Principal Life Breach of Fiduciary Duty to Retirement Plans ERISA Class Action

Employee savings and retirement plans are governed by the Employee Retirement Income Security Act (ERISA) and must be managed for the sole benefit of the participants and beneficiaries. The complaint for this class action brings suit against the Principal Life Insurance Company, its Benefit Plans Administrative and Investment Committees, and the members of those committees, alleging that they sometimes served other interests in their handling of the Principal Select Savings Plans.

The class for this action is all participants in the Principal Select Savings Plan for Employees or the Principal Select Savings Plan for Individual Field, from August 1, 2015 to the present.

The two plans here are the Principal Select Savings Plan for Employees (the Plan) and the Principal Select Savings Plan for Individual Field (the Field Plan).

The two committees (administrative and investment) make decisions about what the plans will pay and the parties they will pay it to. The company’s CEO appoints the members of these committees. The committees are not therefore independent of the company. The complaint alleges, “The Plan Committees ensured that nearly all investments and vendors for the Plans were Principal affiliates.”

The plans together have over a billion dollars in assets. According to the complaint, “Billion-dollar plans pay an average investment management fee of 25 basis points and median total plan fees of 30 basis points.” (A basis point is 0.0001 of an amount.) They are able to negotiate good fees because they are so large. However, the complaint claims that the plans paid “substantially more” than these fees—too much, it suggests, for such large funds.

The complaint also asserts, “Principal affiliates act as the primary investment advisor for the pooled separate accounts in which the Plans invest. Principal affiliates charge a high investment advisor fee for that service.”

But this is not necessary, the complaint claims, because the affiliates hire subadvisors to do the actual work of portfolio management; Principal then keeps a portion of the fees. Instead, the complaint suggests, the plans could hire the subadvisors directly, cutting out Principal’s role as middleman and thereby saving the money it takes as its cut. This, the complaint says, could provide “millions of dollars of annual savings.”

The complaint alleges that Principal and the other defendants in this case did not fulfill their fiduciary duties—first, because they “maintain[ed] a vendor relationship with Principal for administrative services whereby the Plans paid, directly or indirectly, higher than reasonable fees to Principal for such services” and second, because all the investment options except the Principal Common Stock Fund were pooled investment funds “established and marketed by Principal.”

Article Type: Lawsuit
Topic: Employment

Most Recent Case Event

Principal Life Breach of Fiduciary Duty to Retirement Plans ERISA Complaint

February 12, 2021

Employee savings and retirement plans are governed by the Employee Retirement Income Security Act (ERISA) and must be managed for the sole benefit of the participants and beneficiaries. The complaint for this class action brings suit against the Principal Life Insurance Company, its Benefit Plans Administrative and Investment Committees, and the members of those committees, alleging that they sometimes served other interests in their handling of the Principal Select Savings Plans.

Principal Life Breach of Fiduciary Duty to Retirement Plans ERISA Complaint

Case Event History

Principal Life Breach of Fiduciary Duty to Retirement Plans ERISA Complaint

February 12, 2021

Employee savings and retirement plans are governed by the Employee Retirement Income Security Act (ERISA) and must be managed for the sole benefit of the participants and beneficiaries. The complaint for this class action brings suit against the Principal Life Insurance Company, its Benefit Plans Administrative and Investment Committees, and the members of those committees, alleging that they sometimes served other interests in their handling of the Principal Select Savings Plans.

Principal Life Breach of Fiduciary Duty to Retirement Plans ERISA Complaint
Tags: Breach of Fiduciary Duty, ERISA Violations, Employment Violations, Retirement Plans