Aon Hewitt sued for 401(k) 'kickback' scheme with Financial Engines

The record keeper joins three others — Fidelity, Voya and Xerox — in being sued over its relationship with the advice provider

Jan 31, 2017 @ 3:28 pm

By Greg Iacurci

Aon Hewitt is the latest retirement-plan record keeper to be sued for an alleged kickback scheme with 401(k) advice provider Financial Engines, following similar lawsuits filed recently against three other prominent record keepers.

A participant in the $2.5 billion Caterpillar 401(k) Retirement Plan sued Aon Hewitt because of “covert kickback operations” that caused millions of dollars in losses for retirement savers through excessive fees being paid for Financial Engines' managed-account services, according to the lawsuit.

“The fee for those services was significantly higher than it should have been because the agreement between defendants and Financial Engines required Financial Engines to 'kickback' to defendant Hewitt a significant percentage of the fees charged by Financial Engines, even though Hewitt and its sister company co-defendants did not perform any investment advisory or other material services in exchange for the payment they received,” according to the complaint.

The plaintiff, Cheryl Scott, claims Aon Hewitt took a 20%-25% kickback from Financial Engines.

Aon Hewitt spokeswoman MacKenzie Lucas said the firm doesn't comment on litigation, but underscored that it has an “unwavering commitment to fee transparency.”

“Our model has always been and will continue to be fully transparent about all sources of revenue and fees we receive, so that plan sponsors and plan participants fully understand the cost of their plan,” Ms. Lucas said.

The lawsuit, Scott v. Aon Hewitt Financial Advisors et al, was filed Jan. 27 in Illinois district court.

Fidelity Investments, Voya Financial and Xerox HR Solutions were also sued within the past several months for their kickback schemes with Financial Engines. The advice provider hasn't been a defendant in any of the lawsuits filed to date.

"Financial Engines is not named in this lawsuit and is not in a position to comment on it or its merits," spokesman Mike Jurs said of the Aon suit.

Financial Engines, which serves roughly nine million participants across 700 companies, partners with seven record keepers, according to its website. Of those listed, T. Rowe Price, Vanguard Group and Mercer (whose record-keeping business was bought by Aegon, Transamerica's parent company, in 2015), haven't yet been sued.

Caterpillar's 401(k) plan was also in the news several years ago, as the company reached a settlement with plan participants, represented by Jerome Schlichter, for $16.5 million in 2009 over alleged fiduciary breaches.

0
Comments

What do you think?

View comments

Recommended for you

Integration can mean of different things to advisers. What does it mean to you? Marc Butler of Albridge Solutions explains how it is powering advisory practices.

Video Spotlight

Recommended Video

Channels

Latest news & opinion

Is ESG investing going mainstream?

Despite advisers' misgivings, asset managers are coming around to the idea that a company's stance on environmental, social and governance issues is a good proxy for future success.

Despite January's run-up in stocks, investors headed to bonds

More than $46 billion went to taxable bonds last month, versus $17 billion flowing into stock funds and ETFs.

Alternative funds suddenly look a whole lot better

The market sell-off highlights the virtues of hedging.

Olympics advice from financial advisers who are Olympians themselves

Meet some of the Olympians among U.S. financial advisers, and hear their words of wisdom for those vying for the gold in PyeongChang, South Korea.

Why the new tax law amounts to a 'stealth' tax increase

The government will use an inflation measure that causes things like marginal income tax rates to rise more slowly.

X

Hi! Glad you're here and we hope you like all the great work we do here at arjuna-design. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting arjuna-design.com? It'll help us continue to serve you.

Yes, show me how to whitelist arjuna-design.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Last News

vanguard target retirement 2025 fund turbotax 2014 prices social security deceased spouse benefits pension lump sum rollover fidelity spartan total market index advantage turbotax price comparison 1099 distribution code 3 1099 r code 4 allstate insurance san francisco survivor benefits for spouse vanguard low cost index fund what percent of social security is taxed h and r block tax preparation fees security benefit total value annuity review are high dividend stocks a good investment seafarer overseas growth and income fund social security disability benefits taxable income who lost money with bernie madoff penalty free 401k withdrawal at 55 best high yield closed end funds can i convert 401k to roth ira how to invest in hedge fund merrill lynch trading platform ken fisher retirement guide fidelity small cap enhanced index fund usaa ultra short term bond fund best rbc mutual funds 2014 franklin floating rate daily access fund is money from a life insurance policy taxable roth 401k or traditional tiger cub hedge fund top s&p 500 index funds