Deals & People February 24, 2023

AON Boosts Staff to Further $1B Pooled Employer Plan

Aon continues pooled employer plan push, adding headcount to keep adding beyond over $1B in reported assets and commitments in its PEP.

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Aon is bringing on more staff to push its pooled employer plan business beyond its over $1 billion in reported plan assets and commitments, a spokesperson confirmed.  

Aon earlier this month hired Chris Han to the newly created role, director of pooled employer plan 401(k) sales. The company also added two sales executives for pooled employer plans, Thomas Geraghty and Alexander Xie. Rick Jones, senior partner and head of PEPs at Aon, said in an email that the time is right for Aon to commit resources to build the PEP business and grow market share. 

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“We believe that PEPs are the next generation of retirement savings because they reduce work for employers, reduce risk for fiduciaries and reduce costs and improve results for employees,” Jones explains. “We are ready to target this multi-trillion-dollar market with a dedicated sales team that will give clients the clarity and confidence they need to make better decisions to protect and grow their business.”

Aon is building up its team even as competitors enter the market. On Thursday, Willis Towers Watson announced a new PEP that the firm said will build on its experience with pooled employer plans in the U.K.  In October, AON said it had accumulated $1 billion in plan assets and commitments for its PEPs, with benefits for more than 30,000 participants from 40 employers.

Pooled employer plans were established by the SECURE Act of 2019 and introduced to the market in 2021. The goal was to encourage employers that didn’t provide retirement plans to participants to offer one. PEPs allow unrelated employers to convene to participate in a single 401(k) defined contribution plan sponsored by a registered pooled plan provider. The SECURE Act 2.0, passed in December 2022, permits certain 403(b) plans to be operated as PEPs as well.

Geraghty is responsible for PEP sales coverage in the mid-Atlantic and southeast. He was previously a regional sales director, at Empower.

Xie is responsible for sales covering the West region, says the spokesperson. Xie has worked at Aon since 2010, as an actuary and retirement plan strategist, within the firm’s wealth solutions practice.

After passage of the SECURE Act of 2019, Xie helped design, build and launch the Aon PEP, adds the spokesperson. A final position on the Aon PEP team is yet to be filled, the spokesperson adds.

Geraghty and Xie both report to Jones, the spokesperson says.

Compliance February 23, 2023

Legal Complaint Says DOL’s ESG Rule “Jeopardizes” Retirement Savers

A second lawsuit in less than a month has been brought challenging the legality of the DOL’s rule concerning ESG in retirement plans.

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The Wisconsin Institute for Law and Liberty, a conservative nonprofit law firm, brought a lawsuit Tuesday in the District Court for the Eastern District of Wisconsin challenging the Department of Labor’s recently enacted rule permitting the use of environmental, social and governance investment strategy in retirement plans. The complaint alleges that the rule “unlawfully politicizes the retirement system.”

The plaintiffs in the lawsuit are two defined contribution plan participants in Wisconsin: Richard Braun, an operations manager for SWAT Environmental, and Frederick Luehrs III, a maintenance supervisor at Petron Corporation.

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Like a similar lawsuit brought against the DOL in January, this one alleges that ESG is a “non-pecuniary” factor which prioritizes political considerations over risk and return, at the expense of retirees’ finances and to the benefit of political causes.

Different from the first lawsuit filed against DOL on this issue, verbiage indicating general disregard for ESG appears throughout the complaint. ESG is dismissed as an “investing fad” and said to be designed to promote “left-leaning political causes.” In a statement regarding this lawsuit from Kate Spitz, one of the WILL attorneys representing the plaintiffs, Spitz said “By injecting highly partisan issues—like climate change and racial justice—into investment strategy, the Biden Administration is jeopardizing the retirement income of over 140 million Americans.”

This complaint also emphasizes the removal of documenting requirements. A previous DOL rule from 2020 under President Donald Trump’s administration said that non-pecuniary factors could only be considered as a tiebreaker between two investments if those investments were otherwise indistinguishable and if the plan documented why pecuniary factors were insufficient. The new rule allows non-pecuniary factors to be used if two investments would both equally serve the interests of the plan—seen by investment managers and ERISA attorneys as a lower bar—and has no documentary requirement.

The plaintiffs allege that dropping this documentary requirement allows plans to justify politically-informed investing choices using hindsight if they ever face litigation, rather than rely on their documented reasoning at the time the decision was made. This would have the effect of making it harder for participants to sue sponsors who use ESG considerations in investment selection, they argue, because there would be no paper trail documenting the plan’s decisionmaking, allowing for post hoc justifications.

The complaint ultimately requests that the court temporarily suspend the rule and then permanently enjoin the DOL from enforcing it and promulgating similar ones in the future.

WILL also signed on to a coalition letter earlier this month. The letter likewise dismisses ESG as a political agenda masquerading as an investment strategy. The letter states: “Rather than prioritize the financial well-being and stability of retirees, ESG seeks to advance ideological goals related to environmental policy and other divisive subjects.”

Among other signatories, the letter was signed by members of the fossil fuel industry—including four state coal alliances—and a number of nonprofits financed in part by the Koch brothers, including the Leadership Institute and Americans for Prosperity.

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