Form 11-K PRINCIPAL FINANCIAL GROU For: Dec 31

June 23, 2021 3:55 PM EDT

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

  

FORM 11-K

  

(Mark One)

 

xANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
  
 For the fiscal year ended: December 31, 2020

 

OR

  

¨TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
  
 For the transition period from ____________ to _____________

  

Commission file number: 1-16725

 

The Principal Select Savings Plan for Individual Field

(Full title of the plan)

  

Principal Financial Group, Inc.

(Name of Issuer of the securities held pursuant to the plan)

 

711 High Street

Des Moines, Iowa 50392

(Address of principal executive offices) (Zip Code)

 

 

 

 

 

 

 

Report of Independent Registered Public Accounting Firm

 

To the Plan participants and the Benefit Plans Administration Committee

Principal Financial Group, Inc.

 

Opinion on the Financial Statements

 

We have audited the accompanying statements of net assets available for benefits of The Principal Select Savings Plan for Individual Field (the Plan) as of December 31, 2020 and 2019, and the related statement of changes in net assets available for benefits for the year ended December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the net assets available for benefits of the Plan at December 31, 2020 and 2019, and the changes in its net assets available for benefits for the year ended December 31, 2020, in conformity with U.S. generally accepted accounting principles.

 

Basis for Opinion

 

These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on the Plan’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Plan in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Plan is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Plan’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

1

 

 

 

Supplemental Schedule

 

The accompanying supplemental schedule of assets (held at end of year) as of December 31, 2020, has been subjected to audit procedures performed in conjunction with the audit of the Plan’s financial statements. The information in the supplemental schedule is the responsibility of the Plan’s management. Our audit procedures included determining whether the information reconciles to the financial statements or the underlying accounting and other records, as applicable, and performing procedures to test the completeness and accuracy of the information presented in the supplemental schedule. In forming our opinion on the information, we evaluated whether such information, including its form and content, is presented in conformity with the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. In our opinion, the information is fairly stated, in all material respects, in relation to the financial statements as a whole.

 

We have served as the Plan’s auditor since at least 2001, but we are unable to determine the specific year.

 

/s/ Ernst & Young LLP

Des Moines, Iowa

 

June 23, 2021

 

2

 

 

The Principal Select Savings Plan for Individual Field

 

Statements of Net Assets Available for Benefits

 

   December 31, 
   2020   2019 
Assets          
Investments at fair value:          
    Unallocated investment options:          
          Deferred income annuity  $383,690   $318,144 
          Guaranteed interest accounts   1,132,291    1,130,294 
          Separate accounts   187,535,163    175,415,246 
    Principal Financial Group, Inc. Employee Stock Ownership Plan   18,580,100    18,813,837 
    Collective investment trusts   32,578,976    30,556,794 
    Self-directed brokerage account   2,666    1,890 
Total invested assets at fair value   240,212,886    226,236,205 
     Plan interest in Master Trust Investment Account at contract value   23,666,936    15,402,189 
Total investments   263,879,822    241,638,394 
           
Receivables:          
    Contributions receivable from employer   255,565    291,460 
    Notes receivable from participants   1,909,848    2,033,166 
    Other receivables       229 
Total receivables   2,165,413    2,324,855 
Net assets available for benefits  $266,045,235   $243,963,249 

 

See accompanying notes.

  

  3

 

  

The Principal Select Savings Plan for Individual Field

 

Statement of Changes in Net Assets Available for Benefits

 

   For the 
   year ended 
   December 31, 
   2020 
Additions     
Investment income:     
     Interest  $16,329 
     Dividends   871,980 
     Net appreciation of investments   29,866,723 
     Interest in Master Trust Investment Account   381,187 
Total investment gain   31,136,219 
      
Interest income on notes receivable from participants   115,240 
      
Contributions:     
     Employer   3,253,261 
     Participants   7,910,113 
     Transfers from affiliated plans, net   2,334,457 
Total contributions   13,497,831 
Total additions   44,749,290 
      
Deductions     
Benefits paid to participants   22,515,278 
Administrative expenses   152,026 
Total deductions   22,667,304 
Net increase   22,081,986 
      
Net assets available for benefits at beginning of year   243,963,249 
Net assets available for benefits at end of year  $266,045,235 

 

See accompanying notes.

  

  4

 

 

The Principal Select Savings Plan for Individual Field

 

Notes to Financial Statements

 

December 31, 2020

  

1. Significant Accounting Policies

 

Basis of Accounting

 

The accounting records of The Principal Select Savings Plan for Individual Field (the Plan) are maintained on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles (GAAP).

