Fourth Circuit Affirms Aon Hewitt Did Not Breach ERISA Fiduciary Duties in Cross-Selling Services and Managing Lowe’s 401(k) Plan

In Reetz v. Aon Hewitt Inv. Consulting, Inc., No. 21-2267, __F.4th__, 2023 WL 4552593 (4th Cir. July 17, 2023), a class action, Plaintiff-Appellant Benjamin Reetz appealed the district court’s judgment in favor of Aon Hewitt Investment Consulting following a 5-day bench trial on whether Aon breached its fiduciary duties of loyalty and prudence to the Lowe’s Home Improvement 401(k) Plan. The Fourth Circuit affirmed the decision of the district court.

First, the court found that Aon was not acting as an ERISA fiduciary when it engaged in cross-selling of additional services at the time that it was recommending that Lowe’s restructure its retirement plan. Selling delegated-fiduciary services is not investment advice since a plan administrator is not an ERISA fiduciary when negotiating its compensation with a prospective customer. The same analysis extends to cross-selling. When Aon was selling its services, it was not acting as a fiduciary.

Second, the court found that Aon did not violate its ERISA fiduciary duty of loyalty by recommending that the plan adopt a streamlined investment menu which happened to play to its interest. Reetz need not only show that Aon had an interest but that it acted on its interest. The district court found that Aon did not act disloyally since it made some recommendations which did not advance Aon’s interests.

Lastly, the court found that Aon did not violate its ERISA fiduciary duty of prudence by selecting and retaining the Growth Fund as the investment vehicle for the Growth option in Lowe’s retirement plan. The court found that Aon considered alternative investment funds when it created its fund and it continued to monitor the fund’s performance. Though the fund did not perform well, the court found that Aon engaged in a reasoned decision-making process. Judge King dissented in part and recommended reversing the judgment on the duty of loyalty issue.