Plaintiffs in this newly filed case allege that the Principal Fixed Income Option, specifically the contract underlying, is “inappropriately structured” thereby enabling Principal to, at its discretion, retain excessive profits instead of crediting participants and beneficiaries with appropriate returns in a breach of its fiduciary duties to the plans for which it provides such services. Principal can set and change the interest rate at its discretion, does not promise a threshold rate or effective date of the rate. Plaintiffs suggest that Principal invested the assets received “pursuant to the contract” as it chose, and retained for itself the difference between the investment earnings of those assets and the interest chosen to credit to the plans – referred to as the spread – in addition to high fees for administrative and/or recordkeeping services provided to clients’ plans. ERISA breaches are alleged on the basis that “the contract is a plan asset of the plans holding it,” as Principal exercised discretionary authority over the administration of the contract, including setting the credited rate. At such, Principal “owed fiduciary duties to plan participants with respect to the contract.”
www.planadvisor.com; May 17, 2017.