 

Valuation of Investments and Income Recognition

 

Investments held by the Plan are stated at fair value, which is defined as the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date (an exit price). See Note 4 for further discussion and disclosures related to fair value measurements.

 

Interest income is recorded as earned. Dividends are recorded on the ex-dividend date. Net appreciation (depreciation) includes the Plan’s gains and losses on investments bought and sold as well as held during the year.

 

Notes Receivable From Participants

 

The notes receivable from participants are reported at their unpaid principal balance plus any accrued but unpaid interest. Interest income on notes receivable from participants is recorded when earned.


Payment of Benefits

 

Benefits are recorded when paid.

 

Risks and Uncertainties

 

The Plan invests in various investment securities. Investment securities are exposed to various risks such as interest rate, market volatility, and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect participants’ account balances and the amounts reported in the Statements of Net Assets Available for Benefits.

 

Use of Estimates

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates that affect the amounts reported in the financial statements and accompanying notes and supplemental schedule. Actual results could differ from those estimates.

  

  5

 

 

The Principal Select Savings Plan for Individual Field

 

Notes to Financial Statements (continued)

 

1. Significant Accounting Policies (continued)

 

Recent Accounting Pronouncement

 

In August 2018, the Financial Accounting Standards Board issued authoritative guidance on fair value measurement disclosures under ASC Topic 820. This guidance was adopted retrospectively in 2020 and did not have a material impact on the Plan’s financial statements.

 

2. Description of the Plan

 

The Plan is a defined contribution 401(k) plan that was established January 1, 1985. The Plan is available to agents holding a Career Agent Contract and financial representatives with Principal Life Insurance Company (Principal Life) or its affiliates (the Company) who meet eligibility requirements. The Plan Sponsor is Principal Financial Group, Inc. (PFG), the ultimate parent of Principal Life.

 

Information about the Plan, including eligibility, and benefit provisions is contained in the Summary Plan Description. Copies of the Summary Plan Description are available from Principal Life’s Human Resources Benefits Department or the Company’s intranet. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended (ERISA).

 

The Plan Administrator is responsible for the control and administration of the Plan. The Plan Administrator is the Benefit Plans Administration Committee (BPAC). For the purposes of investment and protection of Plan assets, the named fiduciary of the Plan is the Benefit Plans Investment Committee. The Plan is funded through a trust fund that holds group annuity contracts issued by Principal Life and collective investment trusts (CITs) issued by Principal Global Investors Trust Company (PGITC), an indirect wholly owned affiliate of PFG. The PFG Employee Stock Ownership Plan (ESOP), which consists of common stock of PFG, is held in a separate trust. The Trustees of the Trust that hold the group annuity contracts and CITs are employees of Principal Life. Bankers Trust is the Trustee of the Trust that holds PFG common stock in the ESOP. Delaware Charter Guarantee & Trust Company, doing business as Principal Trust Company, an affiliate of PFG, is the Directed Trustee of the self-directed brokerage account (SDBA). Principal Life is the recordkeeper of the Plan.

 

Contributions

 

On January 1, 2006, the Company made several changes to the retirement program. Participants who were age 47 or older with at least ten years of service on December 31, 2005, could elect to retain the prior benefit provisions under the qualified defined benefit retirement plan and the Plan and forgo receipt of the additional benefits offered by amendments to the Plan. The participants who elected to retain the prior benefit provisions are referred to as “Grandfathered Choice Participants.”

 

Matching contributions for participants other than Grandfathered Choice Participants were increased from 50% to 75% of deferrals, with the maximum matching deferral increasing from 6% to 8% of eligible pay-period compensation.

 

  6

 

 

The Principal Select Savings Plan for Individual Field

 

Notes to Financial Statements (continued)

  

2. Description of the Plan (continued)

 

Participant Accounts

 

Each participant’s account is credited with the participant’s contributions and the Company’s matching contributions. The participant’s account also receives an allocation of plan earnings and administrative expenses. Plan earnings are allocated based on the participant’s share of net earnings or losses of their respective elected investment options. Allocations of administrative expenses are based on the participant’s account balances, as defined. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s vested account.

 

Vesting

 

Participants are eligible for immediate entry into the Plan with vesting at 100% after three years. The funds accumulate along with interest and investment return and are available for withdrawal by participants at retirement, termination, or when certain withdrawal specifications are met. The participants may also obtain loans of their vested accrued benefit, subject to certain limitations described in the governing document (the Plan Document). The federal and state income taxes of the participant are deferred (except in the case of Roth deferrals) on the contributions until the funds are withdrawn from the Plan.

