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Defined Contribution

Judge rejects T. Rowe Price bid to dismiss fiduciary breach case

A U.S. District Court judge in Baltimore has rejected a request by T. Rowe Price Group Inc. to dismiss charges by participants in the company's 401(k) plan that fiduciaries violated their ERISA responsibilities.

Participants in the T. Rowe Price U.S. Retirement Plan, Owings Mills, Md., first sued the company and plan fiduciaries in February 2017, alleging, among other things, that plan managers only offered T. Rowe Price funds and offered retail funds when institutional-priced funds were available.

On Monday, Judge James K. Bredar denied the company's petition to dismiss all seven counts contained in an amended complaint by the participants.

The company said the charges should be dismissed "for failure to allege plausible claims," Mr. Bredar wrote in his opinion, rejecting the company's arguments in the case of Feinberg et al. vs. T. Rowe Price Group Inc. et al.

"We continue to believe that the suit is without merit and intend to vigorously defend against it," Craig Smith, a company spokesman, wrote in an email Thursday.

In recounting the participants' arguments, Mr. Bredar wrote that they complained about "excessive" fees due to the 401(k) plan's use of proprietary investment products. He noted participants alleged some investment options performed poorly in relation to similar, non-proprietary investments. The plan's use of more expensive retail shares vs. institutional shares was another key complaint by participants, he added.

"Defendants argue that the plan document required the plan trustees to select an exclusive lineup of T. Rowe Price funds," Mr. Bredar wrote, adding that T. Rowe Price had contended that because it did this as a plan sponsor, it was not subject to ERISA's fiduciary provisions. The company said its action was a "settlor function" — a business decision — that is exempt from ERISA guidelines, the judge wrote.

"Regardless of the reasons that T. Rowe Price may have chosen to restrict the trustees to investing in only in-house funds, it does not provide a blanket defense for the plan trustees," Mr. Bredar wrote.

The plan had $2.48 billion in assets as of Dec. 31, 2017, according to the latest Form 5500 filing.