Court dismisses ERISA case against Principal
The judge says the insurer didn’t violate its fiduciary duty by retaining agreed-upon investments.
A federal judge in Des Moines, Iowa, dismissed an ERISA lawsuit against Principal Life Insurance Co. and affiliates brought by former participants in a 401(k) plan who alleged Principal provided underperforming and high-fee investment choices.
“By simply retaining specific investments that were expressly agreed to by the plan sponsor and fiduciary,” Principal did not violate any fiduciary duties, Judge Stephanie M. Rose wrote in dismissing the case.
The complaint started as a lawsuit against the plan sponsor, CHS/Community Health Systems, and Principal. The plaintiffs accused CHS and its fiduciaries of acting “imprudently” in retaining three Principal-affiliated index funds as stand-alone investment options. They also alleged ERISA violations related to the selection of Principal-affiliated index funds and certain other Principal-affiliated investments as underlying investments in the target-date series.
In December 2020, the plaintiffs and CHS announced a settlement in which CHS agreed to pay $580,000 without admitting any wrongdoing. Principal wasn’t part of that settlement, and the plaintiffs repeated their allegations in their lawsuit against Principal.
“Principal was not acting as a fiduciary when it negotiated at arms-length with CHS,” the judge wrote in her decision.
[More: Several new ERISA lawsuits target big retirement plan sponsors]
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