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Foundation Resolution sues Aon Hewitt over mismanaging pension plan termination

Foundation Resolution Corp., Inverness, Fla., formerly known as the Citrus Memorial Health Foundation, has filed a fiduciary breach lawsuit against Aon Hewitt Investment Consulting in connection to its management of the foundation's pension plan termination.

The corporation alleges Aon Hewitt mismanaged the liability-driven investing process intended to bring the $94 million pension plan to full funded status to allow for termination, according to the complaint filed in U.S. District Court in Ocala, Fla., on Thursday.

The complaint alleges "as a consequence of Aon Investing's (sic) deficient design, implementation and monitoring of its 'hedge path' strategy, the plan's funded status unexpectedly deteriorated by about $3.3 million in the six months (after June 2015), after the plan achieved a funded status at which Aon, as it proposed, should have hedged the plan to a degree that it was practically immune from interest rate volatility." The complaint alleges the loss of $3 million in assets and an increase of $300,000 in liabilities between June and December 2015 was a result of Aon Hewitt failing "to hedge the plan against interest rate volatility." According to the complaint, there were $118 million in plan assets as of Jan. 1, 2015, and $124 million in liabilities as of that date.

The corporation also alleges that Aon Hewitt mismanaged the process of offering lump sums to participants as part of the termination. It said Aon Hewitt filed for an unnecessary IRS determination letter, delaying that process by 12 to 18 months and resulted in unnecessary fees being charged to the foundation, and used a "poor" communication strategy that resulted in 67% of participants taking the offer instead of the 80% that Aon Hewitt estimated would do so.

Maurissa Kanter, Aon Hewitt spokeswoman, could not be immediately reached for comment.