Compliance July 31, 2007

Judge Blasts Principal Fee Suit Plaintiff Lawyers in Appeal Delay

A federal judge presiding over a lawsuit against the Principal Financial Group over its 401(k) revenue sharing arrangements has cleared the way for the case to be moved to Iowa after plaintiff’s lawyers never mounted the appeal they had promised.
Reported by

Bemoaning the “inordinate delay” in plaintiff’s lawyers asking for a review before a federal appellate court, U.S. District Judge David R. Herndon of the U.S. District Court for the Southern District of Illinois this week lifted his earlier stay of the Illinois-to-Iowa case transfer (See Principal Suit Transfer Order Postponed).

“The (appeal) proposal seems to the Court illusory and now clearly a dilatory tactic,” Herndon complained in his later order lifting the transfer stay, charging that lawyers for Plaintiff Joseph Ruppert never explained to him why the appeal to the 7th U.S. Circuit Court of Appeals had not yet been filed.

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Ruppert, vice president of Fairmount Park Inc., which runs the Fairmount Park Racetrack in Collinsville, Illinois near St. Louis, alleged in the suit that Principal’s revenue sharing practices violated the Employee Retirement Income Security Act (ERISA). Ruppert acts as trustee for his company’s 401(k) plan (See Plan Sponsor Sues Principal over 401(k) Fund Revenue Sharing).

Herndon’s instructions to transfer further proceedings to the U.S. District Court for the Southern District of Iowa in Des Moines came at the request of lawyers for the Des Moines-based Principal after they argued that it was unfair to force the financial services firm to litigate the case in an Illinois federal courtroom.

Compliance July 31, 2007

Ways&Means to Hold Hearings on 401(k) Fees

Just after the introduction of a new bill regarding 401(k) fee disclosures, another House Committee is gearing up for hearings on the issue.
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House Ways and Means Committee Chairman Charles B. Rangel (D-New York) on Friday commended Congressman George Miller’s introduction of the 401(k) Fair Disclosure for Retirement Security Act of 2007, which would call for a number of reforms regarding fee disclosure (see Fee Disclosure Legislation Introduced in House).

“I congratulate Chairman Miller on his bill to require full disclosure of all fees charged to 401(k) participants, an issue of vital importance to Americans workers,” Rangel said, in a statement. “Our retirement system has experienced a major shift from traditional benefit plans to defined contribution plans, with 401(k) plans being the most popular type of plan. But this growth explosion in 401(k) plans has comes with an annual cost to the Federal Government and American taxpayers of roughly $40 billion. It is the responsibility of the Congress to ensure that the taxpayers` interests are protected. It is also our responsibility to ensure that the retirement savings of Americans are not eaten away by unreasonable administrative and investment fees.’

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“I intend to have hearings in the Ways and Means Committee on this issue later this year and continue to move forward in the spirit of comity and bipartisanship, which has guided our deliberations thus far,’ Rangel continued. He also said that he looked “forward to working with Chairman Miller and his Members to develop a reasonable and balanced resolution that serves America’s workers who participate in 401(k) plans, and the employers who sponsor these plans.”

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