A former participant in a 401(k) plan run by Principal Life Insurance Co. sued the company and plan fiduciaries, alleging ERISA violations in it and another 401(k) plan administered by Principal.
The primarily allegation is that Principal loaded the investment menus of both plans — the choices are almost identical — with proprietary products instead of checking if non-Principal products were better performing and less expensive, said the complaint filed Feb. 12 in a U.S. District Court in Des Moines, Iowa.
"Principal and its managers on the plan committees chose and maintained for the plans Principal investment products and plan administrative services with high fees," said the complaint, which seeks class-action status, in the case of David J. Hastings vs. Principal Life Insurance Co.
"Defendants also breached their fiduciary duties by causing the plans to maintain a vendor relationship with Principal for administrative services whereby the plans paid, directly or indirectly, higher than reasonable fees to Principal for such services," the complaint said.
Principal Life Insurance Co. is a subsidiary of Principal Financial Group, Des Moines. The parent company isn't a defendant.
(Principal is the record keeper for the Crain Communications retirement plan. Crain is the publisher of Pensions & Investments.)
The Principal Select Savings Plan for Employees, in which Mr. Hastings was a participant, and the Principal Select Savings Plan For Individual Field had combined assets of $2.96 billion as of Dec. 31, 2019, according to the complaint.
"We disagree with the allegations in this lawsuit and will vigorously contest them," Principal spokeswoman Lonnetta Ragland said in an email. "Principal has always been committed to offering meaningful benefit programs to employees."
With the exception of a self-directed brokerage window, the lawsuit alleged that "the plans invested exclusively in Principal investment options during the class period." The class period started Aug. 1, 2015 and runs through the present day, the lawsuit said.
"Fiduciaries of the plans knew or should have known that no single investment management firm provides best-of-class investment fund offerings across in all asset classes," the lawsuit said. "Defendants failed to leverage the bargaining power of the plans to reduce investment management and other fees charged by Principal and Principal affiliates to the plans."
