The next Employee Retirement Income Security Act (ERISA) fiduciary breach complaint of 2018 has been filed, this one with the U.S. District Court for the Northern District of Georgia.
Plaintiffs bring a broad range of claims against a number of defendants—including Home Depot, Inc.; the administrative committee of the Home Depot Futurebuilder 401(k) Plan; the plan’s investment committee; Financial Engines Advisors; Alight Financial Advisors; and some 30 or more individuals from these firms.
The sweep of the claims included in the 98-page complaint is very broad, and for that reason alone it will be interesting to see how successfully the plaintiffs will be able to demonstrate standing on such a broad range of issues. Echoing the language of the numerous excessive fee and failure to monitor ERISA litigation cases that have been filed in recent years, plaintiffs here suggest Home Depot has “selected multiple poorly-performing funds for its 401(k) plan, allowed investment advisers to charge its employees unreasonable fees, and turned a blind eye to a kickback scheme between an investment adviser and the plan’s recordkeeper.”
The lead plaintiffs are both participants in Home Depot’s retirement plan, and they are seeking certification on behalf of themselves and approximately 200,000 current and former plan participants. At this very early stage, the class complaint seeks $140 million in damages. One somewhat unique aspect of their challenge is that, unlike some others that have come before, plaintiffs here have named multiple providers touching the plan as defendants—rather than focusing on one provider relationship and mentioning others as being more peripherally involved in wrongdoing. It stands to reason that the case will see a dizzying number of cross motions from the defendants, testing which of them carries a fiduciary responsibly to the plan—and if they do, to what extent and in what contexts.
The text of the complaint includes substantial detail about the inner workings of the Home Depot retirement plan, and its relationships with advice providers Financial Engines and, later, Alight. Plaintiffs include in their complaint a substantial amount of backward-looking fund performance data to underpin their failure to monitor claims, comparing the Home Depot offerings to others that could have been purchased.
In another section, the plaintiffs further allege that Home Depot arranged for the investment adviser Financial Engines to sell investment advisory services to participants. But rather than providing genuine personal investment advice, Financial Engines is accused of delivering “cookie-cutter portfolios based on minimal participant input.” According to the complaint, Home Depot allowed Financial Engines to charge plan participants advisory fees that were in some cases double the competitive rate.
“To add insult to injury, Home Depot condoned an arrangement in which Financial Engines kicked-back a portion of its fee to the plan’s recordkeeper,” plaintiffs allege. “Although Home Depot replaced Financial Engines with Alight Financial Advisors in July 2017, Alight simply re-hired Financial Engines as a sub adviser. Thus, the new arrangement added another layer of inefficiency to the plan’s fee structure.”
As relief, plaintiffs seek “compensation for financial losses to plan participants and beneficiaries resulting from the plan’s underperforming investments and excessive fees; reform to Home Depot’s retirement plan that would remove imprudent investments and ensure only reasonable investment advisory expenses; and the removal of the fiduciaries who have violated their duties to the plan’s participants and beneficiaries under ERISA.”
The full text of the complaint is available here.