Principal Financial Group, a well-established financial services company, has found itself embroiled in a series of legal disputes over the years. These lawsuits have centered on various allegations, including fiduciary breaches, excessive fees, and involvement in Ponzi schemes. While Principal has emerged victorious in some cases, others have resulted in significant settlements.
Fiduciary Duty Breaches
One of the most prevalent themes in Principal’s legal battles involves allegations of fiduciary breaches. As a plan administrator, Principal has a legal obligation to act in the best interests of its clients. However, several lawsuits have claimed that Principal has prioritized its own profits over the well-being of its plan participants.
In 2014, Principal was sued by a group of participants in the 401(k) plan of the American Red Cross. The plaintiffs alleged that Principal had breached its fiduciary duty by offering high-cost investment options and failing to adequately monitor the plan’s performance. The case was settled in 2020 for $11 million.
More recently, Principal has faced similar allegations in connection with its handling of target-date funds, which are designed to automatically adjust their investment mix as participants approach retirement. A 2022 lawsuit claims that Principal’s target-date funds underperformed and that the company failed to adequately disclose the risks associated with these investments.
Excessive Fees
Another common complaint against Principal is that it charges excessive fees for its services. These fees can erode the returns of plan participants, especially those with smaller account balances.
In 2020, Principal was sued by the Department of Labor (DOL) for allegedly charging excessive fees for its 401(k) recordkeeping services. The DOL alleged that Principal’s fees were significantly higher than those charged by other providers, resulting in losses for plan participants. The case is still ongoing.
Ponzi Scheme Involvement
In 2009, Principal was accused of knowingly allowing its retirement account holders to invest in a Ponzi scheme operated by Westgate Management LLC. The plaintiffs alleged that Principal failed to conduct adequate due diligence on Westgate and that the company’s marketing materials misrepresented the risks of the investment. Principal settled the case in 2013, agreeing to pay $3.2 million to the affected investors.
Conclusion
Principal Financial Group’s history of legal entanglements highlights the importance of carefully scrutinizing the fees and investment options offered by financial services providers. Plan participants should also be aware of their rights under ERISA, the Employee Retirement Income Security Act, which protects the interests of retirement plan beneficiaries.
FAQs
What is the most recent lawsuit against Principal Financial Group?
A 2022 lawsuit alleges that Principal’s target-date funds underperformed and that the company failed to adequately disclose the risks associated with these investments.
Has Principal Financial Group ever settled a lawsuit for excessive fees?
Yes, in 2014, Principal settled a lawsuit for $11 million over allegations that it had offered high-cost investment options and failed to adequately monitor the 401(k) plan of the American Red Cross.
Was Principal Financial Group involved in a Ponzi scheme?
Yes, in 2009, Principal was accused of knowingly allowing its retirement account holders to invest in a Ponzi scheme operated by Westgate Management LLC. The plaintiffs alleged that Principal failed to conduct adequate due diligence on Westgate and that the company’s marketing materials misrepresented the risks of the investment. Principal settled the case in 2013, agreeing to pay $3.2 million to the affected investors.
What are some of the allegations of fiduciary breaches against Principal Financial Group?
Some of the allegations of fiduciary breaches against Principal Financial Group include offering high-cost investment options, failing to adequately monitor plan performance, and investing plan participants’ money in risky investments without adequate disclosure.
What is the Employee Retirement Income Security Act (ERISA)?
The Employee Retirement Income Security Act (ERISA) is a federal law that protects the interests of retirement plan beneficiaries. ERISA requires plan fiduciaries to act in the best interests of plan participants and to provide them with certain information about their plans.
What should plan participants do if they believe their plan is not being managed in their best interests?
Plan participants who believe their plan is not being managed in their best interests should contact the plan administrator or the DOL. They may also be able to file a lawsuit under ERISA.
References
- [Principal Wins Dismissal of ERISA Lawsuit](https://www
