Aon, Alight Win Lawsuit Alleging PRT Failures

A federal judge has ordered a judgment in favor of Aon Hewitt Investment Consulting and Alight Solutions in a case alleging breaches of Employee Retirement Income Security Act (ERISA) fiduciary duties related to pension risk transfer (PRT) transactions.

Following a bench trial, Judge James S. Moody Jr. of the U.S. District Court for the Middle District of Florida said in his order that the defendants “acted prudently and reasonably in administrating, investing and terminating the pension plan.” In addition, he said Alight Solutions is “entitled to judgment in its favor as a matter of law because the portion of the business it purchased from Hewitt Associates LLC did not perform any portion of the contract with plaintiffs and did not inherit any associated liability.”

The case went to trial after a magistrate judge recommended the rejection of dismissal motions filed by Aon Hewitt and Alight Solutions, and Moody accepted the recommendation.

According to case documents, Aon Hewitt was hired by Foundation Resolution Corp., the sponsor of a defined benefit (DB) plan for hospital employees of Citrus Memorial Hospital, to provide services related to termination of the plan, including administration, actuarial and compliance, investments, communications related to a lump-sum offer, and plan termination services, including lump sum window strategy and execution and annuity placement services for plan participants that did not elect to take a lump sum.

Among other claims, the lawsuit alleged that Aon Hewitt didn’t perform all the communications services that it was contracted to perform, resulting in only 67% of eligible plan participants electing a lump-sum distribution instead of a projected 80% of participants. Leading up to the lump-sum offer and annuity placement of plan liabilities, the lawsuit claims, Aon Hewitt used an investment strategy designed to hedge interest rate risk and increase the plan’s funded status that did not pan out and resulted instead in a loss to the plan.

Alight Solutions was named as a defendant in the case because after most of the services had been provided under the contract in question and the plan had been terminated, Aon Plc entered into a sales agreement with Tempo Acquisition LLC for the sale of various business entities, including Hewitt. In May 2017, the sale closed, and in June 2017, Hewitt changed its company name to Alight Solutions.