401k Lawsuit Denied by Federal Judge
Summary: Last Thursday, a federal district court judge in Minnesota dismissed a class-action lawsuit brought forth by participants in the Wells Fargo 401k plan. The suit alleged that Wells Fargo breached their fiduciary duty by including their own Wells Fargo target date funds in the plan. Central to the plaintiff’s argument was that Fidelity and Vanguard offered lower cost and better performing funds in comparison to the Wells Fargo funds. However, the court disagreed with the plaintiffs assertion that the mere existence of less expensive and better performing funds, without showing a flawed decision making process, was grounds for a 401k fiduciary breach lawsuit. In the 10 page decision issued by the court, Judge Doty stated, “[plaintiff] pleads no facts suggesting that the choice of affiliated funds was the result of flawed decision-making.” This decision is subject to appeal and could possibly be overturned by the United States Court of Appeals for the 8th Circuit.
Our take: Plan Sponsor’s may insulate themselves from 401k lawsuits by having a sound decision-making process for determining what funds should be included in their 401k. Having an independent investment adviser quarterback this process can be an inexpensive way to provide this value. Learn how we can help manage your 401k by contacting us at firstname.lastname@example.org.