Ex-employees sue UnitedHealth for alleged 401(k) chicanery

Image shows a gavel and the UnitedHealth logos — UnitedHealth Group is being sued by current and former employees who claim the insurer did not lawfully manage their 401(k) plan.

By John Hilton

Update: Joseph Clements filed an unopposed motion on Dec. 18, 2025 to be removed as a plaintiff.

Four current and former UnitedHealth Group employees are suing the embattled insurer for allegedly using forfeiture funds to pay the corporate match for 401(k) plan participants.

Plaintiffs allege breaches of the duties of loyalty and prudence, as well as fiduciary and parties-in-interest transactions prohibited by the Employee Retirement Income Security Act of 1974. They filed the lawsuit on April 28 in the District Court for the District of Minnesota, where UnitedHealth is headquartered.

Employee plan forfeitures are portions of an employee's retirement account balance that are returned to the plan when they leave employment before becoming fully vested.

ERISA dictates that forfeiture funds be used in ways that benefit the plan and its participants, and that they be used in accordance with the plan’s governing documents. Using those funds to pay the corporate match does not adhere to ERISA's fiduciary duty, plaintiffs say.

“While Defendants’ decisions to use the Plan’s forfeitures to reduce its outstanding and unpaid contributions benefitted the UnitedHealth by lowering its costs, it harmed the Plan, along with its participants and beneficiaries, by reducing the amount of assets the Plan otherwise would have received,” the lawsuit reads.

UHG initiated a reset last week when CEO Andrew Witty abruptly resigned and was replaced by Stephen Hemsley, who led the insurer for more than a decade before assuming a board role in August 2017. The shocking change came amid steadily sinking share prices, and less than four weeks after UHG reported its first earnings miss since 2008.

The poor quarter followed the Dec. 4 murder of UnitedHealthcare CEO Brian Thompson as he walked to an investor event in Manhattan. Luigi Mangione, reportedly bitter about the healthcare industry, faces state and federal murder charges. UnitedHealthcare is a subsidiary of UHG.

The Wall Street Journal reported last week that UnitedHealth is under federal criminal investigation for possible Medicare fraud. CNN speculated that the insurer – which lost half of its market value, $288 billion, in one month – is “imploding.”

Decisions called into question

The plaintiffs in the lawsuit include Theresa M. Kotalik, who remains employed with UHG as a network contract manager on the dental side. The three former employees include Joseph Clements, who worked at UHG from 2006 until 2020 as a finance director for capital finance.

As most employers do, UHG offers a 401(k) plan match of 100% of contributions up to 3% of eligible compensation, plus 50% of the next 3% of eligible compensation for a maximum contribution of 4.5% per payroll period.

UHG plan language permitted the plan committee to use forfeited funds to pay plan expenses or to reduce UnitedHealth’s own contributions to the plan, the lawsuit states.

“When Defendants decided to reduce employer contributions, by the Plan’s own language, it was a ‘discretionary,’ fiduciary decision,” the lawsuit claims.

From 2019 to 2023, the UHG plan committee used the forfeiture fund “exclusively” to pay the company match, plaintiffs allege. Every dollar that was not distributed among plan participants meant the loss of future investment earnings as well, the lawsuit notes. Plaintiffs calculate their total loss at $25.6 million through 2024, according to the lawsuit.

Plaintiffs allow that UHG could make a case for using forfeiture funds to pay its own match costs.

“It is possible that reducing employer contributions may be in the best interests of participants where there is a risk that UnitedHealth may be financially unable to satisfy its matching contribution obligations; there is no evidence that UnitedHealth had such financial inability,” the lawsuit states.

The lawsuit asks the court to restore all funds lost from the forfeiture to the plan and for UHG to reimburse members for all lost investment gains as well.

Lawsuit trend

Plaintiffs challenging the use of forfeiture funds by plan sponsors is a growing trend, the law firm Holland & Knight said.

“Despite clear guidance from the U.S. Department of the Treasury acknowledging the propriety of using 401(k) forfeitures to offset future employer contributions and the decades-long practice of doing so, plaintiffs have gained traction with some courts on this novel theory,” the law firm wrote in a January column.

Of the few dozen 401(k) forfeiture lawsuits filed since the start of 2023, there have been mixed decisions of routine motions to dismiss. On April 30, an Arizona federal judge dismissed a class action lawsuit accusing Knight-Swift Transportation Holdings of misusing forfeited assets in its 401(k) retirement plan.

Plaintiffs in that case pointed to language Knight-Swift included in its annual Form 5500 filings to the Department of Labor that forfeited assets “shall be used” to pay plan expenses. But Judge Steven P. Logan ruled that ERISA trumps the Form 5500 filing and gives plan sponsors broad discretion.

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.