 

Forfeitures

 

Upon termination of employment, participants forfeit their non-vested balances. Forfeited amounts are used to reduce Company contributions. As of December 31, 2020 and 2019, forfeited non-vested account balances totaled $3,109 and $26,743, respectively. In 2020 and 2019, employer contributions were reduced by $176,232 and $177,350, respectively, from forfeited non-vested accounts.

 

Participant Loans

 

The Plan provides for loans to active participants, which are considered a participant-directed investment of his/her account. The loan is a Plan asset, but only the borrowing participant’s account shares in the interest paid on the loan or bears any expense or loss incurred because of the loan. The rate of interest is 2% higher than the Federal Reserve “Bank Prime Loan” rate at the time of the loan. The rate is set the day a loan is approved. Loans merged into the Plan come with existing rates at the time of the merger.

  

  7

 

 

The Principal Select Savings Plan for Individual Field

 

Notes to Financial Statements (continued)

  

2. Description of the Plan (continued)

 

The loan rates were as follows:

 

Participant Loan Dates  Rates 
January 1, 2013 to December 16, 2015   5.25%
December 17, 2015 to December 14, 2016   5.50%
December 15, 2016 to March 21, 2017   5.75%
March 22, 2017 to June 20, 2017   6.00%
June 21, 2017 to December 19, 2017   6.25%
December 20, 2017 to March 27, 2018   6.50%
March 28, 2018 to June 19, 2018   6.75%
June 20, 2018 to October 2, 2018   7.00%
October 3, 2018 to December 25, 2018   7.25%
December 26, 2018 to August 6, 2019   7.50%
August 7, 2019 to September 24, 2019   7.25%
September 25, 2019 to November 5, 2019   7.00%
November 6, 2019 to March 3, 2020   6.75%
March 4, 2020 to March 10, 2020   6.68%
March 11, 2020 to March 17, 2020   6.25%
March 18, 2020 to March 24, 2020   5.82%
March 25, 2020 to December 31, 2020   5.25%

 

Plan Termination

 

Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event the Plan terminates, affected participants will become fully vested in their accounts.

 

3. Income Tax Status

 

The Plan has received a determination letter from the Internal Revenue Service (the IRS) dated October 12, 2017, stating that the Plan is qualified under Section 401(a) of the Internal Revenue Code (the Code) and, therefore, the related trust is exempt from taxation. Subsequent to this determination by the IRS, the Plan was amended and restated. The Plan and the Trust are required to operate in conformity with the terms of the Plan Document and the Code to maintain the tax-exempt status of the Trust. BPAC and the Company believe the Plan is being operated in compliance with the applicable requirements of the Code and therefore, believe the related Trust is tax-exempt.

 

  8

 

 

The Principal Select Savings Plan for Individual Field

 

Notes to Financial Statements (continued)

 

3. Income Tax Status (continued)

 

U.S. GAAP requires plan management to evaluate uncertain tax positions taken by the Plan. The financial statement effects of a tax position are recognized when the position is more likely than not, based on the technical merits, to be sustained upon examination by the IRS. BPAC relies on the representations of the corporate tax department regarding the tax positions taken by the Plan and has concluded that as of December 31, 2020, there are no uncertain positions taken or expected to be taken. The Plan has recognized no interest or penalties related to uncertain tax positions.

 

The Plan is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress.

 

4. Fair Value of Financial Instruments (excluding interest in Master Trust Investment Account)

 

Valuation Hierarchy

 

Fair value is defined as the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date (an exit price). The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three levels.

 

  Level 1 – Fair values are based on unadjusted quoted prices in active markets for identical assets. The Plan’s Level 1 assets include the Principal Financial Group, Inc. ESOP and the SDBA.

 

  Level 2 – Fair values are based on inputs other than quoted prices within Level 1 that are observable for the asset, either directly or indirectly. The Plan’s Level 2 assets include separate accounts and CITs and are reflected at the net asset value (NAV).

 

  Level 3 – Fair values are based on significant unobservable inputs for the asset. The Plan’s Level 3 assets include the deferred income annuity and guaranteed interest accounts.

 

There were no transfers between levels during 2020 and 2019.

 

Determination of Fair Value

 

The following discussion describes the valuation methodologies used for assets measured at fair value on a recurring basis. The techniques utilized in estimating the fair values of financial instruments are reliant on the assumptions used. Care should be exercised in deriving conclusions based on the fair value information of financial instruments presented below.

