Principal may be a workable recordkeeper, but the investment menu needs an adult in the room.

Most companies choose Principal because it is familiar, bundled into an existing relationship, or recommended by an advisor.

Principal can operate perfectly well while still being a poorly managed 401(k).

Contributions may process correctly. Employees may be able to enroll and access their accounts. Distributions may get handled without much drama.

But many Principal plans are filled with proprietary investments that would not survive a serious independent review—even when stronger alternatives are available on the same platform.

So, is Principal good?

That depends on what you mean by good—and who is watching the plan.

A Plan Can Function and Still Be Badly Managed

There are two separate questions:

1. Does the plan operate efficiently?
2. Are the investments, fees, and structure actually good?

Those are not the same thing.

If payroll contributions go through, participants can use the website, and the sponsor gets the service it needs, then Principal may be perfectly workable operationally.

That matters. A 401(k) is not just an investment menu.

But a plan can function smoothly while still containing mediocre proprietary funds, unnecessary fee layers, and investments that were never meaningfully compared with better options.

A plan that works is not necessarily a plan that is being managed well.

The Problem Is Not That Principal Lacks Better Investments

Principal’s platform generally has access to plenty of legitimate investment choices.

The problem is that Principal plans are often filled with Principal funds anyway.

That does not mean every proprietary fund is bad. I would not reject an investment simply because Principal manages it.

But I would not give it a pass either.

Every fund should have to earn its place based on:

• Management
• Investment process
• Organizational quality
• Cost
• Performance
• Risk
• Its specific role in the plan

Too often, Principal’s own funds appear to be treated as the starting point rather than compared objectively with non-Principal alternatives already available on the platform.

That is not independent investment selection.

It is product placement.

Two Principal Funds That Would Not Clear My Screening Process

Here are two real examples.

Principal Blue Chip Fund Institutional Class — PBCKX

PBCKX is not an obviously incompetent fund.

Morningstar rates its People pillar High and its Process Above Average. The managers are experienced, and the strategy has a coherent investment philosophy.

But that is not enough.

Morningstar rates Principal’s Parent organization only Average. The fund charges 0.66% annually and, as of July 31, 2026, ranked in the 87th percentile over three years and the 85th percentile over five years within the large-growth category. Its three- and five-year alpha figures were materially negative, and it lagged the Russell 1000 Growth Index over the three-, five-, and ten-year periods shown in the report.

In plain English:

Participants paid active-management fees for results that badly trailed both the benchmark and most peers.

The managers may be capable.

The fund still would not clear my screen.

There are too many lower-cost large-growth options with stronger evidence, stronger organizations, or simpler investment cases.

Principal LifeTime Hybrid 2045 Fund Institutional Class — PHTYX

Target-date funds deserve even more scrutiny because they often become the plan’s default investment and can hold most participant assets.

Morningstar rates PHTYX Average across all three qualitative pillars:

• People: Average
• Process: Average
• Parent: Average

It receives a Neutral Medalist rating.

Its three-, five-, and ten-year category rankings are essentially dead center: 49th, 48th, and 49th percentile, respectively.

That is not disastrous.

It is thoroughly average.

Morningstar also notes that Principal moved much of the series away from outside subadvisors and into Principal-managed funds, primarily to make the series more price-competitive. The current portfolio is overwhelmingly made up of Principal investment vehicles.

That may have lowered the cost.

It did not create a compelling investment case.

For the plan’s default option—the fund participants may hold for decades—I want a stronger answer than:

It is reasonably priced and mostly average.

PHTYX would not clear my screening process either.

Why Proprietary Funds Deserve Extra Scrutiny

A proprietary fund creates an obvious conflict.

The company providing the recordkeeping platform may also earn money managing the investments placed on that platform.

That does not automatically make the investment inappropriate.

It does mean the selection deserves more scrutiny, not less.

The question should be:

Is this truly the best available option for participants?

Not:

Is this the easiest fund for the provider to place in the lineup?

When better investments are already available on the same platform, there is little excuse for filling a plan with mediocre house-brand funds.

Principal Represents an Older 401(k) Model

In my experience, Principal represents one of the clearest surviving examples of the old bundled 401(k) model.

The recordkeeper, insurance contract, investment products, pricing structure, and advisory relationship can all become intertwined.

That arrangement may be convenient.

It can also produce:

• Proprietary investments selected by default
• Insurance-contract pricing that is difficult to understand
• Multiple layers of fees
• Limited flexibility
• Fragmented service
• Plans that go years without a meaningful independent review

John Hancock is another example of this older model, although every provider and plan arrangement is different.

The problem is not merely that these platforms feel old-fashioned.

The problem is that the structure can make it difficult to tell whether decisions are being made for participants or for the companies selling the products.

When Principal Can Still Be Good

Principal can be a reasonable provider when:

• Payroll and recordkeeping operate smoothly
• The sponsor receives responsive service
• Fees and contract charges are fully understood
• The investment lineup is built independently
• Proprietary funds are used only when they genuinely earn a place
• An advisor actively reviews the plan and is willing to push back

Principal does not need to be replaced simply because its name appears on the statement.

Sometimes the platform is workable and the investments are the problem.

Sometimes the investments are acceptable and the service relationship is the problem.

Sometimes meaningful improvements can be made without converting the entire plan.

But somebody has to look.

What to Ask About Your Principal Plan

If you are a business owner or HR professional, ask:

Who selected the investment lineup?

How many of the funds are managed by Principal?

Were those funds compared with non-Principal alternatives available on the platform?

Who is responsible for reviewing them?

When was the last meaningful investment review completed?

Can your advisor clearly explain why every fund is there?

If nobody can answer those questions, the plan is not being actively managed.

It is merely operating.

Bottom Line

Is Principal 401(k) good?

That depends on what you mean by good.

If contributions are processed correctly, participants can use the system, and the sponsor receives the service it needs, then Principal may be perfectly acceptable operationally.

But a plan can operate smoothly while still containing weak investments, unnecessary costs, and proprietary funds that were never independently evaluated.

That is especially difficult to defend when stronger alternatives are already available on the same platform.

I do not reject an investment because Principal manages it.

But I do not give it a pass.

Every fund has to earn its place.

And the two Principal funds reviewed here would not clear my screening process.