The settlement calls for UnitedHealth and its insurers to deposit $69 million into a settlement fund. After deducting attorneys’ fees, litigation expenses and a service award for the class representative, the remaining funds will be distributed pro rata among as many as 300,000 current and former participants. The agreement also includes a request for court orders to notify class members, appoint a settlement administrator and schedule a fairness hearing.
Poor performance
In an earlier filing in the U.S. District Court of Minnesota, lead plaintiff Kim Snyder alleged that UnitedHealth violated ERISA by failing to uphold its fiduciary duties and engaging in prohibited transactions. She asserted that the majority of the funds in the Target Fund Suite performed worse than between 70 and 97 percent of peers within the respective Morningstar categories over three-, five- and 10-year periods.
In a March 2024 decision partially denying UnitedHealth Group’s motion for summary judgment, U.S. District Judge John R. Tunheim, found the possibility that UnitedHealth prioritized its business relationship with Wells Fargo over its legal duty under ERISA to act prudently and in the best interest of plan participants and beneficiaries. As Turnheim wrote, “Because a reasonable trier of fact could easily find that Plaintiff Kim Snyder caught Defendant UnitedHealth Group, Inc. with its hand in the cookie jar, the Court will substantially deny United’s motion for summary judgment”.
He further noted that, “[t]here was a large, two-way business relationship between United and Wells.” Tunheim wrote. “United generated between $50 million and $60 million in revenue from 2014-2017 as Wells’s health insurance provider. On the other side of the ledger, Wells provided United with substantial banking services.”
ERISA fiduciary duty
ERISA section 404 requires that plan fiduciaries act solely in the interest of the participants and beneficiaries of ERISA Plans and for the exclusive purpose of providing benefits to participants and their beneficiaries. Subsequent sections of the law specifically prohibit various forms of self-dealing, called “prohibited transactions.”
Affirmative duties
ERISA sets out affirmative duties for plan fiduciaries. The duty of loyalty to the interests of plan participants has been described as, “the “highest standard of care” in the financial world. This is an aspirational goal, on the basis of which it would be difficult to bring an ERISA lawsuit.
It might best be understood in light of the history of ERISA’s enactment in 1974, which followed the bankruptcy of the Studebaker-Packard auto factory in 1963. When Studebaker closed, about 3,000 workers received nothing, and 4,500 received only a fraction of what was promised. Only employees over 60 and eligible for retirement received their full pension. Employees under 60 received a lump sum payment of about 15 percent of their original pension. It was a scandal in the day.
In 2025, however, because of the move away from defined benefit plans and toward 401k plans, participants are far less protected by the affirmative obligations of ERISA than they were 50 years ago. As a result, fiduciary breach lawsuits have become a major avenue for legal enforcement, and most attention has shifted to evidence of prohibited transactions.
Prohibited transactions
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Prohibited transactions include:
- dealing with the assets of the plan in the fiduciary’s own interest or for his or her own account;
- acting on behalf of a party (including the plan sponsor) whose interests are adverse to the interests of the plan in any transactions involving the plan; or
- receiving any consideration for its own account from any party dealing with the plan in connection with a transaction involving the plan’s assets.
Overall, it may be helpful to understand these prohibitions as various (and evolving) forms of self-dealing. Plan administrators and service providers often develop long-standing, cooperative relationships – understandable, but forbidden under law unless those business relationships have a measurable benefit to plan participants and beneficiaries.
The boom in ERISA breach of fiduciary duty lawsuits has depended heavily on statistical analysis of performance of the funds in question to other comparable funds. Recently, most of these cases have settled.
A good deal for UnitedHealth?
The UnitedHealth Group’s 401k plan had assets of $22.4 billion as of June 2024, according to a Form 5500 filing. Potential damages from UnitedHealth Group’s apparent self-dealing were estimated to be as great as $276 million and $340 million. Under the circumstances, $69 million might have looked like a good deal.
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