Court rejects ERISA claim lodged against Principal Life Insurance pionline.com - get the latest breaking news, showbiz & celebrity photos, sport news & rumours, viral videos and top stories from pionline.com Daily Mail and Mail on Sunday newspapers.
Judge Finds in Favor of Principal Life’s Process for Setting GIC Crediting Rate
Principal prevailed in a lawsuit that alleged it set the crediting rate for a guaranteed investment contract (GIC) such that it could “retain unreasonably large and/or excessive profits.”
Following a six-day trial, Judge John A. Jarvey of the U.S. District Court for the Southern District of Iowa ruled in favor of Principal Life Insurance Co. in a lawsuit alleging it violated the Employee Retirement Income Security Act (ERISA) by setting the crediting rate for a guaranteed investment contract (GIC) such that it could “retain unreasonably large and/or excessive profits.” A GIC is a stable value investment contract issued by an insurance company that usually pays a specified rate of return for a specific period of time, guaranteeing principal and accumulated interest.
Judge Sides With Principal Life Insurance in GIC Lawsuit
A federal judge found Principal’s ‘meticulous’ process for setting the GIC’s composite crediting rate protected the availability of the investment and was in the best interest of participants.
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Following a six-day trial, Judge John A. Jarvey of the U.S. District Court for the Southern District of Iowa ruled in favor of Principal Life Insurance Co. in a lawsuit alleging it violated the Employee Retirement Income Security Act (ERISA) by setting the crediting rate for a guaranteed investment contract (GIC) such that it could “retain unreasonably large and/or excessive profits.” A GIC is a stable value investment contract issued by an insurance company that usually pays a specified rate of return for a specific period of time, guaranteeing principal and accumulated interest.
Principal Life Beats 401(k) Class Action After Bench Trial law360.com - get the latest breaking news, showbiz & celebrity photos, sport news & rumours, viral videos and top stories from law360.com Daily Mail and Mail on Sunday newspapers.
Divane v. Northwestern University, No. 16 C 8157 (N.D. Ill. May 25, 2018),
aff d, 953 F.3d 980 (7th Cir. 2020), the district court first rejected plaintiff’s claim that the plan sponsor breached its fiduciary duty by allowing the recordkeeper access to participant data – which plainly is necessary to the recordkeeping function – and allowing the recordkeeper to use it for cross-selling. It then agreed with the plan sponsor’s argument that allowing the recordkeeper’s use of that data could not constitute an ERISA prohibited transaction because that data, while potentially of economic value to the recordkeeper, was not a plan asset under “ordinary notions of property rights,” the touchstone under the ERISA plan asset regulation.