Lowe’s Cos. and Aon Hewitt Investment Consulting forced an untested and underperforming investment fund on Lowe’s workers who invested in the company’s 401(k) plan, a new lawsuit alleges.
The proposed class action, filed April 27 in a North Carolina federal court, challenges Lowe’s decision to move more than $1 billion in 401(k) assets into the Hewitt Growth Fund. The fund was untested—with no large retirement plan investors and only $350 million in assets before the Lowe’s plan’s investment—and performed worse than the funds previously in the company’s 401(k) plan, the lawsuit claims. Both Lowe’s and Aon Hewitt, which provides investment consulting services to the Lowe’s plan, are accused of breaching their fiduciary duties under the Employee Retirement Income Security Act.
The central claim in the lawsuit—that it was imprudent to force an untested and poorly performing fund on 401(k) investors—also drives several recent lawsuits against financial companies that put their own investment products in their workers’ 401(k) plans. Putnam and Allianz—owner of PIMCO—have been sued for offering their workers in-house funds that, like the Hewitt Growth Fund, had few other investors. Similarly, Deutsche Bank, M&T Bank, and New York Life have been sued for offering workers funds not offered by any other large retirement plans.
By bringing these claims against a large retailer and not a financial company that offers investment funds, the case could represent an evolution in the legal theories and strategies driving 401(k) litigation.
The Lowe’s plan has more than 262,000 investors and more than $5.2 billion in assets. The plan’s decision to swap out existing funds for the Hewitt Growth Fund caused more than $100 million in investment losses, according to the lawsuit.
Lowe’s and Aon Hewitt didn’t respond to inquiries made outside normal business hours.
The lawsuit was filed in the U.S. District Court for the Western District of North Carolina by Nichols Kaster PLLP and Tharrington Smith LLP.
The case is Reetz v. Lowe’s Cos., W.D.N.C., No. 5:18-cv-00075-RJC-DCK, complaint 4/27/18.