 

Fair value estimates are made at a specific point in time, based on available market information and judgments about the financial instrument. Such estimates do not consider the tax impact of the realization of unrealized gains or losses. In addition, the disclosed fair value may not be realized in the immediate settlement of the financial instrument. There were no significant changes to the valuation processes during 2020 or 2019.

 

The unallocated investment options consist of a deferred income annuity, guaranteed interest accounts under a guaranteed benefit policy (as defined in section 401(b) of ERISA), and separate accounts (as defined in ERISA section 3(17)) of Principal Life. The deferred income annuity and guaranteed interest accounts are reported at fair value while the separate accounts are reported at NAV as determined by Principal Life. These unallocated investment options are non-benefit-responsive.

  

  9

 

 

The Principal Select Savings Plan for Individual Field

 

Notes to Financial Statements (continued)

 

4. Fair Value of Financial Instruments (excluding interest in Master Trust Investment Account) (continued)

 

Deferred Income Annuity

 

The deferred income annuity cannot be sold to a third party; thus, the only option to exit the deferred income annuity is to withdraw or transfer the funds. The fair value for each deferred income annuity surrendered within 90 days from the date of the purchase is the purchase amount of the surrendered portion. The fair value for each deferred income annuity surrendered more than 90 days after the date of the purchase is the lesser of the guaranteed income balance or the commuted value associated with the surrendered portion of the deferred income annuity. The fair value will never be greater than and may be less than the guaranteed income balance associated with the surrendered portion of the deferred income annuity. The fair value of the deferred income annuity is reflected in Level 3.

 

Guaranteed Interest Accounts

 

The guaranteed interest accounts cannot be sold to a third party; thus, the only option to exit the guaranteed interest accounts is to withdraw or transfer the funds prior to maturity for an event other than death, disability, termination, or retirement. The fair value represents guaranteed interest account values adjusted to reflect current market interest rates only to the extent such market rates exceed contract crediting rates. This value represents contributions allocated to the guaranteed interest accounts, plus interest at the contractually guaranteed rate, less funds used to pay Plan benefits and Principal Life’s administrative expenses. The fair value of the guaranteed interest accounts is reflected in Level 3.

 

Separate Accounts

 

Separate accounts are designed to deliver safety and stability by preserving principal and accumulating earnings. The separate account assets include, but are not limited to, contributions invested in domestic and international common stocks, high-quality short-term debt securities, real estate, private market bonds and mortgages, and high-yield fixed income securities that are slightly below investment grade, all of which are valued at fair value. The NAV of each of the separate accounts is calculated in a manner consistent with GAAP for investment companies and is determinative of their fair value and represents the price at which the Plan would be able to initiate a transaction. The fair value of the underlying funds and securities is used to determine the NAV of the separate account, which is not publicly quoted. The fair value of the underlying mutual funds and equity securities are based on quoted prices of identical assets. The fair value of the underlying fixed income securities are based on third-party pricing vendors that utilize observable market information. The fair value of all separate accounts is reflected in Level 2.

  

  10

 

 

The Principal Select Savings Plan for Individual Field

 

Notes to Financial Statements (continued)

 

4. Fair Value of Financial Instruments (excluding interest in Master Trust Investment Account) (continued)

 

One separate account invests in real estate, for which the fair value of the underlying real estate is based on unobservable inputs and used to determine the NAV of the separate account. The fair value of the underlying real estate is estimated using discounted cash flow valuation models that utilize public real estate market data inputs such as transaction prices, market rents, vacancy levels, leasing absorption, market cap rates, and discount rates. In addition, each property is appraised annually by an independent appraiser. During 2020, this specific separate account had a temporary withdrawal limitation related to turmoil in the credit markets that resulted in a sharp slowdown in the sale of commercial real estate assets. See Note 5 for further discussion related to contingencies.

 

Principal Financial Group, Inc. ESOP

 

The ESOP is reported at fair value based on the quoted closing market price of PFG’s stock on the last business day of the Plan year and is reflected in Level 1.

 

Collective Investment Trusts

 

The CITs invest in growth and value stocks of small, medium and large market capitalization companies, fixed-income securities, domestic and foreign securities, securities denominated in foreign currencies, investment companies (including index funds), securitized products, U.S. government and U.S. government-sponsored securities and derivatives. The NAV of the CITs is calculated in a manner consistent with GAAP for investment companies and is determinative of their fair value and represents the price at which the Plan would be able to initiate a transaction. The fair value of the underlying funds and securities is used to determine the NAV of the CITs. The CITs are reflected in Level 2.

