That phrase was burned into my brain from the couple of law classes I had decades ago as well as from countless TV shows. Innocent until proven guilty. The State has to prove guilt beyond a reasonable doubt. The defense could (apparently) simply sit still, do nothing, and possibly achieve a "not guilty" verdict. Against that backdrop, I found myself pondering the Home Depot 401k fee decision and the recent action by the US Supreme Court.
The Court has asked the US Solicitor General whether it should hear an excessive fee case and whether it should revisit a 2022 decision about whether the Home Depot 401k fiduciaries breached their fiduciary duty. The alleged breach follows a familiar refrain of "Here we go again", with the plaintiffs claiming the fiduciaries did not prudently monitor the third-party investment advisory service offered to the employees. Accordingly, it is alleged employees were overcharged.
The second alleged breach is that the fiduciaries did not prudently monitor and remove poor performing investments (relative to other plan investments) in the 401k. As I have said repeatedly, this point, whether accurate or not, speaks to the need for a defendable and repeatable process. Such a process dictates not only how all investments are screened but when and how they should be replaced.
So what seems to be the issue here? Last August, a three-judge panel issued issued a summary judgement stating that the Home Depot does not bear the burden of proof that participant losses resulted from the alleged breaches. In fact, the plaintiffs bear the proof of loss causation.
That this is being revisited again (finally decided by the Supreme Court?) is puzzling to me. To state that the defendants have to prove their innocence (if you will) seems to fly in the face of what I thought was common sense. If anything, I am left scratching my head on this.
The Parting Glass
My basic philosophy remains the same. Document every decision related to the 401k. Have a defendable and repeatable process for any investments actions taken. Monitor plan fees and investment performance and take appropriate action. Make sure the plan offers the lowest fee version of an investment that is available.
Whether the Supreme Court takes up this case or not is anyone's guess. And if they do take it up and issue a ruling, would this be the end of the "Here we go again" cases?