Price says costlier mutuals wanted by own employees

April 23, 2006|By WALTER HAMILTON | WALTER HAMILTON,LOS ANGELES TIMES

Employees of T. Rowe Price Group Inc., the low-cost mutual fund provider based in Baltimore, have a dizzying array of 401(k) investment choices - 69 funds in all.

But all the options are retail funds that T. Rowe also sells to the public. Marcy Supovitz, a retirement plan consultant in Worcester, Mass., who reviewed regulatory filings for the plan, estimated that employees paid an average of $721 in 401(k) fees in 2003. Price executives contend that figure is skewed by a relatively small number of employees who have high account balances.

"The firm would not offer a plan that is unfair or unreasonably expensive to employees, or to anyone else for that matter," spokesman Steve Norwitz said

Still, costs would be lower if Price gave workers the option of buying institutional funds. The company offers such funds to some of its clients for their 401(k) plans, but not to its own employees.

Why? Price Vice Chairman James Riepe said it was important to show customers that "we eat our own cooking." He also said employees preferred mutual funds to institutional funds, in part because their share prices are publicly available.

"If your theory is that our plan and a lot of other plans would have a lower cost if everybody used institutional funds instead of retail funds, I think that's fine to state because that would be true," Riepe said.

"But people for a lot of reasons don't want to use institutional funds."

Tina Bognet says she would have liked lower-priced options when she worked for Price.

Bognet, a computer analyst, thought she was getting a good deal on her 401(k) because of the firm's reputation for moderately priced funds.

Bognet said she discovered how much she had been paying when she moved to another financial services company in late 1999.

Walter Hamilton writes for the Los Angeles Times.

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