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.


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


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.


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 It'll help us continue to serve you.

Yes, show me how to whitelist

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


Subscribe and Save 60%

Last News

ira tax deduction deadline vanguard short duration bond fund what are fdic limits edward jones calculator irs rules on ira contributions what is ssa-1099 dfa short term extended quality franklin templeton investments reviews vanguard hsa franklin templeton performance lowest expense ratio etf ira withdrawal age without penalty american funds cap world growth and income how to avoid taxes on 401k withdrawals t rowe price gold mutual fund can you carry forward capital losses breaking into wall street financial modeling download how to withdraw 401k early without penalty william and sue gross family foundation jpmorgan investor growth & income fd cl a t rowe price assets under management fidelity spartan small cap index fund best retirement planning calculator mojo real estate services free turbo tax for low income stock broker sales scripts early social security calculator financial abuse of elderly by family members 401k early withdrawal taxes value of a 1943 steel penny enrolling in medicare part b top five mutual funds top small cap biotech stocks