 billion in assets were pulled fromRiverSource funds,” they argued.

Ameriprise’s motion to dismiss the case was denied in November2012.

In agreeing to settle the suit, the Minneapolis-based firmagreed to make some changes in the way it runs its 401(k)plan.

It will re-bid its plan to recordkeepers and investmentconsultants. Also, recordkeeping fees will now be set on a flat-feeor fee-for-participant basis, and those fees will be disclosed morethoroughly, along with performance benchmarks for each fund offeredin the plan.

The plan is also required to consider lower-cost collectiveinvestment trusts or separately managed accounts.

And the plan’s fiduciary committee will no longer be able toinclude executives from Ameriprise’s investment managementsubsidiaries.

In a statement, company spokesman John Brine said Ameriprise has “astrong 401(k) plan that is administered for the sole interests ofparticipants."

“The settlement does not require any changes to our plan, whichwill maintain the existing broad and competitive selection ofinvestment options and features. The plan has always included fundswe manage, as well as funds from other companies and a brokeragewindow that offers participants additional choice.”

The Supreme Court last month heard arguments in anotherSchlichter case, Tibble vs. Edison, a dispute thatthat may give investors more power to sue over excessive fees.

Eight of the 13 lawsuits brought by Schlichter's firm havesettled so far, with Bethesda, Md., defense firm Lockheed Martin payingthe biggest amount, some $62 million.

Also read: Monitoryour 401(k) investment menus or else

Correction: An earlier version ofthis story wrongly reported Ameriprise would redesign its 401(k),rather than changing the way it runs its plan.