UnitedHealth agrees to pay $69M in 401(k) ERISA class action

After a long-fought legal battle, UnitedHealth Group has agreed to pay $69 million to settle a class-action lawsuit alleging breaches of fiduciary duties under the Employee Retirement Income Security Act of 1974.

The litigation, initiated in April 2021, centered on claims that UnitedHealth retained a poorly performing suite of target-date funds, the Wells Fargo Target Fund Suite, on its 401(k) investment menu.

According to the plaintiffs, the decision to keep these funds was influenced by UnitedHealth’s financial relationship with Wells Fargo.

UnitedHealth, which has found itself near the center of a fierce debate around American healthcare following the fatal shooting of its CEO, has rejected the allegations and maintains its selection and monitoring processes complied with ERISA standards.

“This is a tremendous and historic result for our Plaintiff and Plan participants,” Charles H. Field, counsel for the plaintiffs at Sanford Heisler Sharp McKnight, said Friday. “Our Plaintiff took a leading and decisive part in the litigation and fought with courage and strength against a major corporation to obtain an outstanding result for the Plan and its participants.”

The class includes approximately 300,000 plan participants who invested in the Wells Fargo funds from April 23, 2015, through the settlement date. The settlement fund will be distributed among participants based on their investments in the funds and the funds’ relative performance during the class period. Current participants will receive allocations directly into their plan accounts, while former participants can opt for rollovers to retirement accounts or receive payments by check.

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Leigh Anne St. Charles, also counsel for the plaintiffs, highlighted the long journey to the decision.

“After years of vigorous litigation, we're delighted the parties have agreed to resolve their differences," St. Charles said. "We are especially pleased to have achieved this historic settlement for the Class and look forward to final approval before the Court.”

The case involved extensive legal proceedings, including motions for summary judgment and expert testimony. Court records reveal potential damages were initially estimated between $276 million and $340 million, depending on the investment benchmarks used.

The $69 million settlement, which was announced Friday and requires court approval, represents a significant recovery in light of the uncertainties and risks of continuing litigation.

The settlement is also considered one of the largest resolutions of an ERISA case tied to underperforming investments in a 401(k) plan. After an increase in such settlements in 2023, this year has seen some significant 401(k) class actions resolved to the tune of eight-figure sums, including New York Life's $19 million settlement in February and the $61 million GE agreed to pay in October to end its own ERISA litigation.

A fairness hearing will be scheduled by Judge John R. Tunheim of the District Court for the District of Minnesota to determine final approval of the United Health settlement. Class members will be notified about the settlement terms and their options for participation in the coming months.