The company that told us we can do home improvement by ourselves might not have been able to properly run their 401(k) plan.
Home Depot is now the target of a $140 class action lawsuit that was filed in the U.S. District Court of the Northern District of Georgia.
The lawsuit claims that Home Depot violated their fiduciary duty by mismanaging their 401(k) retirement plan. According to the complaint, Home Depot selected multiple poorly-performing funds for its 401(k) plan, that allowed their investment advisers to charge its employees unreasonable fees. It also claimed that Home Depot turned a blind eye to a kickback scheme between an investment adviser and the plan’s recordkeeper.
The Plaintiffs alleges that with their $6 billion plan that Home Depot arranged for the investment advisor Financial to sell investment advisory services through “robo advice,” in which “a robot creates cookie-cutter portfolios based on minimal participant input.” It’s also alleged that Home Depot allowed Financial Engines to charge plan participants advisory fees that were in some cases double the competitive rate. While Financial Engines was replaced by Alright Financial Advisors in 2017, they rehired Financial Engines as a sub-advisor. The lawsuit names Financial Engines and Alright as co-defendants.
With 20,000 employees, $6 billion in plan assets, and using a robo-advisors, suing Home Depot is an ERISA litigator’s dream. Whether this lawsuit survives a motion for summary judgment is anyone’s guess. Regardless, it’s important for a plan that size to be careful out there.