PLANADVISER - September/October 2021 - 10

compliance news //
a result of the conduct described above,
MMLIS willfully violated Sections
206(2) and 206(4) of the Advisers Act
and Rule 206(4)-7 thereunder. "
The firm provided the following
statement: " MML Investors Services
takes this matter very seriously and
cooperated fully with the SEC. Similar
to other industry participants, we have
reimbursed impacted accounts and are
pleased to have resolved this matter. "
per participant. It says participants
in L Brands' plan were paying $56 per
participant throughout the period the
lawsuit covers.
The defendants are also accused of
failing to monitor the average expense
ratios charged to similar-size plans for
investment management fees, which,
together with the plan's allegedly
high recordkeeping and administrative
costs, renders the plan's total plan
The complaint says the " 401(k) Averages
Book " shows that the average cost for
recordkeeping and administration in 2017
for plans that were much smaller than
L Brands' plan was $35 per participant.
The L Brands Inc. ERISA Lawsuit
May Proceed
The U.S. District Court for the Southern
District of Ohio, Eastern Division,
has ruled in an Employee Retirement
Income Security Act (ERISA) lawsuit
filed against L Brands Inc., an entity
best known as the former parent
company of Bath & Body Works and
Victoria's Secret.
The ruling strikes down two related
dismissal motions filed by the defendants,
one motion alleging the court
lacks subject matter jurisdiction and
the other suggesting the complaint
fails to adequately state a claim for
relief. This outcome, though far from
the end of the matter, opens the door
for discovery and potential settlement-or
a trial.
A former participant in the L
Brands 401(k) Savings and Retirement
Plan sued the plan sponsor late last
November, alleging various plan fiduciaries
breached their duties under
ERISA by allowing excessive fees for
recordkeeping and investments. The
complaint says the " 401(k) Averages
Book " shows that the average cost
for recordkeeping and administration
in 2017 for plans that were much
smaller than L Brands' plan was $35
cost " significantly above the market
average for similarly sized and situated
defined contribution [DC] plans, "
according to the complaint. The lawsuit
also accuses plan fiduciaries of failing
to use the least expensive share classes
for mutual funds on the 401(k) plan's
investment menu.
In its new ruling, the District Court
considers both dismissal motions in
turn, noting that, when a defendant
seeks dismissal for both lack of subject
matter jurisdiction under Federal
Rule of Civil Procedure 12 part (b)(1)
and failure to state a claim under part
(b)(6), a court must consider the " 12(b)
(1) motion " first, because the " 12(b)(6)
motion " will become moot if subject
matter jurisdiction is lacking. After
doing this, the court says, the plaintiffs'
complaint clears both hurdles as
required.
Judge Finds Most Allegations
Sufficient in Lawsuit Over CITs
A federal judge has denied motions to
dismiss a lawsuit alleging that fiduciaries
of the Centerra Group 401(k)
plan violated the Employee Retirement
Income Security Act (ERISA) by
selecting poorly performing collective
investment trusts (CITs) for the plan
and allowing for excessive recordkeeping
fees. According to the decision
by the U.S. District Court for the
District of South Carolina, Aon Hewitt
Investment Consulting (now known
as Aon Investments USA) was hired
by Centerra's benefits committee in
January 2016 as the plan's discretionary
investment manager. That year, Aon
Hewitt replaced 11 actively managed
equity, fixed-income and target-date
funds (TDFs) with five CITs, called the
Aon Trusts, that were managed by Aon
Trust Co., a banking affiliate of Aon
Hewitt. When the plan merged with
another plan in January 2019, the new
sponsor replaced the five Aon Trusts.
The lawsuit, filed a year ago
December, alleges that the Centerra
defendants and Aon Hewitt breached
their ERISA fiduciary duties when the
plan invested in the Aon Trusts and
that
they engaged in transactions
that ERISA prohibits. The plaintiffs
also allege that
the Centerra defendants
breached their fiduciary duties
by causing the plan to pay unreasonable
recordkeeping fees. The Centerra
defendants and Aon Hewitt filed separate
motions to dismiss the claims
related to them.
Aon Hewitt argued that the plaintiffs
failed to plausibly allege that it
breached its duty of prudence under
ERISA when selecting the Aon Trusts
as investments for the plan. The firm
says the plaintiffs rely on a hindsightdriven
view of the poor performance of
the investment selections instead of an
allegation that Aon Hewitt's process in
selecting the investments was deficient.
However, the court noted that the
plaintiffs also allege that Aon Hewitt
benefited directly and indirectly when
it chose to invest the plan in its affiliated
Aon Trusts, creating a significant
conflict of interest. The plaintiffs
also say that, despite the conflict of
interest, Aon Hewitt failed to undertake
an independent investigation of
investment options available in the
market before deciding to use its own
products; that Aon Hewitt hired an
inexperienced manager without
a
meaningful track record; and that the
Aon Trusts were newly created with
insufficient performance history. -PA
10 | planadviser.com September-October 2021
http://www.planadviser.com
PLANADVISER - September/October 2021

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