Franklin Templeton Investments has agreed to pay roughly $14 million to settle a lawsuit alleging the firm profited at the expense of its employees by loading its 401(k) plan with in-house investments.
Plaintiffs in the class-action lawsuit claimed the firm violated its fiduciary duties under the Employee Retirement Income Security Act of 1974 by selecting high-cost proprietary funds for its company 401(k) plan in place of better, lower-cost investments.
Franklin Templeton and plaintiffs have reached a preliminary settlement that would see the firm pay $13.85 million, according to a court document filed last Friday in the U.S. District Court for the Northern District of California. The settlement still needs approval from a judge.
Stacey Coleman, spokeswoman for Franklin, said the firm believes plaintiffs' allegations to be without merit but decided to settle in order to avoid protracted litigation.
The case, Cryer v. Franklin Resources Inc. et al, was originally filed in July 2016.
Several financial services firms, primarily active asset managers, have been sued for self-dealing in their company 401(k) plans. Many have settled their respective cases, including Waddell & Reed Financial Inc., Jackson National, Citigroup Inc. and Deutsche Bank.
A few, such as American Century Investments and Capital Group, won their cases in district court.