 

Self-Directed Brokerage Account

 

Plan participants have access to a limited number of mutual funds through the SDBA. The SDBA is reflected in Level 1.

 

Assets Measured at Fair Value on a Recurring Basis

 

Assets measured at fair value on a recurring basis are summarized below.

  

  11

 

 

The Principal Select Savings Plan for Individual Field

 

Notes to Financial Statements (continued)

  

4. Fair Value of Financial Instruments (excluding interest in Master Trust Investment Account) (continued)

  

   As of December 31, 2020 
   Assets   Fair Value Hierarchy Level 
   measured             
   at fair                 
   value   Level 1   Level 2   Level 3 
Assets                    
Deferred income annuity  $383,690   $   $   $383,690 
Guaranteed interest accounts   1,132,291            1,132,291 
Separate accounts   187,535,163        187,535,163     
Principal Financial Group, Inc. ESOP   18,580,100    18,580,100         
Collective investment trusts   32,578,976        32,578,976     
Self-directed brokerage account   2,666    2,666         
Total invested assets, excluding Plan interest in Master Trust Investment Account  $240,212,886   $18,582,766   $220,114,139   $1,515,981 
                     

  

   As of December 31, 2019 
   Assets   Fair Value Hierarchy Level 
   measured             
   at fair                 
   value   Level 1   Level 2   Level 3 
Assets                    
Deferred income annuity  $318,144   $   $   $318,144 
Guaranteed interest accounts   1,130,294            1,130,294 
Separate accounts   175,415,246        175,415,246     
Principal Financial Group, Inc. ESOP   18,813,837    18,813,837         
Collective investment trusts   30,556,794        30,556,794     
Self-directed brokerage account   1,890    1,890         
Total invested assets, excluding Plan interest in Master Trust Investment Account  $226,236,205   $18,815,727   $205,972,040   $1,448,438 

  

  12

 

 

 

The Principal Select Savings Plan for Individual Field

 

Notes to Financial Statements (continued)

 

4. Fair Value of Financial Instruments (excluding interest in Master Trust Investment Account) (continued)

 

Changes in Level 3 Fair Value Measurements

 

The reconciliation for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the years ended December 31, 2020 and 2019, was as follows:

 

   For the year ended December 31, 2020     
                                 Changes in 
                                 Unrealized 
   Beginning                            Gains 
   Asset                        Ending Asset   Included in Changes 
   Balance                        Balance   in Net Assets 
   as of                  Transfers    as of   Available for 
   January 1,                  In (Out) of    December 31,   Benefits Relating to 
   2020   Interest*   Purchases**   Sales**   Level 3    2020   Positions Still Held 
Assets                                   
Deferred income annuity  $318,144   $7,562   $62,360   $(4,376)  $   $383,690   $7,562 
Guaranteed interest accounts   1,130,294    19,682    415,126    (432,811)       1,132,291    3,353 
Total  $1,448,438   $27,244   $477,486   $(437,187)  $   $1,515,981   $10,915 

 

   For the year ended December 31, 2019     
                           Changes in 
                           Unrealized 
   Beginning                       Gains 
   Asset                   Ending Asset   Included in Changes 
   Balance                   Balance   in Net Assets 
   as of               Transfers   as of   Available for 
   January 1,               In (Out) of   December 31,   Benefits Relating to 
   2019   Interest*   Purchases**   Sales**   Level 3   2019   Positions Still Held 
Assets                                   
Deferred income annuity  $176,018   $9,359   $163,088   $(30,321)  $   $318,144   $9,359 
Guaranteed interest accounts   1,370,856    47,141    404,600    (692,303)       1,130,294    27,573 
Total  $1,546,874   $56,500   $567,688   $(722,624)  $   $1,448,438   $36,932 

 

*Includes interest and unrealized gains or losses.

**Includes contributions, transfers from affiliated and unaffiliated plans, transfers to other investments via participant election, benefits paid to participants, and administrative expenses.

 

13

 

 

The Principal Select Savings Plan for Individual Field

 

Notes to Financial Statements (continued)

 

4. Fair Value of Financial Instruments (excluding interest in Master Trust Investment Account) (continued)

 

Quantitative Information about Level 3 Fair Value Measurements

 

The following table provides quantitative information about the significant unobservable inputs used for recurring fair value measurements categorized within Level 3.

