UnitedHealth Group has agreed to pay $69 million to settle a class-action lawsuit filed by employees who claimed the company offered lower-performing 401(k) options than it could have. The lawsuit alleged that this led to significant losses in investment profits for workers. The litigation, which originated in Minneapolis, accused UnitedHealth Group of retaining certain funds within the employee 401(k) plan to maintain business relations with a major customer for UnitedHealth’s insurance arm.
The settlement news comes after a judge ruled earlier this year that a jury could conclude the company manipulated its 401(k) offerings for business benefits. Lead plaintiff Kim Snyder filed the case over three and a half years ago, and it was certified as a class action by the judge. Snyder’s attorneys estimated the class could include more than 300,000 people.
The lawsuit argued that UnitedHealth Group deliberately kept certain funds within the 401(k) plan despite their poor performance to preserve its lucrative relationship with the major customer. Court documents revealed that UnitedHealth generated significant revenue through this business, which provided substantial services in return.
Settlement impacts employee 401(k) plans
In March, U.S. District Court Judge John Tunheim denied UnitedHealth’s motion for summary judgment, stating that there was enough evidence to suggest the company prioritized its business interests over employee investment returns. The hearing for court approval of the settlement has not yet been scheduled, but preliminary approval seeks to provide substantial relief to the affected class members. UnitedHealth Group’s 401(k) plan included over 200,000 current and former employees, with about $15 billion under management.
In 2010, the company included the target fund suite in its retirement savings plan. This choice was questioned, as an external consultant later recommended a reevaluation of the investment options in 2014. An internal committee in 2016 ranked the funds at the bottom among potential vendors, but UnitedHealth continued with the offerings in 2017.
UnitedHealth Group defended its choice by citing a leadership change and the potential for negotiating better terms. However, plaintiffs argued a prudent fiduciary would have initiated changes more swiftly to avoid further losses. In a statement, UnitedHealth Group said, “This settlement reflects a significant step forward in resolving these issues and refocusing our efforts on what’s best for our employees and their futures.”
The case’s conclusion awaits judicial review, which, if approved, will close this chapter and allow all parties to move forward.
