Another Excessive Fee Suit Settled

A federal district court judge has approved what plaintiffs’ attorneys have called an $11 million settlement in another so-called excessive fees case, though the actual cash outlay will be significantly less.

Under the terms of the settlement of the class action lawsuit, approved by U.S. District Judge John Jarvey, Principal has agreed to pay $3 million into a settlement fund (which also includes payment for attorneys’ fees), as well as agreeing to reduce plan fees going forward by at least $8.1 million. Pensions & Investments reports that Principal will reduce administrative expenses of the plans to seven basis points from 14 basis points, and has also agreed to add a self-directed brokerage window to its defined contribution plans. Participants will also be able to invest in non-Principal funds.

The class action lawsuit claimed that employees of Principal only had the option of investing in Principal-branded funds for their company-sponsored retirement plans, “whereby the plans paid, directly or indirectly, higher than reasonable fees.” The participants alleged that the retirement plans used Principal investments and administrative services “because Principal, its subsidiaries and its officers benefited financially from the fees,” according to P&I, citing court documents.

A preliminary settlement in the case, Anderson et al. v. Principal Life Insurance Co. et al., was reached in late June. The two plans had a total of about $2 billion in assets as of Dec. 31, 2014, and all of the investment options were Principal funds, according to court documents.

The participants also alleged that the defendants breached their fiduciary duty by entering into a vendor relationship with Principal for administrative services.

Principal denied wrongdoing, according to the settlement agreement. “The company states that it is entering into the agreement solely to eliminate the burden and expense of further litigation,” the agreement document said, according to the report by P&I.

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