   As of December 31, 2020 
   Assets               
   measured   Valuation  Unobservable  Input/range   Weighted 
   at fair value   technique  input description  of inputs   average 
Assets                     
Deferred income annuity  $383,690   Discounted cash flow  Long duration interest rate   2.01%  ̶  4.19%   3.19%
           Mortality rate   See note (1)      
Guaranteed interest accounts   1,132,291   See note (2)  Interest rate on account   0.09%  ̶  2.19%   1.42%
           Applicable interest rate   0.61%  ̶  1.00%   0.63%
           Maturity date   

  12/31/2020  ̶ 

12/31/2026

      

 

   As of December 31, 2019 
   Assets               
   measured   Valuation  Unobservable  Input/range   Weighted 
   at fair value   technique  input description  of inputs   average 
Assets                     
Deferred income annuity  $318,144   Discounted cash flow  Long duration interest rate   2.77%  ̶  4.19%   3.60%
           Mortality rate   See note (1)      
Guaranteed interest accounts   1,130,294   See note (2)  Interest rate on account   0.60%  ̶  2.19%   1.56%
           Applicable interest rate   2.07%  ̶  2.26   2.09%
           Maturity date   

 12/31/2019  ̶  

12/31/2025

      

 

(1)This input is based on an industry mortality table and a range does not provide a meaningful presentation.

 

(2)If the applicable interest rate is equal to or less than the interest rate on the account, the fair market value is equal to the contract value. If the applicable interest rate is greater than the interest rate on the account, the fair market value is the contract value reduced by a percentage. This percentage is equal to the difference between the applicable interest rate and the interest rate on the account, multiplied by the number of years (including fractional parts of a year) until the maturity date.

  

14

 

 

The Principal Select Savings Plan for Individual Field

 

Notes to Financial Statements (continued)

 

5. Contingencies

 

During the first quarter of 2020, the global spread of COVID-19 resulted in volatility in the public equities market, which also impacted the Principal U.S. Property Separate Account. Due to these and other factors, investors submitted an unusual number of withdrawal requests in a concentrated period of time. To allow for orderly administration and management benefiting all separate account investors, Principal Life implemented a pre-existing contractual limitation to delay withdrawal requests for this separate account. Certain high need payments, such as death, disability, required minimum distributions, and hardship withdrawals, were not subject to the withdrawal limitation. Other withdrawal requests were subject to the limitation and such payments were delayed until certain liquidity levels were achieved. Since the inception of the withdrawal limitation, outstanding withdrawal requests have been paid in multiple payments. Except for certain de minimis payments, payments were made proportionately among all other outstanding withdrawal requests, based upon available liquidity. All withdrawals are being transacted at the NAV price at the date of distribution. The withdrawal limitation has been in place since March 20, 2020.

 

While the outcome of any future litigation or regulatory matter cannot be predicted, management does not believe that any future litigation or regulatory matter will have a material adverse effect on our net assets available for benefits. The outcome of such matters is always uncertain, and unforeseen results can occur. It is possible that such outcomes could materially affect net assets available for benefits in a particular year.

 

6. Interest in Master Trust Investment Account

 

A portion of the Plan’s investments are in the Principal Select Stable Value Separate Account (PSSVSA), which is reported as a Master Trust Investment Account (MTIA). The MTIA was established for the investment of assets of The Principal Select Savings Plan for Employees and The Principal Select Savings Plan for Individual Field (the Plans). The Plans gain access to the PSSVSA through a group annuity contract (Contract) issued by Principal Life. Each participating plan has an undivided interest in the PSSVSA. The PSSVSA is an insurance company separate account that invests in Morley Stable Income Bond Funds (Bond Funds) and the Principal Liquid Asset Separate Account (PLASA). The Bond Funds are collective investment trusts that invest in investment-grade fixed income securities. The Bond Funds are maintained by PGITC. The PLASA is a separate account that invests in high quality short term instruments. The PSSVSA is valued at contract value as reported to the Plans by Principal Life.

 

As of December 31, 2020 and 2019, the Plan’s interest in the net assets of the MTIA was approximately 11%. Investment income and administrative expenses are allocated to the individual plans based upon each plan’s interest in the MTIA.

 

The Contract provides a crediting rate that amortizes portfolio gains and losses over time and accounts for benefit payments to the Plans’ participants at the contract value. Under the Contract, Principal Life agrees to pay any deficiency if the investments in the PSSVSA have been exhausted for benefit payments and the contract value is greater than zero. The objective of the PSSVSA is to preserve capital, credit relatively stable returns consistent with its comparatively low risk profile, and provide liquidity for benefit-responsive payments. The crediting interest rate is based on a formula agreed upon with Principal Life, but it may not be less than 0%. Such interest rates are reviewed on a monthly basis for resetting.

