Aon Overcomes Foundation’s Allegations of Botched Wind-Down

Last week’s ruling ends a two-year-long lawsuit claiming that Aon violated ERISA laws.

Bigstock photo

Bigstock photo

Consulting firm Aon has prevailed in a lawsuit alleging that it had bungled the wind-down of a Florida-based health foundation’s pension plan.

On Friday, a federal judge ruled that Foundation Resolution Corp.’s allegations that Aon committed ERISA violations and investment mismanagement were unfounded.

This closes a nearly two-year-long case in which Foundation Resolution — previously been known as Citrus Memorial Health Foundation — had alleged that the investments Aon selected as a part of its plan termination process had resulted in “millions of dollars of losses.” Foundation Resolution had accused Aon of “deceptive, imprudent, and incompetent performance of its obligations as a fiduciary,” in its amended complaint, which its legal team filed in July 2019.

The nonprofit had specifically sued Aon for violation of ERISA, or the Employee Retirement Income Security Act; professional malpractice; and breach of contract. Following a trial that took place in mid-April, James Moody, a U.S. district judge for Florida’s middle district, ruled that Aon had, in fact, “acted prudently” in its work with Foundation Resolution.

“We are pleased with the court’s ruling that Aon acted prudently and reasonably with respect to services provided to the plan,” a spokesperson for the company said via email Monday.

Like many employer-administrated pension plans, Citrus Memorial Health Foundation closed the plan to new participants in 2004, according to the amended complaint. Later, in 2010, the foundation froze its plan, stopping new benefits from accruing.

The foundation decided to terminate the pension plan in 2014 and hired Aon to do so. According to the amended complaint, the consulting firm had touted savings of $6 million to the foundation during the wind-down process. The plan involved paying lump sum benefits to some participants while setting up an annuity and managing the plan’s assets leading up to the termination.

But, according to Foundation Resolution, Aon implemented a “deficient” strategy for hedging the portfolio against interest rate volatility, and the pension plan’s funding level “unexpectedly deteriorated by about $3.3 million” over a six-month period.

The foundation also alleged that Aon tried to charge more money than agreed upon to communicate the details of the fund’s termination to clients.

Aon, for its part, denied these allegations in an answer to the amended complaint. It’s unclear whether Foundation Resolution will appeal the judge’s decision. An attorney for the foundation did not return an email seeking comment Monday.

[II Deep Dive: Allianz Faces Another Lawsuit Over Alleged $2 Billion Loss]

Although this case has come to a close, Aon remains tied up in at least one other legal battle: Last year the Blue Cross Blue Shield Association National Employee Benefits Committee sued Aon and Allianz, alleging that the two downplayed the risks involved in investing in Allianz’s Structured Alpha products.

Those products lost significant value in February and March 2020 as markets fell and volatility spiked. Blue Cross Blue Shield filed its suit in September 2020, and it is still winding its way through the court system.