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Caterpillar 401(k) Case Dismissal

This case has been dismissed due to the plaintiffs’ failure to state an actionable claim. The primary claim in the case was the alleged overpayment for advisory services provided by Financial Engines, with the excess payments flowing to Aon Hewitt companies (Aon Hewitt Financial Advisors, Hewitt Financial Services and Hewitt Associates). Prior to 2014, FE was paid directly from Caterpillar plan participant accounts – fees claimed to be excessive due to the contractual arrangement between FE and Hewitt which required FE to “kick-back” a large percentage of fees to Hewitt and Hewitt companies despite the fact that Hewitt did not perform any investment advisory service in exchange for the payment received. Defendants argued that they did not act as fiduciary with regard to receipt of fees from FE or the retention of FE as the subadviser.

The court stated that the complaint does not allege Hewitt as fiduciary in any plan documents and the claim that Hewitt controlled Caterpillar’s decision to hire FE is not supported by the Hewitt/Financial Engines Master Service Agreement. Caterpillar had the authority to hire FE; Hewitt did not. Of note, “Aon Hewitt Financial Advisors (AFA) is a fiduciary to the Plan for purpose of providing investment advice to the plan participants, but that doesn’t make AFA a fiduciary for all purposes.” A service provider negotiating compensation with a plan fiduciary at “arm’s length” is not a fiduciary for that purpose.

www.planadviser.com; March 22, 2018.