  

15

 

 

The Principal Select Savings Plan for Individual Field

 

Notes to Financial Statements (continued)

 

6. Interest in Master Trust Investment Account (continued)

 

 

Certain events limit the ability of the Plans to transact at contract value with Principal Life when material event withdrawals are made, including (1) certain events that result in the termination of employment of a group of participants (including through layoffs or early retirement incentive programs instituted by the Company) representing 25% or more of the Plan Members in any calendar year, (2) a certain spin-off or sale of the Company’s business entity or location that affect more than 25% of the Plan Members, (3) certain adoptions of amendments to one of the plans, any change in practice, or any change in participant withdrawal rights under one of the plans. The Plans do not believe that the occurrence of any such material event is probable.

 

As required by Accounting Standards Codification (ASC) 962, Plan Accounting – Defined Contribution Pension Plans, the Statements of Net Assets Available for Benefits present the fair value of investments, excluding the fully benefit-responsive investment contract which is presented at contract value. The Statement of Changes in Net Assets Available for Benefits is prepared on a contract value basis.

 

The net assets, including investments, of the MTIA was as follows:

 

   December 31, 2020 
   MTIA   Plan interest in the
MTIA
 
PLASA  $4,740,264   $499,637 
Bond funds   219,815,469    23,169,180 
Total assets   224,555,733    23,668,817 
Payables   (17,849)   (1,881)
Total net assets at contract value  $224,537,884   $23,666,936 

 

   December 31, 2019 
   MTIA   Plan interest in the
MTIA
 
PLASA  $4,936,436   $529,593 
Bond funds   138,636,758    14,873,300 
Total assets   143,573,194    15,402,893 
Payables   (6,563)   (704)
Total net assets at contract value  $143,566,631   $15,402,189 

 

16

 

 

The Principal Select Savings Plan for Individual Field

 

Notes to Financial Statements (continued)

 

6. Interest in Master Trust Investment Account (continued)

 

Investment income for the MTIA was as follows:

 

   For the year ended December 31, 2020 
   MTIA   Plan interest in the
MTIA
 
Interest income  $3,939,943   $415,281 
Expenses   (261,136)   (34,094)
Total investment income  $3,678,807   $381,187 

 

7. Related Party Transactions

 

In addition to the transactions with parties in interest discussed herein, Principal Life provides recordkeeping services to the Plan and receives fees. There is a fee charged by Principal Life for the guarantee it provides for participant balances that allows participants to transact at contract value for the PSSVSA. Fees were paid by Plan participants. The Company may pay other Plan expenses from time to time. The ESOP received $871,941 in dividends from PFG in 2020.

 

These transactions are exempt from the prohibited transactions rules of ERISA.

 

8. Form 5500

 

The following table reconciles net assets available for benefits per the Statements of Net Assets Available for Benefits to the Form 5500:

 

   December 31, 
   2020   2019 
Net assets available for benefits per the Statements of Net Assets Available for Benefits  $266,045,235   $243,963,249 
Adjustments from contract value to fair value for fully benefit-responsive investment contract   728,676    161,382 
Net assets available for benefits per the Form 5500  $266,773,911   $244,124,631 

 

The following table reconciles the Statement of Changes in Net Assets Available for Benefits to the Form 5500:

 

   December 31, 
   2020 
Net change from contract value to fair value for fully benefit-responsive investment contracts  $567,294 
MTIA investment income   381,187 
Net investment gain from MTIA per the Form 5500  $948,481 

  

17

 

 

The Principal Select Savings Plan for Individual Field

 

Notes to Financial Statements (continued)

 

8. Form 5500 (continued)

 

GAAP requires that the Plan reports interest in fully benefit-responsive contracts at contract value, while the Form 5500 is required to report these investments at fair value.

  

18

 

 

The Principal Select Savings Plan for Individual Field

 

EIN: 42-1520346 Plan Number: 004

 

Schedule H, Line 4i – Schedule of Assets
(Held at End of Year)

 

December 31, 2020

 

   Description of  Current 
Identity of Issue  Investment  Value 
Principal Life Insurance Company*  Deposits in deferred income annuity  $383,690 
         
Principal Life Insurance Company*  Deposits in guaranteed interest accounts   1,132,291 
         
Principal Life Insurance Company*  Deposits in insurance company Small-Cap Value II Separate Account   3,314,412 
         
Principal Life Insurance Company*  Deposits in insurance company U.S. Property Separate Account   18,980,739 
         
