UnitedHealthcare corporate headquarters in Minnetonka, Minnesota. Photo: Ken Wolter/Shutterstock
After three years of litigation, UnitedHealth Group has agreed to pay $69 million to settle a class-action lawsuit, Snyder v. UnitedHealth Group, et al., according to an announcement in mid-December from law firm Sanford Heisler Sharp McKnight. The settlement amount is believed to be the largest ever of an Employee Retirement Income Security Act of 1974 (ERISA) case stemming from poorly performing investment options in a 401(k) plan, according to the law firm.
The case stems from allegations that UnitedHealth violated its fiduciary duties, under the federal ERISA, by “imprudently and disloyally selecting, retaining, and monitoring a suite of poorly performing target-date funds—the Wells Fargo Target Fund Suite—for the plan’s investment menu,” according to the suit.
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As alleged in the complaint, Wells Fargo was a critical customer and financier for UnitedHealth and, UnitedHealth’s executive leadership personally intervened to keep the poorly performing Wells Fargo Target Fund Suite on UnitedHealth’s 401(k) plan to garner favor with, and benefit, Wells Fargo. UnitedHealth has denied these allegations and contends that its monitoring and selection processes complied with the fiduciary standards under ERISA.
In March, a federal judge denied UnitedHealth Group’s motion for summary judgment in the class-action lawsuit, filed on behalf of the insurer’s 200,000 current and former employees, alleging that CFO John Rex interfered with the company’s decision to drop “one of the worst-performing target-date options in the entire market.”
The class-action lawsuit was brought by Kim Snyder, who worked for UnitedHealth as a nurse, who filed the lawsuit in April 2021. The suit alleged the company’s 401(k) retirement plan invested in low-performing target-date funds; that CFO John Rex gave preferential priority to UnitedHealth’s relationship with Wells Fargo, which managed the funds; and that the company kept those interests even when they underperformed. The suit claimed that the Wells Fargo funds underperformed against six benchmarks over an 11-year period and had “a lower cumulative return and lower annualized return than every other comparator.” The suit further alleges that Rex personally overruled removing Wells Fargo funds from the plan after an independent investment consultant and the company’s investment committee recommended doing so.
“This is a tremendous and historic result for our plaintiff and plan participants,” said class counsel Charles H. Field of Sanford Heisler Sharp McKnight. “Our plaintiff took a leading and decisive part in the litigation, and fought with courage and strength against a major corporation to obtain an outstanding result for the plan and its participants.”
“This opinion sends a strong message that retirement plan fiduciaries cannot run ‘head first’ into conflicts of interest and escape the consequences, regardless of their position in the company,” said Leigh Anne St. Charles, a partner in the law firm.
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From: BenefitsPRO
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Lynn Cavanaugh
Lynn Varacalli Cavanaugh is Senior Editor, Retirement at BenefitsPRO. Prior, she was editor-in-chief of the What's New in Benefits & Compensation newsletter. She has worked for major firms in the employee benefits space, Vanguard and Willis Towers Watson, as well as top media companies, including Condé Nast and American Media.
