.bodytext {float: left; } .floatimg-left-hort { float:left; margin-top:10px; margin-right: 10px; width:300px; clear:left;} .floatimg-left-caption-hort { float:left; margin-bottom:10px; width:300px; margin-right:10px; clear:left;} .floatimg-left-vert { float:left; margin-top:10px; margin-right:15px; width:200px;} .floatimg-left-caption-vert { float:left; margin-right:10px; margin-bottom:10px; font-size: 10px; width:200px;} .floatimg-right-hort { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 300px;} .floatimg-right-caption-hort { float:left; margin-right:10px; margin-bottom:10px; width: 300px; font-size: 10px; } .floatimg-right-vert { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 200px;} .floatimg-right-caption-vert { float:left; margin-right:10px; margin-bottom:10px; width: 200px; font-size: 10px; } .floatimgright-sidebar { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 200px; border-top-style: double; border-top-color: black; border-bottom-style: double; border-bottom-color: black;} .floatimgright-sidebar p { line-height: 115%; text-indent: 10px; } .floatimgright-sidebar h4 { font-variant:small-caps; } .pullquote { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 150px; background: url(http://www.dmbusinessdaily.com/DAILY/editorial/extras/closequote.gif) no-repeat bottom right !important ; line-height: 150%; font-size: 125%; border-top: 1px solid; border-bottom: 1px solid;} .floatvidleft { float:left; margin-bottom:10px; width:325px; margin-right:10px; clear:left;} .floatvidright { float:right; margin-bottom:10px; width:325px; margin-right:10px; clear:left;} Principal Financial Group Inc. announced today that it has reached a settlement with the attorney general of Connecticut regarding expense reimbursement arrangements made with brokers who sold single-premium group annuity policies. The policies primarily fund terminating defined benefit retirement plans.

“Throughout the process, we have denied the assertions of the attorney general, and we continue to do so,” Ron Danilson, senior vice president of retirement and investor services at Principal, said in a press release. “These payments were legitimate and legal. We disclosed all costs, including all broker payments, to plan sponsors. We believe that we won all business fairly, and clients selected us because we provided the best value for them.”

“We have fully cooperated with the attorney general at every stage of the investigation, and though we disagree with the allegations, we have now decided to settle this case to avoid the costs and distractions of litigation,” said Karen Shaff, executive vice president and general counsel at Principal.

The settlement calls for Principal to establish a $4.4 million fund to be used to pay plan sponsors that purchased single-premium group annuity policies from brokers who received these payments from Principal from 1998 through January 2006. The company also agreed to pay a penalty of $600,000 to the state of Connecticut.

In a press release, Connecticut Attorney General Richard Blumenthal said: “This national settlement provides both significant restitution and sweeping reforms. Principal’s schemes potentially inflated pension plan costs for private and public pension plans nationwide. Principal paid hidden commissions to brokers disguised as expense reimbursement agreements, marketing agreements or administrative costs.”

The state contends that although some brokers claimed to act for the benefit of the plan and to obtain the best product at the best price, their recommendations were often motivated by the additional, undisclosed compensation they received from Principal.

In some cases, the compensation exceeded the disclosed specified commission by more than 100 percent. The agreements provided additional compensation to the brokers without revealing higher commission costs to clients.

Under today’s settlement, Principal must, by early January 2008, identify customers eligible for restitution and calculate the amount each will receive from the SPGA restitution fund.

In the sale and placement of SPGAs to pension plans, Principal has also agreed to:

● Impose a four-year ban on any broker compensation apart from the disclosed commissions for SPGA products and lines of business.

● Provide written disclosures to brokers and customers in its initial SPGA proposals — prior to binding — of all compensation and commissions paid to the broker, and receive written consent from each of its customers to such terms.

● Provide, by the end of the calendar year, written disclosure to pension plan customers of all compensation and commissions paid to or to be paid to the broker in relation to that customer’s SPGA.

● Post a disclosure on its Web site, in a format to be approved by Blumenthal’s office, of its compensation practices and policies.

● Implement written standards of conduct regarding compensation and commissions paid to brokers, and appropriate employee training.