Principal Life Insurance Company*  Deposits in insurance company Core Plus Bond Separate Account   7,969,784 
         
Principal Life Insurance Company*  Deposits in insurance company Diversified International Separate Account   12,354,965 
         
Principal Life Insurance Company*  Deposits in insurance company Large-Cap Stock Index Separate Account   20,243,262 
         
Principal Life Insurance Company*  Deposits in insurance company Government and High Quality Bond Separate Account   4,099,132 
         
Principal Life Insurance Company*  Deposits in insurance company Mid-Cap Separate Account   33,973,927 
         
Principal Life Insurance Company*  Deposits in insurance company Origin Emerging Markets Separate Account   11,175,176 
         
Principal Life Insurance Company*  Deposits in insurance company Diversified Real Asset Separate Account   782,805 

 

19

 

 

   Description of  Current 
Identity of Issue  Investment  Value 
Principal Life Insurance Company*  Deposits in insurance company Inflation Protection Separate Account  $2,371,027 
         
Principal Life Insurance Company*  Deposits in insurance company Large-Cap Growth I Separate Account   17,162,447 
         
Principal Life Insurance Company*  Deposits in insurance company Blue Chip Separate Account   22,298,200 
         
Principal Life Insurance Company*  Deposits in insurance company Small-Cap Growth I Separate Account   10,676,603 
         
Principal Life Insurance Company*  Deposits in insurance company Small-Cap Stock Index Separate Account   10,680,425 
         
Principal Life Insurance Company*  Deposits in insurance company Equity Income Separate Account   11,452,259 
         
Principal Global Investors Trust Company*  Collective investment trust Lifetime Hybrid 2010   1,558,488 
         
Principal Global Investors Trust Company*  Collective investment trust Lifetime Hybrid 2015   906,070 
         
Principal Global Investors Trust Company*  Collective investment trust Lifetime Hybrid 2020   6,549,184 
         
Principal Global Investors Trust Company*  Collective investment trust Lifetime Hybrid 2025   1,788,625 
         
Principal Global Investors Trust Company*  Collective investment trust Lifetime Hybrid 2030   7,310,948 

 

20

 

 

   Description of  Current 
Identity of Issue  Investment  Value 
Principal Global Investors Trust Company*  Collective investment trust Lifetime Hybrid 2035  $982,430 
         
Principal Global Investors Trust Company*  Collective investment trust Lifetime Hybrid 2040   3,934,002 
         
Principal Global Investors Trust Company*  Collective investment trust Lifetime Hybrid 2045   1,234,801 
         
Principal Global Investors Trust Company*  Collective investment trust Lifetime Hybrid 2050   2,954,605 
         
Principal Global Investors Trust Company*  Collective investment trust Lifetime Hybrid 2055   455,503 
         
Principal Global Investors Trust Company*  Collective investment trust Lifetime Hybrid 2060   560,282 
         
Principal Global Investors Trust Company*  Collective investment trust Lifetime Hybrid 2065   1,436,441 
         
Principal Global Investors Trust Company*  Collective investment trust Lifetime Hybrid Income   2,907,597 
         
Principal Life Insurance Company*  Self-directed brokerage account   2,666 
         
Principal Financial Group, Inc.*  374,523 shares of Principal Financial Group, Inc. ESOP   18,580,100 

 

21

 

 

   Description of  Current 
Identity of Issue  Investment  Value 
Loans to participants*  Notes receivable from participants with varying maturity dates and interest rates ranging from 5.25% to 7.50%  $1,909,848 
      $242,122,734 

 

*Indicates party in interest to the Plan.

 

22

 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the administrator of The Principal Select Savings Plan for Individual Field has duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

  THE PRINCIPAL SELECT SAVINGS PLAN FOR INDIVIDUAL FIELD
  by Benefit Plans Administration Committee

 

Date: June 23, 2021 By /s/ Lisa Coulson
    Lisa Coulson
    Committee Chair

 

23

 

 

Exhibit Index

 

The following exhibit is filed herewith:

 

  Page
23 Consent of Ernst & Young LLP 25

 

24

Exhibit 23

 

Consent of Independent Registered Public Accounting Firm

 

We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-178510) pertaining to The Principal Select Savings Plan for Individual Field of Principal Financial Group, Inc. of our report dated June 23, 2021, with respect to the financial statements and supplemental schedule of The Principal Select Savings Plan for Individual Field included in this Annual Report (Form 11-K) for the year ended December 31, 2020.

 

/s/ Ernst & Young LLP

Des Moines, Iowa

June 23, 2021

 

 



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