The Principal Unveils Written Warranty for Plan Fiduciaries
Warranty helps give financial professionals, third party administrators and their clients added confidence
July 20, 2011 (Des Moines, Iowa) – Retirement plan fiduciaries have significant responsibilities and could face potential liabilities. To help financial professionals, third party administrators (TPAs) and plan fiduciaries manage these risks and feel more protected, the Principal Financial Group® announces The Principal Warranty.
The Principal Warranty offers plan fiduciaries a level of financial protection for covered investment fiduciary support and services. Available at no additional cost, the written warranty helps plan fiduciaries and financial professionals manage their fiduciary risks.
“While we can't eliminate the fiduciary burden for plan sponsors, we are able to provide a level of support to help them feel more confident in their duties. We also extend much of that financial coverage to financial professionals and third party administrators,” said Monica Kirgan, vice president of retirement and investor services at The Principal®. “We put our warranty in writing because we stand behind our services and our investment fiduciary support. Few warranties in the marketplace today offer such breadth and depth.”
Flexible investment fiduciary support coverage
Investment fiduciary support through The Principal Warranty provides financial protection for three key areas of concern among fiduciaries:
- Broad Range Requirement under 404(c)
- Qualified Default Investment Alternatives
- Prudent monitoring on an investment-by-investment basis
The fiduciary is able to select one, two or all three areas of investment-related concerns for warranty coverage. If one investment option in the retirement program line-up no longer fits warranty coverage, it would only impact that option. Other investment options in the line-up would continue to be covered.
Service warranty
Plan sponsors are automatically eligible for the service warranty under The Principal Warranty. “Through our service warranty, we promise prompt and accurate services,” said Kirgan. “If we fall short, we will fix the problem and waive the fee for that service. In addition the service warranty provides plan fiduciaries a level of indemnification protection.”
The Principal Warranty is one way The Principal helps plan fiduciaries manage their obligations. Other tools include a Fiduciary Handbook and the annual Fiduciary File which provides an easy, convenient way for plan sponsors to store important documents.
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About the Principal Financial Group
The Principal Financial Group® (The Principal®)[1] is a retirement and global asset management leader. The Principal offers businesses, individuals and institutional clients a wide range of financial products and services, including retirement, investment services and insurance through its diverse family of financial services companies. A member of the FORTUNE 500®, the Principal Financial Group has $327.4 billion in assets under management[2] and serves some 16.4 million customers worldwide from offices in Asia, Australia, Europe, Latin America and the United States. Principal Financial Group, Inc. is traded on the New York Stock Exchange under the ticker symbol PFG.
This is for informational purposes only and does not affect those terms and provisions defined in The Principal Warranty Investment Fiduciary Support and Service Warranty documents. For comprehensive warranty details on the levels of coverage we offer, see The Principal Warranty document(s) available at principal.com
2 Investment options eligible for use in the five broad investment asset classes include Sub-Advised, Mutual Fund Network and certain short-term fixed income options specified in investment fiduciary support portion of The Principal Warranty document(s).
The five broad asset class categories include: Short-Term Fixed Income, Fixed Income, Large US Equity, Small/Mid US Equity and International Equity.
The investment fiduciary support portion of The Principal Warranty applies to covered plan investment options that are part of an active retirement plan recordkept by Principal Life. 404(c) and QDIA coverage applies only to plans subject to ERISA. In general, nonqualified plans are not regulated under ERISA. Different investment products and financing options apply to nonqualified plans. No member company of The Principal assumes any additional fiduciary responsibility for any nonqualified deferred compensation plan. For purpose of nonqualified plans and plans not subject to ERISA, Principal Life indemnifies the Plan Representative who signs the Service Agreement.
References to prudence means compliance with the prudent standard described in §404(a)(1)(b) of ERISA, including following prevailing industry standards and generally accepted investment theories. ERISA imposes on the plan administrator ongoing accountability for the selection and monitoring of those to whom specific fiduciary responsibilities have been delegated or on whom the plan administrator is depending for help in meeting its own fiduciary obligations.
Principal Life is not a fiduciary in the broader context of operating any plan. The selection of any investment option on behalf of a plan is the fiduciary responsibility of the appropriate plan fiduciary, which is not Principal Life, nor any affiliate. Principal Life does not guarantee performance of any investment option (other than the portion of a group annuity contract that constitutes a guaranteed benefit policy as described in ERISA §401(b)(2)). Principal Life does not guarantee that any investment option will meet the criteria of any particular plan's investment policy statement or be suitable for use by any specific plan. The limited fiduciary tasks undertaken by Principal Life do not eliminate the responsibilities of the relevant plan fiduciaries for the prudent selection and monitoring of any investment option for a retirement plan. Please consult with your counsel or other advisor.
Insurance products and plan administrative services are provided by Principal Life Insurance Company. Principal Funds, Inc., is distributed by Principal Funds Distributor, Inc. Securities are offered through Princor Financial Services Corporation, 800-547-7754, member SIPC and/or independent broker/dealers. Securities sold by a Princor® Registered Representative are offered through Princor. Principal Funds Distributor, Princor and Principal Life are members of the Principal Financial Group®, Des Moines, IA 50392. Separate Accounts are made available through a group annuity contract with Principal Life, Des Moines, IA 50392. They may not be available in all states or U.S. commonwealths. Ask your representative for more details.
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