A federal appeals court in Richmond, Va., has upheld a district court ruling that Aon didn't violate ERISA in its role as an investment adviser to a Lowe's Cos. retirement plan.
The 2-1 decision by a panel of the 4th U.S. Circuit Court of Appeals said Aon didn't engage in ERISA's prohibition of self-dealing — the duty of loyalty — by recommending the Aon Growth Fund to Lowe's plan executives.
"Selling services is not investment advice," the majority wrote. "And the actual investment advice — streamlining the plan menu — was not informed by Aon's desire to sell its services. So Aon did not violate the duty of loyalty."
Aon, previously known as Aon Hewitt Investment Consulting, was one of the defendants in the original lawsuit that also alleged ERISA violations by Lowe's and the company's 401(k) plan fiduciaries. The lawsuit was filed in April 2018 by a 401(k) plan participant in the case of Benjamin Reetz vs. Lowe's Cos. et al.
The plaintiff, seeking class-action status, accused the defendants of limiting choices in the 401(k) line-up and transferring more than $1 million to the Aon fund, which he said performed poorly.
The Lowe's defendants settled the case for $12.5 million, which was approved in September 2021 by U.S. District Court Judge Kenneth D. Bell, Charlottesville, N.C. Lowe's admitted no wrongdoing. Aon didn't participate in the settlement.
In October 2021, following a bench trial, Mr. Bell dismissed the claim against Aon.
"The court finds that Aon did not breach its fiduciary duty as an investment adviser to the plan in proposing and encouraging Lowe's to change the plan's investment structure," Mr. Bell wrote. "Nor did it violate ERISA in its efforts to 'cross-sell' its delegated fiduciary services, which Lowe's – a large, sophisticated corporation – independently decided to engage."
The appeals-court majority said Aon acted properly to meet ERISA's standards of prudence. "Aon engaged a reasoned decision-making process by reviewing comparable funds," they wrote. "Plus, it continued to monitor the fund. So Aon did not violate the duty of prudence." However, Appeals Court Judge Robert B. King dissented in part, saying Aon breached its ERISA duty of loyalty.
"In these circumstances, it is readily apparent that the fiduciary investment advice Aon provided to the Lowe's 401(k) retirement plan was made 'at least in part'" to benefit Aon, he wrote.
