A 401(K) participant is suing Aon Hewitt for its purported involvement in a kickback scam involving Financial Engines. Aon Hewitt is not the first company to be subject to such allegations involving the 401(K) advice provider.
According to a participant in the Caterpillar 401(k) Retirement Plan, the alleged “covert kickback operations” cost retirement savers millions of dollars as a result of the excessive fees paid to Financial Engines for managed-account services. The complaint contends that the service fees were much higher than needed because of an agreement between Aon Hewitt and Financial Engines in which the latter paid the former kickbacks.
The kickbacks were purportedly a substantial percentage of the fees that Financial Engines charged, even though Hewitt and its sister companies, which are also defendants in the 401(K) lawsuit, didn’t provide any investment advisory services in exchange for the payments. According to plaintiff Cheryl Scott, Aon Hewitt received a 20-25% kickback.
Aon Hewitt is not the only company that has been sued over purported kickbacks involving Financial Engines. Within the last year, Voya Financial (VOYA), Fidelity Investments, and Xerox HR Solutions were named as defendants of 401(K) lawsuits that make similar allegations. Financial Engines is not a defendant in any of these lawsuits.
Franklin Resources Must Face 401(k) Case
In other 401(k) lawsuit news, last month, a federal judge refused to throw out the case against Franklin Resources. The complaint alleges $64M in lost retirement funds due to purportedly high fees and poor performance. The lawsuit contends that the firm had overpopulated its retirement plan with in-house mutual funds that didn’t do as well as the funds of competitors and charged investors excessive fees.
Also recently, participants in JPMorgan Chase’s (JPM) 401K lawsuit sued the bank in a proposed class-action securities case claiming that the firm caused employees to pay millions of dollars in excessive fees. The firm is accused of keeping its own proprietary mutual funds, as well as those of affiliate companies, in the retirement plan even though there were less costly funds that were almost equivalent to the firm’s funds and performed better. Similar allegations were brought in a separate 401(k) lawsuit against Charles Schwab (SCHW).
Our securities fraud law firm works with high net worth individual investors and institutional investors in trying to recoup their fraud losses. Contact The SSEK Partners Group and ask for your free, no obligation case consultation.
Aon Hewitt Sued Over Fee Scheme in Caterpillar’s 401(k) Plan, Trust Advisor, February 2, 2017
Franklin Resources Can’t Get 401(k) Fee Lawsuit Dismissed, BNA, January 19, 2017