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When trying to set a domain user id in application pool identity, IIS 8 on Server 2K12, getting error: "The specified password is invalid. Type a new password."

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When trying to set a domain user id in application pool identity, IIS 8 on Server 2K12, getting error: "The specified password is invalid. Type a new password."

The service account is having below setup

> member of local IIS_USRS group

> OU level GPO set up "deny logon through terminal services"

> pwd is aplhanumeric however does not have any special character

> Account is set to password never expires

> have verified, pwd is correct

> Using local policy, added IIS_USRS to logon as batch and logon as service 

> If try anyother domain account with local admin, it works fine but not the service account

Are there any other pre-requisites? 

Are there any pwd complexities required?

none of the articles I browsed are helping. Most solutions talk about IIS7, not sure if any differences for IIS8 


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