UnitedHealth Settles Class Action Over Poorly Performing 401(k) Funds for $69 Million

UnitedHealth has agreed to settle a three-year-long class action battle for $69 million, the largest ever settlement in an Employee Retirement Income Security Act (ERISA) case. The settlement stems from allegations that UnitedHealth violated its fiduciary duties under ERISA by selecting and retaining poorly performing investment funds for its 401(k) plan. The case is Snyder v. UnitedHealth Group et al., currently pending in the U.S. District Court for the District of Minnesota.

The fund at issue was the Wells Fargo Target Fund Suite. The class of about 200,000 current and former UnitedHealth employees alleged that Wells Fargo was a substantial customer and financier for UnitedHealth. As a result, company executives intervened to ensure that the 401(k) plan continued to offer the Wells Fargo fund as an investment option, despite its lackluster performance. The move was designed to benefit and maintain UnitedHealth’s relationship with Wells Fargo.

In response, UnitedHealth contends that it selected and retained the Wells Fargo fund according to ERISA’s fiduciary standards. However, a federal judge denied UnitedHealth’s motion for summary judgment earlier this year.

Former employee Kim Snyder filed the suit in 2021, alleging that UnitedHealth gave preferential treatment to the Wells Fargo fund based on the company’s relationships with Wells Fargo. Snyder also claimed that UnitedHealth kept the fund as an investment option even when it was one of the market’s most poorly performing target-date investment funds. The Wells Fargo fund allegedly underperformed over 11 years based on six benchmarks, resulting in a lower cumulative and annualized return than any other competitor. Furthermore, the CEO allegedly overruled the recommendations of an independent investment consultant and the UnitedHealth investment committee to maintain the Wells Fargo fund.

HBL has experience in all areas of benefits and employment law, offering a comprehensive solution to all your business benefits and HR/employment needs. We help ensure you are in compliance with the complex requirements of ERISA and the IRS code, as well as those laws that impact you and your employees. Together, we reduce your exposure to potential legal or financial penalties. Learn more by calling 470-571-1007.

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Hall Benefits Law, LLC

HBL offers employers comprehensive legal guidance on benefits in mergers and acquisitions, Employee Stock Ownership Plans (ESOPs), executive compensation, health and welfare benefits, healthcare reform, and retirement plans. We counsel a wide spectrum of clients including small, mid-sized, and large companies, 401(k) investment advisors, health insurance brokers, accountants, attorneys, and HR consultants, just to name a few. HBL is passionate about advising clients, and we are dedicated to our mission: to provide comprehensive, personalized, and practical ERISA and benefits legal solutions that exceed client expectations.

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