The 401(k) problems as they exist today cannot be solved by simply exposing one of the perpetrators. Principal isn’t the only problem, crime and corruption is the problem. Principal simply illustrates the systemic nature of the existing fraud within the 401(k) industry. Not all plan providers are crooks, but enough of them are to corrupt the entire system. So how can the problem be fixed? The Employee Benefits Security Administration is an agency of the United States Department of Labor responsible for administering, regulating and enforcing the provisions of Title I of the Employee Retirement Income Security Act (ERISA) of 1974. ERISA is a federal law that sets minimum standards for most voluntarily established pension and health plans in private industry to provide protection for individuals in these plans.
The Employee Benefits Security Administration (EBSA) already has in place what they call the “Voluntary Fiduciary Correction Program” (VFCP) where “Anyone who may be liable for fiduciary violations under ERISA, including employee benefit plan sponsors, officials, and parties in interest, may voluntarily apply for relief from enforcement actions, provided they comply with the criteria and satisfy the procedures outlined in the VFCP.” Ok, it looks like Principal, assuming they are a “parties in Interest” may actually “voluntarily apply for relief from enforcement actions.” Let’s take a look at the “provided they comply with the criteria and satisfy the procedures outlined in the VFCP.” part of the program. The “criteria” part gets a little more difficult for the wrongdoer. The following defines exactly what the criteria involves:The “fully and accurately correct violations” part could be a “no show” for companies like Principal… and if they fail to meet the criteria, there could be penalties. The next step, “How to Apply,” in the process sounds pretty easy for most companies, large or small:
Wow, “four easy steps” is all it takes. The first step would be easy for Principal. All they would have to do is have someone look at my website; I may have not yet covered all the violations, but there is a sliver of light at the end of the tunnel, as they say! The next step is also easy, since I can help them identify most of the “improper loans or incorrect valuation of plan assets.” The next part would be difficult, since it involves paying back the money Principal stole from investors. They certainly would have no reason to do that. It is hard work to steal money, launder it, and get it back into the banking system. It takes a lot of people, not knowing that they are criminals, to pull this off. In fact, it takes over 10,000 employees to unknowingly help Principal to steal, and in some cases, as they recently discovered, their own money!
Sounds pretty simply, doesn’t it? The system is well written, and enforceable. The DOL enforces actions under this program every year, and the wrong-doer is forgiven for their misdeeds. It is that simple. Nobody needs to go to jail, corporations can remain in business, and hopefully, investors will get their money back…. but therein lies the problem. Principal likes the thought of stealing your money, especially when they can be forgiven for their bad deeds. It’s the “pay-back” feature of the VFCP they don’t like. If the truth be known, I suspect Principal really doesn’t like the part about actually admitting they stole the money either, so we probably have two issues.
In all seriousness, we already have existing laws that would solve this problem, and more “laws” will not work any better than the ones still on the books! President Trump has already said he wants to “clean the swamp” in Washington. He needs to start with the agencies that are doing the most harm to individual Americans. The DOL Alexander Acosta’s nomination to be Labor Secretary took place almost a year ago, and little, if any effort, to “clean the swamp,” has taken place. He can start with Principal Life Insurance Company, and the sooner, the better. Today, 401(k) investors are saving more, and earning more, than ever before in the history of the program. For Principal, that simply means the “piggy bank” is once again getting full, as it did in 2006 when they stole several billions of dollars.
Principal has argued for years that they are NOT fiduciaries, and that they are NOT parties in interest, and they found a handful of district and circuit judges to support their position. At least one of them is a former college classmate of the former Principal CEO, Larry Zimpleman. ANYONE who takes ownership of plan assets, by ANY definition, MUST BE A PARTY IN INTEREST! THIS IS A “NO-BRAINER.” ANYONE who buys and sells their own proprietary products to a 401(k) plan IS A PARTY IN INTEREST! And anyone who uses A 401(K) plan to pay off defaulted loans that THEY previously made to developers, should be in prison. THIS IS A NO-BRAINER!
I could go on, but I won’t. The law is on the books, and it must be enforced… now. Principal’s thought process is simple. if they do not admit to being fiduciaries, and do not admit to their crimes, no-one can enforce the Voluntary Fiduciary Correction Program. They already know the federal government will not prosecute them, and the State of Iowa is in bed with them, so they continue their campaign of misdeeds with impunity. It is that simple. As 401(k) investors, you must recognize this problem and take steps to remediate your own 401(k) plan as soon as possible. Time is important.
Your 401(K) returns may appear to be fair and reasonable NOW, but check out the BrightScope website and my previous blog posts for other Principal sponsored plans. Many of those investors, including my wife and I, lost over the life of their investing, an average of a quarter million dollars, and that did not include the money Principal stole during the PUSPSA account freeze in 2008 and 2009! Until Principal feels the pain of market-based pressure to comply with a moral and ethical standard, you will become a victim. It IS that simple.