A new class action lawsuit accuses Principal Financial Group affiliates of enriching themselves by packing retirement plan assets into their own high-fee, underperforming funds.
The suit, filed April 14 in the U.S. District Court for the District of Oregon (East et al. v. Principal Global Investors Trust Company et al., Case No. 3:26-cv-00738), names five Principal-affiliated entities and centers on the management of the Principal LifeTime Hybrid Collective Investment Trusts, a target date fund series used by approximately 7,800 retirement plans across the country.
Two participants in the International Brotherhood of Electrical Workers District #9 Pension Plan brought the action, alleging that Principal's fiduciaries steered billions in target date fund assets into proprietary index funds that charged more, tracked their benchmarks less accurately, and delivered weaker returns than widely available alternatives from firms like BlackRock, Vanguard, State Street, and Northern Trust.
The numbers laid out in the filing are stark. Performance comparisons spanning 2018 through 2024 across four passively managed asset classes — large cap, mid cap, small cap, and bonds — show Principal's index products allegedly trailing peers year after year. According to the filing, as of the end of 2024, Principal's S&P 500 index product carried a fee of 0.13 percent, while competing products used by other target date fund managers charged as little as 0.02 percent. For the bond and mid cap index allocations, the filing alleges Principal's products carried tracking error rates five to ten times higher than competitors.
The suit also takes aim at how the funds were assembled. Rather than using the cheapest available share classes or investment vehicles, the filing alleges that Principal's fiduciaries repeatedly chose higher-fee mutual fund versions of their own actively managed strategies when identical, lower-cost annuity separate accounts existed.
A separate prong of the case targets Principal Life Insurance Company, the plan's recordkeeper, for allegedly charging the IBEW plan between $80 and $94 per participant each year. Industry benchmarking data cited in the filing, drawn from the NEPC 2025 Defined Contribution Plan Trends and Fee Survey, places the reasonable range for a plan of comparable size at $20 to $40 per participant.
For advisors and plan fiduciaries, the case is a pointed reminder that proprietary product conflicts, share class decisions, and recordkeeping costs remain firmly in the legal crosshairs. The filing leans heavily on publicly available performance data and fee comparisons, the kind of information any fiduciary is expected to be monitoring on an ongoing basis.
No determination has been made on the merits. The case is in its earliest stages.
Choice anxiety, prestige bias, and the temptation to make selections based on outsourced confidence are just some of the parallels between investing and the world of wine tasting.
Regulators found Bank of America's monitoring software had a known flaw Merrill left uncorrected for years.
While AI has become a go-to research tool for affluent investors, new HSBC research suggests human advisors remain the deciding voice when investment decisions are made.
A 5-4 ruling preserves the Federal Reserve's independence for now, but the legal fight over presidential removal power is far from settled.
For years, large firms have been facing penalties and questions from regulators over interest rates for clients’ cash accounts.
Dan Biagini of American Equity says the steady decline of pensions, longer lifespans and a reset in interest rates are rewriting how advisors build retirement income
Direct indexing is on pace to outgrow ETFs and mutual funds. Northern Trust's Ken Lassner explains why the advisors who get it wish they had started sooner.
