UnitedHealth Group had ‘its hand in the cookie jar,’ said judge in its ERISA lawsuit

A federal judge didn’t mince words on Tuesday when he denied UnitedHealth Group’s motion for summary judgment in an ERISA class-action lawsuit, filed on behalf of the insurer’s 200,000 current and former employees, alleging CFO John Rex interfered with the company’s decision to drop “one of the worst-performing target date options in the entire market.”

“Because a reasonable trier of fact [a group that determines which facts are available in a legal proceeding] 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,” said Judge John Tunheim of the U.S. District Court for the District of Minnesota.

Snyder, who worked for UnitedHealth as a nurse, filed the lawsuit in 2021, arguing that the company breached its fiduciary duty to plan participants under terms of ERISA.

The suit alleges the company’s 401(k) retirement plan invested in low-performing target-date funds; that CFO John Rex gave preferential priority to UnitedHealth’s relationship with Wells Fargo, which managed the funds; and kept those interests even when they underperformed.

The suit claims that the Wells Fargo funds underperformed against six benchmarks over an 11-year period and had “a lower cumulative return and lower annualized return than every other comparator.” The suit further alleges that Rex personally overruled removing Wells Fargo funds from the plan after an independent investment consultant and the company’s investment committee recommended doing so.

“Enterprising lawyers may choose to pursue baseless claims, but nothing in the law supports using hindsight and apples-to-oranges comparisons to question good-faith investment decisions made in the best interests of retirement plan participants,” UnitedHealth said at the time that the suit was filed.

In August 2023, United asked the court to grant summary judgment on all of the plaintiffs’ claims, arguing that United had prudently and loyally administered the 401(k) plan. Sanford Heisler Sharp, which represents the plaintiffs, said it introduced evidence that raises doubt about United’s motivation for retaining the plan’s multibillion-dollar investment in the Wells Fargo Target Fund Suite.

Related: UnitedHealth CFO named in ERISA lawsuit over ‘underperforming’ 401(k) funds

“This opinion sends a strong message that retirement plan fiduciaries cannot run `headfirst’ into conflicts of interest and escape the consequences, regardless of their position in the company,” said Leigh Anne St. Charles, a partner in the law firm. We look forward to the opportunity to present this case at trial.”

The court held that “this case will be placed on the court calendar’s next available trial date.”