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FirstGroup, Aon Hewitt sued over changes to DC plan investment options

Current and former participants in a defined contribution plan offered by FirstGroup America Inc., Cincinnati, have sued the company and its investment consultant, Aon Hewitt Investment Consulting, alleging violations of ERISA fiduciary duties based on fees charged by the plan and by a "radical redesign" of the plan's investment lineup.

The lineup change "was designed to benefit Hewitt ... rather than the participants and beneficiaries of the plan," said the complaint filed May 11 in a federal District Court in Cincinnati. The defendants "have stubbornly adhered to this imprudent menu design in spite of evidence that it caused significant and ongoing damage to the plan."

A representative of FirstGroup America didn't respond to a request for comment. Maurissa Kanter, an Aon Hewitt spokeswoman, wrote in an email that her company doesn't comment on pending litigation.

The defendants "removed a large number of established funds in the plan that were performing well ... and replaced them with an unproven set of newly launched funds from Hewitt that were inappropriate for the plan," said the complaint in McGinnes et al. vs. FirstGroup America Inc., Aon Hewitt Investment Consulting et al. The plaintiffs are seeking class-action status.

Since the Hewitt funds were launched Sept. 30, 2013, they have "underperformed both their stated benchmarks and the established funds that Hewitt eliminated from the plan," the complaint said. "The Hewitt funds experiment has been a failure."

The plaintiffs' document noted that prior to the investment plan redesign, the plan offered 10 options plus a target-date fund series from multiple investment managers; none of the options was offered by Aon Hewitt. After the changes, the plan offered five Aon Hewitt investment options plus an Aon Hewitt target-date series. The new lineup retained only a stable value fund from Wells Fargo.

The FirstGroup America Inc. Retirement Savings Plan, Cincinnati, had $290.7 million in assets as of Dec. 31, 2016, according to the latest Form 5500 filing.