What Are the Implications of the Lowe’s 401K Lawsuit?

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A fiduciary who manages a corporation’s employee’s retirement accounts is bound by a code of ethics established by the Employee Retirement Income Security Act of 1974 (ERISA). The lowes 401k lawsuit demonstrates that just because a fiduciary behaves in a manner that appears to violate one or more of these rules, does not mean he or she actually has.  

Allegation of Non-Diversification

One of ERISA rules insists that a fiduciary should appropriately diversify a fund in order to avoid the risks associated with putting all of his or her clients’ figurative eggs in one basket. The plaintiffs in the Lowe’s lawsuit alleged that the fiduciary managing their plan violated this duty by restricting their fund options to a small selection. The judge, however, ruled that this was not the case and that the fiduciary had acted with care and prudence in offering a reasonable number of funds from which to choose.

Allegation of Selfish Intent

Another stipulation of the ERISA code of ethics specifies that a fiduciary must act exclusively in the interest of his or her clients, never in their own or those of their employer. Plaintiffs in the Lowe’s case alleged that the fiduciary acted in the interest of his or her employer by moving client funds into a fund owned by the managing company. The judge ruled that this was not the case, as the fiduciary had made the recommendation to move these funds based on diligent and prudent consideration and the fund had, in fact, performed well.

What appears to be fiduciary malfeasance is not always the case, as demonstrated by the Lowe’s 401k lawsuit.