A unit of Aon has won its case in federal appeals court in a dispute involving the 401(k) plan of employees of Lowe’s Home Improvement, ThinkAdvisor reports.
By a 2-1 ruling, the U.S. Court of the Appeals for the 4th Circuit upheld a lower court ruling which went in favor of Aon Hewitt Investment Consulting Inc. in a class-action lawsuit. Aon Hewitt was retained by Lowe’s in 2008 as an investment consultant for the company’s retirement plan.
The suit was initially filed in 2018 against Lowes’ and Aon by Benjamin Reetz as a representative of a class of employees and on behalf of the Lowes 401(k) Plan. The plan maintains about $5 billion in assets for 260,000 employee participants. The suit alleged that Aon had violated “core duties of loyalty” and prudence in handling the retirement plan’s assets.
The plaintiffs accused Lowe’s and Aon of moving more than $1 billion in Lowe’s 401(k) plan assets to an Aon fund that did not perform as well as the funds previously in the company’s 401(k) plan. It was later determined that the decisions cost the employees between $70 million and $277 million.
Lowe’s settled the employees’ claims against it in 2021 but the case against Aon went to trial, in which a federal judge ruled that the company acted appropriately in recommending the investment changes based on its expertise and strategic choices.
In affirming the lower court ruling, the appellate court found that Aon did not breach its fiduciary duties to plan participants under the Employee Retirement Income Security Act.
“Aon’s sales efforts to obtain the delegated fiduciary work were not investment advice, so Aon owed no duty of loyalty,” said Circuit Judge Julius Richardson’s written opinion. “The investment-menu recommendation was investment advice, but we agree with the district court that Aon’s recommendation was not motivated by self-interest.”
Furthermore, the court found that Aon met its duty of prudence by engaging in a “reasoned decision-making process by reviewing comparable funds” and continuing to monitor the fund. The court said it did not make a difference that the review occurred before Aon became Lowe’s delegated fiduciary.
Aon said it was pleased with the appellate court ruling “as we continue to help our clients maximize their employees’ retirement savings.”
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