Home Depot Mismanaged 401(k) to the Tune of $140M, Class Action Says

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Home Depot was hit with a class action lawsuit alleging severe mismanagement of employees’ 401(k) accounts in violation of the Employee Retirement Income Security Act (ERISA).

Lead plaintiffs, Jaime Pizarro and Craig Smith, claim in their class action lawsuit that they signed up for their 401(k) accounts when they began working for Home Depot.

However, the plaintiffs say that the hardware giant mismanaged their accounts by using high fee robo-advisers. In fact, the Home Depot class action alleges that the robo-adviser used by Home Depot charged up to 700 percent more than comparable services.

The plaintiffs claim that when they signed up for their 401(k)s, they were directed to a financial company, Financial Engines, a so-called “robo-advisor” that managed employee retirement plans.

Financial Engines, also named as a defendant in the Home Depot class action lawsuit, allegedly violated ERISA in its management of Home Depot employee 401(k) plans, leaving them well behind the curve when compared to statistics from similarly situated employees with different 401(k) plans.

“Excessive investment advisory fees, a kickback scheme between Financial Engines and Aon Hewitt, and the plan’s many poor performing investment portfolios all contributed to this sad statistic and robbed participants of their retirement savings,” state the plaintiffs in their Home Depot class action.

Further, alleges the ERISA class action lawsuit, Home Depot failed to cut funds that didn’t perform well, leaving the plaintiffs and other employees behind when it came to retirement funds.

“According to [financial information company] BrightScope, the average Home Depot plan participant earned $100,000 less in retirement savings than employees in top-rated retirement plans of a similar size. The $100,000 disparity translates to an additional 18 years of work per participant,” the Home Depot ERISA class action lawsuit states.

Home Depot, alleges the plaintiffs, directed employees to Financial Engine 401(k) plans at retirement meetings. Employees were told to sign up for an age targeted plan. At no point did a representative help them or others; however, Financial Engines charged employees $22 million in fees from 2012 and 2016 for the service, or lack thereof, the Home Depot class action claims.

“Financial Engines kicked back a significant portion of its investment advisory fees to the plan’s recordkeeper Aon Hewitt — on the order of 25 percent to 35 percent,” alleges the Home Depot ERISA class action lawsuit. “This kickback was not paid in exchange for any investment services to plan participants and thereby unreasonably increased the plan participants’ investment advisory fees.”

The plaintiffs seek to represent other Home Depot employees, current and former, who participated in the 401(k). They allege that Home Depot and associated financial management companies violated ERISA standards when it came to managing employee retirement funds.

The plaintiffs are seeking $140 million in damages.

The Home Depot employees are represented by Paul Jay Pontrelli of Byrne Davis & Hicks PC and by Charles Field, Edward Chapin, David Tracey, Kevin Sharp and Leigh Anne St. Charles of Sanford Heisler Sharp LLP.

The Home Depot ERISA Class Action Lawsuit is Pizarro, et al. v. The Home Depot Inc., et al., Case No. 1:18-mi-99999-UNA, in the U.S. District Court for the Northern District of Georgia.

UPDATE: On Aug. 27, 2018, employees and 401(k) members in a class action lawsuit alleging Home Depot mismanaged their retirement accounts face a motion to dismiss in federal court.