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T. Rowe Price to Pay $7 Million to Resolve 401(k) Lawsuit (1)

Jan. 10, 2022, 3:14 PMUpdated: Jan. 10, 2022, 8:27 PM

T. Rowe Price Group Inc. will pay $7 million and add a brokerage window to its 401(k) plan, resolving an 18,000-person class action claiming the plan was filled with expensive, in-house funds, papers filed in Maryland federal court show.

The deal carries a total value of $18 million and provides all class members with minimum payments of $20 and additional money based on the size of their investments in the 39 T. Rowe Price funds challenged by the lawsuit, the plaintiffs said in a Jan. 7 settlement motion filed in the U.S. District Court for the District of Maryland. The deal requires T. Rowe Price to add a brokerage window to the plan, which the filing says will “allow Plan participants, for the first time, to invest in a wide range of non-T. Rowe Price investment funds.”

The settlement also reflects a $6.6 million payment T. Rowe Price made to more than 6,000 class members in 2019. This earlier payment—which the settlement request says is now worth $11 million after investment returns—was a response to this lawsuit and an attempt by defendants to “mitigate their liability” on claims of self-dealing under the Employee Retirement Income Security Act, according to the settlement motion.

“The litigation has been hard-fought and vigorously litigated at every stage,” the motion said. “It has included a broad motion to dismiss, extensive fact discovery including sixteen fact depositions and Plaintiffs’ review of over 100,000 pages of Defendants’ documents, six expert reports from Plaintiffs’ experts, three expert reports from Defendants’ experts, six expert depositions, and comprehensive summary judgment motions from each side involving hundreds of exhibits.”

The parties reached a tentative deal in July 2021, two months before the case was set for trial and shortly after the trial court declined to certify plan participants’ appeal to the U.S. Court of Appeals for the Fourth Circuit on the novel legal question of whether an ERISA plan fiduciary can avoid liability for offering in-house funds by “hardwiring” a preference for such funds into the plan document.

The participants objected to portions of a 2021 opinion in which Chief Judge James K. Bredar allowed their ERISA lawsuit to go to trial. In the opinion, Bredar declined to invalidate the T. Rowe Price plan’s hardwiring provision, which the participants say is an illegal “anti-exculpation provision” that attempts to relieve plan fiduciaries from liability in violation of ERISA.

The lawsuit accuses T. Rowe Price of profiting from its employee 401(k) plan by filling it almost exclusively with affiliated investment products that paid fees to the company.

The participants are represented by Cohen Milstein Sellers & Toll PLLC and McTigue Law LLP, which stand to receive $3.5 million in attorneys’ fees if the deal is approved.

T. Rowe Price is represented by O’Melveny & Myers LLP.

The case is Feinberg v. T. Rowe Price Grp., Inc., D. Md., No. 1:17-cv-00427, motion for preliminary settlement approval 1/7/22.

(Adds quote from court documents in fourth paragraph. An earlier version of this story corrected a reference to the appeal that was denied before the settlement.)

To contact the reporter on this story: Jacklyn Wille in Washington at

To contact the editors responsible for this story: Rob Tricchinelli at; Patrick L. Gregory at