The lawsuit claims Principal obtained names and addresses of employees nearing retirement from Principal-managed 401k accounts. Letters were sent to pre-retirees as young as 58, allegedly misleading them to believe they were dealing with their own account manager who was looking out for their interests. The letters did not disclose that the phone number participants were directed to call was to sales agents at Princor Financial Services Corp., a Principal subsidiary broker/dealer rather than the Principal pension administration department.
The agents tried to get callers to roll over their 401k assets into a Principal IRA with a class of mutual funds called J-Shares, even though the company has several classes of less expensive mutual funds it sells to everyone else.
The lawsuit alleges violations of the federal Employee Retirement Income Security Act, including allegations that Principal failed to act solely in the interests of the participants and their plans and instead engaged in blatant and massive self-dealing. It also claims sales agents were paid secret and undisclosed bonuses and commissions out of the extraordinarily high internal expenses of the J-Shares.