McCaffree vs. Principal Life Insurance – Another “Excessive Fee” Case

The complaint, filed on March 18th by McCaffree Financial claims that Principal violated several ERISA provisions by charging “grossly excessive” investment management fees, involving self-dealing transaction and violating ERISA’s duties of loyalty and prudence. We know Principal to be a fiduciary as it’s admitted to it.

One specific issue is that Principal structures the retirement plans by creating separate accounts which end up investing solely in Principal-owned mutual funds.  The lawsuit states, ““By structuring its investment products in this way, Principal reaps substantial fees on top of the fees charged by its own mutual funds. Nothing justifies this extra layer of fees. ”  While creating separate accounts is completely legal, self dealing is not.

The footnote under Investment Options actually says, ” Principal Life does not guarantee that any investment option will meet the criteria of any particular plan’s investment policy statement, include reasonable fees, or otherwise be suitable for use by any specific plan. ”

It will be interesting to see if this case takes off.

Read the full complaint McCaffree Financial vs. Principal Life filing Netti Ruletti Strategia Verkossa + Paras Netti ruletti strategia