Life And Annuity Series: 8th Circuit Excessive Fee Decision

The 8th Circuit's recent decision on "excessive fees" under ERISA, titled McCaffree v. Principal Life, is instructive for three reasons:

First, it adds to the line of circuit court precedents holding that an insurance company does not owe a fiduciary duty to an ERISA plan when negotiating and contracting for its fees as that plan's product provider. Specifically, the 8th Circuit determined that Principal was not an ERISA "functional fiduciary" based on its initial selection of investment options for its retirement products. Since the plan remained free to reject Principal's selected menu of investments in those products, and to choose an alternative provider, Principal could not have been exercising any authority over the Mccaffree plan assets at the time the plan contracted for the allegedly excessive fees.