UnitedHealth Group agrees to $69 million settlement in 401(k) suit

UnitedHealth Group will pay $69 million to settle a class-action lawsuit brought by an employee alleging that the health care giant cost workers millions in lost gains by forcing them into lower-performing 401(k) options.

The settlement news comes as UnitedHealth continues to deal with the fallout from the brazen daylight shooting death of UnitedHealthcare CEO Brian Thompson on Dec. 4. The incident unleashed a torrent of public vitriol toward health insurers for high costs and claim denials.

The 401(k) lawsuit dates to 2021 when lead plaintiff Kim Snyder alleged interference by the company’s CFO to retain certain Wells Fargo funds within the 401(k) plan. The bank was a large customer for UnitedHealth Group, Snyder claimed, including for coverage sold by its large UnitedHealthcare health insurance business.

The law firm Sanford Heisler Sharp McKnight filed the lawsuit on behalf of over 150,000 individuals who were invested in the Wells Fargo Target Fund Suite.

The Wells Fargo fund was “one of the worst-performing target date options in the entire market,” the law firm claimed. UnitedHealth’s decision to keep the Suite as the default investment for the Plan for over a decade violated fiduciary duties of prudence and loyalty under the Employee Retirement Income Security Act (ERISA).

The matter was certified as a class action in February 2022.

In order to justify keeping the poorly performing Wells Fargo Target Fund Suite, Snyder’s attorneys alleged that UnitedHealth “kept its decision-making secret and threw out key findings that the plan’s own Investment Committee had made, while abandoning the plan’s written criteria for screening investments.”

'Hand in the cookie jar'

Earlier this year, a Minneapolis judge ruled that a jury could conclude, based on evidence discovered during the case, that the company had been caught with its “hand in the cookie jar.”

“Over the course of three and a half years of litigation, plaintiff Kim Snyder ... bore the particular burden of being the only class representative in the action,” Charles Field, an attorney with Sanford Heisler Sharp McKnight, said in a statement to the Minnesota Star Tribune. “Ms. Snyder’s commitment to this case was the means of obtaining an outstanding outcome for the plan and the class.”

UnitedHealth Group said in a statement that the company’s 401(k) plan fiduciaries have always acted in the best interest of those using the plan to save for retirement, the paper reported.

“We strongly deny any allegations to the contrary,” UnitedHealth Group said. “If approved by the court, this settlement will enable all parties to put this matter behind them and move forward.”

On March 12, the court denied most of UnitedHealth’s motion for summary judgment and ordered the case to proceed to trial. Judge John Tunheim of the U.S. District Court of Minnesota still needs to sign off on the settlement.

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