According to the SEC's news release, the agency's orders find that Aon was responsible for the calculation of the Harrisburg-based pension fund's investment returns for "risk share," a Pennsylvania statute that requires public school employees to pay higher contributions if PennPSERS does not meet certain investment return rates. "If PSERS' investment return rate for the nine-year period ending June 30, 2020, was lower than 6.36%, it would trigger risk share, requiring an increase in public-school employees' contributions," the news release said.
Aon said in a statement, "We are pleased to have resolved this matter, which did not impact plan assets. Our firm remains focused on continuing to provide exceptional service to clients."
PennPSERS had terminated Aon Investments USA as its general investment consultant for cause in December. In a Dec. 15 statement, the pension fund said, "In anticipation of PSERS' next statutorily mandated risk share analysis due Dec. 31, 2023, PSERS began the process of transitioning Aon's work to a new consultant, beginning in November of 2022, allowing for appropriate overlap with Aon to ensure continuity and a smooth transition. That transition was recently completed. At the Dec. 15 board meeting, the PSERS' board formally adopted the results of this year's risk share analysis and released them to the public."
The SEC orders, and the termination of Aon, appear to be harbingers of the end of the years-long conflict between Pennsylvania's largest public pension fund and insurance giant Aon's U.S. investment consulting unit. A lawsuit is still pending and both PennPSERS and Aon have declined to comment on that pending litigation.
The lawsuit filed by PennPSERS in August in the Philadelphia Court of Common Pleas, Commerce Division, followed a writ of summons in December 2022. The pension fund said at the time in a statement that it "seeks to hold Aon accountable for the errors it made related to PSERS' 2020 risk share analysis and recover damages to compensate PSERS for the significant and ongoing harm Aon has caused."
In March 2021, PennPSERS commissioned a report from law firm Womble Bond Dickinson after its board was notified that the investment reporting figures used for an annual employer contribution rate increase contained a calculation error. According to that report, Aon Investments USA took responsibility for the error, which involved incorrect public markets investment returns in April 2015 that was only discovered by PennPSERS staff in 2020 following Aon's release of nine-year investment return data.