Allegations against the defendants in this case, Financial Engines Advisors, Alight Financial Advisors and persons representing each of these firms, have been dismissed, while allegations against Home Depot defendants will proceed. Plaintiffs allege that in addition to the selection of “poorly performing funds” in the Home Depot Futurebuilder 401(k) Plan, Home Depot allowed hired investment advisors to charge unreasonable fees for managed account/advisory services, and allowed a “kickback scheme between an investment adviser and the plan’s recordkeeper, Alight.” According to the Court ruling, a service provider does not become a fiduciary simply by negotiating its compensation in an “arm’s length bargaining process.” On that basis, the claims against Financial Engines and Alight Financial Advisors were dismissed. However, sufficient facts were presented by the plaintiffs to support an inference of Home Depot’s “imprudent process”, in its role in selecting the managed account services. Additionally, the “circumstantial factual allegations” established by the plaintiffs with regard to Home Depot’s “flawed decision making” in the selection of sub-par investments have been allowed to stand. The case against Home Depot will therefore proceed.
www.planadviser.com; September 22, 2020.