UnitedHealth Group (UHG) is now facing two 401(k) lawsuits from different plaintiffs and different attorneys, alleging that the beleaguered company misused employee-forfeited funds for employer contributions into the retirement plan.
First, UnitedHealth was sued by employees in a 401(k) lawsuit, Kotalik et al. v. UnitedHealth Group Inc. et al, for allegedly using forfeited funds from departing employees to pay the employer contributions for plan participants, rather than using them to lower administrative expenses, violating the Employee Retirement Income Security Act (ERISA). Now comes a second 401(k) lawsuit, filed yesterday, again alleging that UHG improperly used forfeited funds from employees who left the company.
Recommended For You
The latest suit, Holly Hendrickson v. UnitedHealth Group, filed in federal court in Minnesota, alleges that UHG held on to forfeited funds from employees after they left the company and used those funds to improperly lower its own costs. Plan forfeitures are portions of an employee's retirement account balance that are returned to the plan when they leave the company before becoming fully vested in the retirement plan. Between 2019 and 2023, UHG used $19 million in forfeited funds to reduce its own matching contributions, instead of using that money to reduce administrative fees for the 401(k) accounts, breaching its fiduciary duty to plan participants, the plaintiff alleges. A “prudent fiduciary … would have defrayed expenses to the plan’s participants rather than defray costs to the employer,” says the lawsuit, claiming UHG caused “participants to incur millions in expenses that could otherwise have been covered in whole or in part by forfeited funds.” UHG’s 401(k) plan has $22 billion in assets and 267,000 participants, according to the U.S. Department of Labor.
In December, after three years of litigation, UnitedHealth Group agreed to pay $69 million to settle another 401(k) class action lawsuit, Snyder v. UnitedHealth, Group, et al., believed to be the largest ever for an ERISA case stemming from poorly performing investment options. That class-action lawsuit was brought by Kim Snyder, who worked for UnitedHealth as a nurse and alleged that 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 CFO kept those interests even when the assets underperformed.
Aside from these 401(k) lawsuits, UnitedHealth has been facing a vast amount of public scrutiny. The health insurer, which has already had a tough year in the public eye since the killing of UnitedHealthcare CEO Brian Thompson last December, was sued earlier this month by investors alleging misleading forecasts following Thompson’s death. On May 13, UHG CEO Andrew Witty resigned abruptly for “personal reasons.” Then it became public on May 15 that the company stock plummeted following a Wall Street Journal report that the insurer was under criminal investigation for possible Medicare fraud by the Justice Department, even though UnitedHealth released a statement calling the WSJ’s reporting “deeply irresponsible.”
————————————————————
From: BenefitsPRO
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
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.
