Principal’s missing plans…. where’s the money?
The penalties for filing willful violations on your form 5500 report with the government are severe… up to $100,000 fine and/or imprisonment up to 10 years. The form clearly state the following…“Under penalties of perjury and other penalties set forth in the instructions, I declare that I have examined this return/report, including accompanying schedules, statements and attachments, as well as the electronic version of this return/report, and to the best of my knowledge and belief, it is true, correct, and complete.” The Form 5500, Annual Return/Report of Employee Benefit Plan, including all required schedules and attachments must be filed by a specific deadline unless a Form 5558 is filed and received by the Internal Revenue Service before the due date. Since 2010, all plans must be filed electronically through the EBSA website.
In 2006 and 2007, Principal filed incomplete Form 5500’s with the government that understated the number on plan sponsors by an estimated 30%. The 2006 Schedule D reported approximately 9750 plans in force on December 31, 2006, yet their 2006 Annual Report suggests there were over 14,300 plans (described as “investors). In 2007, the Schedule D reported approximately 9380 plans in force, yet the 2007 Annual Report states there were over 14,700 “investors.” Interestingly, the 2005 Annual Report accurately quantified the over 13,800 “pension plans as clients at the end of 2005.” Base on the above discrepancies, Principal may have willfully violated reporting requirements by grossly understating the number of pension plans during 2006-2007 at almost 10,000 plans. But why would they under report their pension plans? The DOL exacts strict penalties on willful violations on the Form 5500 and/or their schedules. Yet I have not been able to find where any penalties have been assessed against Principal for this obvious infraction. Using a bit of logic, one could suggest if the plan wasn’t reported, it doesn’t exist, and the money paid into that plan does exist either. If Principal under reported the plans, they would have under reported the money that was paid by that missing plan as well.
The problem is that the DOL does not require the reports to include dollars paid into the plan, even though there are columns for that information. Transfers to and from the plan are published, and for 2006, $763,354,412 was transferred in and $454,689,042 was transferred out of the plan. Assuming the transfers represent the published plan sponsors, the average plan transferred in about $78,ooo into the plan. In 2007, the values averaged about $81,000, so the averages are close. Combining the two years, we have an average transfer in of $79,780. Using that average, the “missing” plans would have transferred in about $800 million which can now presumed to be missing from the plan for those two years. Interestingly, in 2008 Principal reported a dramatic increase in the number of plan sponsors, over 17,000 plans total. Yet they reported only $32,181,492 for transfers in, a plan average of only $1,893! Again, Principal committed gross willful violations in 2008 as well, with no repercussions from the government! They also reported almost $750 million in transfers out of the plan in 2008, which ironically closely equates to the missing money for 2006 and 2007.
Included below are the links to the forms discussed above. Open the file in a .PDF viewer like Acrobat. To locate your plan in the database, simply place your employer’s name in the .PDF search box and click on the down arrow next to the box. Next, click on “Open Full Acrobat Search” and when a new screen opens with your employer’s name listed, click on the search button….this will search the entire document rather than just the page. If your plan is missing from the database, it is possible your money was never invested in your allocation.
- PUSPSA 2006 FORM 5500
- PUSPSA 2006 FORM 5500 (SCHEDULE D)
- PUSPSA 2006 FORM 5500 (SCHEDULE H)
- PUSPSA 2007 FORM 5500
- PUSPSA 2007 FORM 5500 (SCHEDULE D)
- PUSPSA 2007 FORM 5500 (SCHEDULE H)
- PUSPSA 2008 FORM 5500
- PUSPSA 2008 FORM 5500 (SCHEDULE D)
- PUSPSA 2008 FORM 5500 (SCHEDULE H)
These errors should have been found by the Department of Labor and reported to the Department of Justice for prosecution. The missing investor’s funds approach almost a billion dollars, well within the guidelines for prosecution. If you review the above documents, you will find the Plan names are scrambled on the report rather than alphabetized. To accomplish this feat, the Database Administrator working for Principal would have had to intentionally devise a formula to scramble the database. I have identified both the formula and the author, and if the DOL is interested, they know how to contact me. I have also been able to unscramble the reports and have identified hundreds of missing plan sponsors from 2006 and 2007, as well as listed sponsors in 2008 that had plans with other insurance companies, in case the DOL would like that information as well.
401(k) investors face an uphill battle when they invest with any insurance company. They must rely entirely upon the ethics of that company in which they are invested, and the company must also have a strictly enforced compliance program in place to prevent the events that have taken place with Principal over the past decade or longer. Without ethics and compliance, your 401(k) may as well be invested in Las Vegas, where at least you will have only odds to deal with, and not a corrupt organization.
Under the Trump administration, the Department of Justice must address issues like Mortgage Origination Fraud and Antitrust Cartels, both of which include money laundering. FinCen published an assessment study in 2006 called Money Laundering in the Commercial Real Estate Industry, in which they identified significant findings that implicated property management, real estate investment, realty, and real estate development companies as the most commonly reported entities associated with money laundering and related illicit activity. Principal filed false reports in 2006, 2007 and 2008 related to real estate investing in their Principal U.S. Property Separate Account. Their antitrust cartel would have included other institutional investors as well. Principal’s activity is damaging the well-being of our entire retirement system, at a time when Social Security benefits are at risk as well.
There is ample evidence to support an investigation of Principal’s activities during the years prior to the financial meltdown in 2008. U.S. Attorney General Jeff Sessions has an opportunity to restore much needed confidence in investing for the American worker, and to make their money more secure by punishing the criminals. “Too Big to Jail” criminals continue to roam our financial corridors, snuffing out secure retirements for millions of Americans. These individuals must be identified and, under our Federal Sentencing Guidelines, serve prison time for their failure to report these crimes.