A federal District Court judge in Des Moines, Iowa, dismissed an ERISA lawsuit against Principal Life Insurance Co. and affiliates by former participants in a 401(k) plan sponsored by CHS/Community Health Systems Inc. who alleged Principal provided underperforming and high-fee investment options.
"Principal did not violate any fiduciary duties by simply retaining specific investments that were expressly agreed to by the plan sponsor and fiduciary, CHS," Stephanie M. Rose, chief judge for the U.S. District Court for the Southern District of Iowa, wrote on Monday.
"This means plaintiffs cannot state a claim for breach of fiduciary duty based on these investments," she wrote in the case of Kirk et al. vs. Principal Life Insurance Co. et al.
The complaint against Principal started as a lawsuit against CHS and Principal, filed in August 2019 in a federal District Court in Nashville, Tenn. The plaintiffs accused CHS and fiduciaries of "imprudently" retaining three Principal-affiliated index funds as stand-alone investment options, which were "excessively expensive and poorly performing compared to available alternatives," according to court records.
They also alleged ERISA violation by fiduciaries in their role as investment manager of certain target-date separate accounts "by selecting Principal-affiliated index funds and certain other Principal-affiliated investments as underlying investments" in the target-date series, according to court records.
The plaintiffs and CHS announced a settlement in December 2020 in which CHS agreed to pay $580,000 without admitting any wrongdoing.
Principal wasn't part of the settlement, and the lawsuit was transferred to the Iowa federal court. Principal's headquarters is in Des Moines, Iowa. CHS is based in Franklin, Tenn.
Plaintiffs repeated their target-date allegations in their lawsuit against Principal and its fiduciaries. "Principal was not acting as a fiduciary when it negotiated at arms-length with CHS," Ms. Rose wrote.
