Actuary Not Liable for Correction Program Attorney Fees

October 25, 2005 ( - The US District Court for the Eastern District of Virginia has ruled that Aon Consulting Inc. is not liable for the attorneys' fees of a plan sponsor who participated in the IRS's Employee Plans Compliance Resolution System (EPCRS).

BNA reports that, in Weinberg Group Inc. v. Aon Consulting Inc., E.D. Va., No. 1:04cv410 (JCC), 10/17/05, Judge James Cacheris let Aon off the hook for all attorneys’ fees since Weinberg Group Inc. did not provide evidence to the court to make an “intelligent and reasonable estimate” of the portion of fees that were incurred because of the fiduciary breaches caused by the plan’s actuary. Some of the breaches that caused Weinberg to enter the correction program occurred before Aon became the plan’s actuary.

The company’s pension plan was subject to the “Top 25 Rule” that says security must be posted for any lump sum distribution made to the 25 most highly compensated employees. The court opinion stated that Weinberg made 10 lump sum distributions to highly compensated employees without posting security bonds, according to BNA. Five of them occurred before Aon became the plan’s actuary.

Weinberg entered the EPCRS program in 2002, and chose to terminate its plan as a correction to the violations. In April 2004, Weinberg sued Aon for breach of fiduciary duties under ERISA. Weinberg sought costs and attorneys’ fees it incurred while in the correction program.

In June the district court found that Aon breached its duties with respect to the five distributions that occurred after it became the plan’s actuary. The court ordered that Aon pay costs associated with the compliance program with respect to those distributions so long as Weinberg was able to provide evidence permitting the court to make an “intelligent and reasonable estimate” of the amount of fees attributable to Aon’s conduct.

Weinberg requested nearly $90,000 in attorneys’ fees arguing that Aon was liable for all attorneys’ fees incurred by Weinberg because, had Aon told Weinberg when it first became the actuary that the first five distributions had violated the Top 25 Rule, Weinberg would have self-corrected and would not have made the second five distributions. The court rejected that argument and said it was denying in whole Weinberg’s request for attorneys’ fees because Weinberg failed to provide evidence that would allow the court to make an intelligent and reasonable estimate of the amount of the $90,000 attributable to Aon’s breaches.