Frederick Rozo v. Principal Life Insurance Co., No. 21-2026 (8th Cir. 2022)Annotate this Case
Principal Life Insurance Company (Principal) offers a product called the Principal Fixed Income Option (PFIO), a stable value contract, to employer-sponsored 401(k) plans. Plaintiff on behalf of himself and a class of plan participants who deposited money into the PFIO, sued Principal under the Employee Retirement Income Security Act of 1974 (ERISA), claiming that it (1) breached its fiduciary duty of loyalty by setting a low-interest rate for participants and (2) engaged in a prohibited transaction by using the PFIO contract to make money for itself. The district court granted summary judgment to Principal after concluding that it was not a fiduciary. The Eighth Circuit reversed, holding that Principal was a fiduciary. On remand, the district court entered judgment in favor of Principal on both claims after a bench trial. Plaintiff challenges the court’s judgment.
The Eighth Circuit affirmed. The court agreed with the district court that Principal and the participants share an interest because a guaranteed CCR that is too high threatens the long-term sustainability of the guarantees of the PFIO, which is detrimental to the interest of the participants. The question then becomes whether the court clearly erred by finding that Principal set the CCR in the participants’ interests. The court held that the district court did not clearly err by finding that the deducts were reasonable and set by Principal in the participants’ interest of paying a reasonable amount for the PFIO’s administration. Finally, the court affirmed the district court’s judgment in favor of Principal on the prohibited transaction claim because it is exempted from liability for receiving reasonable compensation.
Court Description: [Smith, Author, with Colloton and Shepherd, Circuit Judges] Civil case - ERISA. For the court's prior opinion in the matter holding defendant was a fiduciary, see Rozo v. Principal Life Ins. Co., 949 F.3d 1071 (8th Cir. 2021). On remand, the district court found defendant had not breached its fiduciary duties to participants in the Principal Fixed Income Option 401(k) plan; the deducts defendant took were reasonable and represented its reasonable expenses of administering the plan; the district court did not clearly err in finding that the deducts were set in the participant's interests; with respect to plaintiff's claim that defendant engaged in prohibited self-dealing, defendant was exempt from liability for receiving reasonable compensation.