Principal Revenue Sharing Suit Gets Moved to Iowa

June 6, 2007 ( - A federal court lawsuit against the Principal Financial Group over fiduciary breach allegations connected with Principal's 401(k) plan revenue sharing arrangements has been moved to Iowa for further proceedings.

U.S. District Judge David R. Herndon of the U.S. District Court for the Southern District of Illinois accepted the argument advanced by lawyers for the Des Moines-based Principal that it was unfair to force the financial services firm to litigate the case in an Illinois federal courtroom.

As support for his decision to transfer the revenue sharing matter to an Iowa court, Herndon looked at where most of Principal’s retirement plans are domiciled.

Wrote Herndon: “the only connection the Court can find to the Southern District of Illinois is that of as of November 8, 2006, the date the action was filed, of the of the 24,816 active plans nationwide only 73 of these plans have received services in this (federal court) District (which represents 0.294% of the active nationwide plans). The record reveals that Principal Life has served 137 (potential) class members in the Southern District of Illinois out of more than 57,000 total potential class members.”

Herndon concluded: “the Court finds it reasonable to look to where the decisions regarding the plans were made and to where the decision makers may be found. According to the record, all of the decisions were made in Iowa, mostly in the Southern District of Iowa, and virtually all of the relevant witnesses reside in Iowa, particularly in the Southern District of Iowa.”

The suit was filed by the sponsor of anIllinois racetrack’s 401(k) plan, saying Principal’s revenue sharing programs with mutual fund companies in its plans were improper (See  Plan Sponsor Sues Principal over 401(k) Fund Revenue Sharing ).  

Joseph Ruppert, vice president of Fairmount Park Inc., which runs the Fairmount Park Racetrack in Collinsville, Illinois near St. Louis, alleged in the suit the revenue sharing practice violated the Employee Retirement Income Security Act (ERISA). Ruppert acts as trustee for the plan.

The case is now based in the U.S. District Court for the Southern District of Iowa in Des Moines.