The investments in the FirstGroup America, Inc. Retirement Savings Plan were doing fine in 2013, according to the information in the complaint for this class action. However, the complaint alleges that in September of that year, the investment options in the plan were replaced with newer, untried options which the complaint says has benefitted only the plan’s consultant, Aon Hewitt Investment Consulting, Inc. This, the complaint says, breaches fiduciary duties under the Employee Retirement Income Security Act of 1974 (ERISA).
The class for this action is all persons who were participants or beneficiaries of the FirstGroup America, Inc. Retirement Savings Plan at any time on or after October 1, 2013, who had any portion of the account invested in Hewitt funds.
FirstGroup America, Inc., the plan’s sponsor, and Hewitt, a consultant for the plan, both have fiduciary duties towards the plan, the complaint says. It claims that Hewitt is legally obliged to perform its duties to the plan with an eye to the interests of the plan participants, “exclud[ing] all selfish interest” on its own behalf. When Hewitt was first hired, around 2009, it did seem to try to provide good advice to the plan, the complaint says, and it helped maintain a diverse line of investments from different managers.
The problem occurred, the complaint says, when Hewitt started its own line of investment funds and offered them to its consulting clients. According to the complaint, fiduciaries for retirement plans generally want to see a performance history of three or more years before considering an investment, and most of the 401(k) plan sponsors did not accept the funds.
However, FirstGroup accepted them, the complaint says. Not only that; it also made one of the Hewitt funds the plan’s default investment option and removed most of the other investment options, the complaint says, so that that more than 90% of the plan’s assets were transferred to the Hewitt options.
The complaint claims, “This radical makeover was unnecessary, imprudent, and not in the best interest of Plan participants.” It claims that, over the long term, the earlier funds had met or exceeded their benchmark indices. The complaint charges that the only reason for the massive makeover was to profit Hewitt, who needed to attract capital to the new funds.
According to the complaint, in the time since then, the Hewitt funds have underperformed, both in terms of their own benchmarks and as compared to the funds that the plan previously had. However, the Hewitt funds have been retained and not replaced with better-performing options.
The complaint cites breaches of the duties of loyalty and prudence as well as a failure to monitor fiduciaries.