401(k) Excessive Fee Settlement Hits a Snag

A recently unveiled settlement in a 401(k) excessive fee suit has hit a snag.

In fairness, the announced settlement was only a “partial” settlement—one that plaintiffs Wendy Berry, Lorri Hulings, and Kathleen Sammons announced with regard to claims against Aon Hewitt Investment Consulting, Inc. as part of a suit relating to the FirstGroup America, Inc. Retirement Savings Plan and the Aon Hewitt Funds. 

It was also “partial” with regard to the monetary component—though the plaintiffs characterized it as “a significant recovery to a portion of the losses that Plaintiffs allege the Plan sustained due to the selection and retention of the Aon Hewitt Funds for the Plan.” The settlement itself had been announced in December, the actual terms just a couple of weeks later.  

That said, the claims[i] those plaintiffs lodged against FirstGroup America, Inc. and the FirstGroup America, Inc. Employee Benefits Committee “remain to be tried and are not released,” according to the plaintiffs.

So, what’s the snag?

Well, as you might suspect, it has to do with the party that was NOT involved in the partial settlement—FirstGroup and its plan fiduciaries. Their concern, according to Bloomberg Law, is that the proposed settlement includes a bar order—one that blocks FirstGroup from asserting counterclaims against Aon Hewitt. In an objection filed last week FirstGroup says the “overly broad” order prejudices FirstGroup and curtails its legal rights beyond the extent necessary to effectuate the settlement, according to Bloomberg Law.

FirstGroup said (Berry v. FirstGroup Am., Inc., S.D. Ohio, No. 1:18-cv-00326, opposition to motion for preliminary settlement approval 12/27/22) its contract with Hewitt, in which the consulting company agreed to provide investment advisory and fiduciary services to the FirstGroup 401(k) plan, includes an indemnification provision that requires Hewitt to indemnify FirstGroup for any claims or liabilities stemming from Hewitt’s services—including the right to seek legal defense costs and any court-imposed liability from Hewitt, according to the filing.

Now, it's not at all unusual for these kind of settlements to, as part of the agreement, preclude further legal actions between the parties, and to establish that the settlement agreement constitutes a full and complete resolution of the conflict. 

As to whether in doing so it has interfered with FirstGroup’s ability to seek subsequent restitution from Aon Hewitt… well, we’ll have to see what the court has to say.

Stay tuned.