An excessive fee suit where plan fiduciaries had prevailed on most issues – has now settled the remaining claims.
The suit – filed in mid-2020 by seven former employees of Schneider Electric Holdings, Inc. – had targeted Schneider Electric, the two committees that oversee the $4.5 billion plan, and Aon Hewitt Investment Consulting, Inc. (“AHIC”), the plan’s investment manager with replacing well-performing funds with the Aon Trusts for their own financial gain rather than to benefit plan participants.[i] They were represented by Schlichter Bogard & Denton LLP and Naumes Law Group LLC. Earlier this year the fiduciary defendants had prevailed in their motion for summary judgement (dismissal of the suit without going to trial) on nearly all the allegations.
The exception? Well, after dismissing the allegations that the plan could/should have negotiated for lower cost shares (as a large plan) – as there was found to be “insufficient evidence that lower-cost share classes were in fact available to the Plan,” the court left open that issue with regard to the Vanguard Developed Markets Index, the Vanguard Total Bond Market Index and the Vanguard Extended Market Index.
Those latter claims have now (Turner v. Schneider Elec. Holdings, Inc., D. Mass., No. 1:20-cv-11006, preliminary settlement approval order 5/5/23) been settled for a $200,000 cash payment.
That settlement will be spread across some 26,000 participants (you can do the math) – after the following “deduction’s”:
- Plaintiffs’ attorney fees – $66,700
- Plaintiffs’ attorney’s costs – $15,000
- Service awards to the nine named plaintiffs in the suit ($4,500 - [email protected]$500 each)
Oh – and an unspecified compensation amount for Analytics Consulting LLC, the settlement administrator.
What This Means
While the dismissals of the vast majority of the original allegations were good news for the defendants, the legal rationale for doing so was…murky (relative to other cases in this genre, certainly). The payoff here for the plan (and the plaintiffs’ attorneys) was considerably smaller than many of these actions – and doubtless does little to defray the actual expense – not to mention the costs in timing and monetary outlay of defending the case.
[i] More specifically, the suit (Turner v. Schneider Elec. Holdings, Inc., D. Mass., No. 1:20-cv-11006, opinion docketed 1/25/23) claimed that since the inception of the Plan (2010), Vanguard had provided recordkeeping and managed account services, while Schneider also retained Aon Hewitt Investment Consulting, Inc. (“AHIC”) to provide investment consulting services. And then in 2016 AHIC became the Plan’s discretionary investment manager – and in February 2017, AHIC replaced several existing Plan investment options (Vanguard target date funds) with its own collective investment trusts, including the Aon Hewitt Index Retirement Solution passively managed target date funds, as well as the actively managed Aon Hewitt Growth, Income and Inflation Strategy Funds. In September 2017, Schneider added new investment options – five new Vanguard index funds.