T. Rowe Price has been sued for self-dealing in its 401(k) plan, becoming the most recent in a growing list of financial services companies being targeted for allegedly acting out of financial self-interest in the construction of their retirement plans.
Plaintiff David G. Feinberg, a participant in the roughly $1.8 billion 401(k), claims that T. Rowe Price offered between 80 and 95 investment funds in its plan each year since 2011, all of which were in-house funds.
That provided "windfall profits" to T. Rowe and its affiliates at the expense of its employees' retirement savings, said Mr. Feinberg, who is seeking class-action status in the lawsuit, Feinberg v. T. Rowe Price Group, Inc. et al.
He also alleges T. Rowe frequently offered retail share class of its funds, as opposed to lower-cost alternatives such as an institutional share class, collective investment trust fund or separately managed accounts, and "refused to consider" non-proprietary funds.
"Defendants, rather than fulfilling their ERISA fiduciary duties, favored the economic interests of T. Rowe Price Group, Inc. and its affiliates over the interests of their employees in saving for their retirement," according to text of the lawsuit, filed Feb. 14 in Maryland district court.
In all, the plaintiff claims participants paid T. Rowe in excess of $50 million in fees during the class period. They would have paid at least $27 million less in fees, and would have saved at least $123 million more for retirement, had cheaper funds from other fund companies been used, the lawsuit says.
"We believe the suit is without merit and intend to defend vigorously," T. Rowe Price spokeswoman Katrina Clay said.
The suit follows on several similar 401(k) cases filed within the past year against financial services organizations, such as JPMorgan Chase & Co., which was sued last month.
Edward Jones, Morgan Stanley, Neuberger Berman, Franklin Templeton, American Century Investments and New York Life are among the other companies smacked with self-dealing lawsuits within the past year.