$34.5 Million PSERS Class Action Settlement

$34.5 million settlement reached in breach of fiduciary duty class action lawsuit brought against four investment advisors by Pennsylvania’s Public School Employees Retirement System (PSERS); case could be landmark for protecting public pension funds

Case puts legal spotlight on hedge funds’ mismanaged pension funds, low returns and escalating fees not tied to performance; lack of privity of contract cited

Media Contact: Barbara M. Fornasiero, EAFocus Communications; [email protected]; 248.260.8466

Philadelphia —November 4, 2026— In what could prove to be a landmark case for protecting public pension funds, co-lead counsel John Joseph (J.J.) Conway, employee benefits and ERISA litigator with J.J. Conway Law, and Gerard Mantese, corporate litigator and civil rights attorney with business litigation law firm Mantese Honigman, representing members of the Public School Employees Retirement System (PSERS) of Pennsylvania, achieved a $34.5 million settlement in a class action lawsuit filed against four investment advisors for breach of fiduciary duty. The case was originally granted class action status by the Court of Common Pleas for Philadelphia County on September 11, 2024. The case is comprised of approximately 170,000 teachers and employees, such as custodians, currently contributing to PSERS who were required to pay additional direct contributions via payroll deductions to the Plan – even as their investments were losing money. In December 2025, the case was removed to federal court.

The settlement was given final approval on November 3, 2026, by United States District Court Judge Chad F. Kenney of the Eastern District of Pennsylvania.  Writing in the final approval order, Judge Kenney noted that “…Class Counsel represents that the instant case is ‘precedent-setting’ because the Class Members lacked ‘privity of contract with four outside consultants’ and ‘Class Counsel had to demonstrate not only that Defendants owed duties to the Class but that they breached those duties.’”

The four defendants in the case were Chicago-based AON Investments USA, Inc. (formerly named AON Hewitt Investment Consulting, Inc., which was formerly named Hewitt Enisknupp, Inc.); Darien, Connecticut-based Portfolio Advisors, LLC; Conshohocken, Pennsylvania-based Hamilton Lane Advisors, LLC.; and New York City-based Aksia LLC. The suit alleged a breach of fiduciary duties to Plan participants to examine, evaluate and monitor PSERS’ investments and to undertake all actions and inactions in good faith and with loyalty and honesty, and for the sole benefit of the Plan participant – and not for the benefit of any defendant, the underlying investments, the investment managers, PSERS staff or anyone else.

Conway noted that in the case of 170,000 class participants, only two opted out of the class action settlement. Further, there were no objections by any member of the class. The recovery is expected to be about 40% of lost funds, higher than what is typical in a class action lawsuit. Checks for participants are based on contribution rates and will average $125; some class members could receive a check of $500 or more.

“The case had a simple premise – while public school employees are busy doing their jobs, the advisors to their pension funds should be properly doing theirs,” Conway said. “These are the people who teach our children; maintain our ballfields; and clean our classrooms.  They shouldn’t have to worry about their retirement benefits. Judge Kenney’s decision affirms that.” 

PSERS, which has about 365 employees, including 50 highly paid members of the investment unit, holds retirement funds in trust for Pennsylvania’s public-school employees. As of March 31, 2026, PSERS had assets valued at approximately $83.7 billion. Underfunded for several years, the Plan is approximately 66% funded. Membership is mandatory for virtually all Pennsylvania public school employees. There are approximately 543,000 PSERS participants – 262,000 active members, 255,000 retirees and 26,000 vested but inactive members.

Switch from defined benefit plan to defined benefit/contribution plan marks the slide from funded to underfunded

In 2011, PSERS changed from a defined benefit plan to a combined defined benefit/defined contribution plan, subjecting employees to a shared-risk arrangement whereby participants would be required to pay more for their retirement benefits if their investments underperformed an actuarial benchmark.  

With this change, the PSERS Board – the administrator and a fiduciary of the PSERS Plan – had a statutory responsibility to conduct a shared risk assessment every three years to determine the rate of return, net of fees, of the Plan’s investments. The Board also had authority to hire outside consultants in pursuit of its investment goals.

Ultimately, the PSERS investment strategy moved away from traditional, publicly traded investments to alternative investments that are risky and non-transparent. Such investments include private equity, hedge funds, private credit and venture capital, as well as private real estate investments and other nonpublic opportunities, and may require limited partnerships – with PSERS as one of the limited partners. In 2016, PSERS had the highest percentage of alternative investments in the nation at 56%, with the national average at 26%. At the same time, PSERS investment returns were consistently among the lowest among public pensions of similar size.  

“At one time, PSERS was a marquee pension fund. In the early 2000s, it was fully funded, then it switched gears and the investment selections were overpriced and underperforming. The problem was that public school employees were effectively made the re-insurers of the bad investment performance, not the huge money funds that made the recommendations,” Conway said.

Claims against all four defendants include breach of fiduciary duties. Their relationship to PSERS follows:

• AON Investments USA, Inc.: Under its previous name, Hewitt Enisknupp, Inc., entered into a five-year, $3,450,285 contract in 2013 to provide investment consulting, performance evaluation and related services for all PSERS asset classes.
• Portfolio Advisors, LLC; hired in 2012 for a five-year period to provide non-discretionary private equity, venture capital and private debt investment advisory services under an $8,000,000 contract.
• Hamilton Lane Advisors, LLC; hired in 2017 for a five-year, $7,000,000 consulting arrangement to provide non-discretionary private market consulting services for the Plan’s alternative, non-traditional investments.
• Aksia LLC: hired in 2015 for a five-year, $3,500,000 contract to provide nondiscretionary hedge fund investment consulting services, including due diligence on hedge fund management/oversight, hedge fund investment opportunities and regulatory and compliance reviews.

Mantese cut to the heart of the matter reflecting on the decision and the realities of the case.

“I’m pleased that our litigation focused a spotlight on how investment decisions are made affecting state employees. The industry is due for a check-up,” Mantese said. “These advisors make billion-dollar decisions on where pension funds should invest their assets, without a lot of oversight. Some of the due diligence reports showed an appalling lack of judgment. These advisors would never put their own money in some of these risky investments, yet they enthusiastically recommended that schoolteachers and other state employees put billions of dollars in them.”

A copy of the Final Approval Order is available upon request.

About J.J. Conway Law

J.J. Conway Law, an employee benefits litigation and ERISA firm founded by John Joseph (J.J.) Conway in 1999, represents those seeking full access to the employee benefits they earned and are legally entitled to. The firm has been involved with nationally significant employee benefit, disability and pension cases, including class action lawsuits for such landmark decisions as requiring Michigan private insurers to cover autism health treatments for children through age 18 and protecting the pension rights of City of Detroit employees, police and firefighters as well as Wayne County employees by holding their trustees accountable for investment decisions. The firm’s motto, Conquer Tomorrow^®, is dedicated to making the future easier for their clients across the United States.  Learn more on the firm’s website.

About Mantese Honigman

Mantese Honigman, PC, is a business law firm led by CEO Gerard Mantese and focuses on business litigation, including business breakups. A leader in shareholder, LLC member, and partnership disputes, the firm has recovered more than $1 billion for its clients in shareholder litigation and class actions. The firm also handles public interest matters, including civil rights cases and has offices in Clayton, Missouri; Troy, Michigan; New York City; and Miami, Florida and handles litigation in courts around the U.S.