UnitedHealth Group will pay $69 million to settle a class action suit related to low-performing investments in its 401(k) plan linked to Wells Fargo target date funds, according to a Dec. 13 court filing.
Leigh Anne St. Charles, a managing partner at Sanford Heisler Sharp McKnight, the law firm that represented the plaintiffs' class, said that this is the largest ERISA class action settlement in a case targeting low-performing investment options on a 401(k) plan.
According to the Dec. 13 court filing in the U.S. District Court of Minnesota, lead plaintiff Kim Snyder initially sued UnitedHealth more than three and a half years ago, alleging the company breached its fiduciary duties and engaged in prohibited transactions in violation of ERISA by “imprudently and disloyally selecting, retaining, and monitoring a suite of poorly performing funds,” namely, the Wells Fargo Target Fund Suite, for the plan’s investment menu.
Snyder claimed in an earlier court document that a majority of the funds included in the Wells Fargo Target Fund Suite performed worse than between 70% and 97% of their peer funds in their respective Morningstar Category over the preceding three, five, and 10 years for those in existence that long.
The plaintiff class comprises some 300,000 current and former retirement plan participants in the UnitedHealth Group 401(k) Savings Plan who invested in the Wells Fargo Target Fund Suite from April 23, 2015 through the date of judgment.
St. Charles also confirmed that the plan’s target date suite was managed by Allspring Global Investments, formerly Wells Fargo Asset Management, but neither Allspring nor Wells Fargo is or was a defendant.
In an opinion written in March, the judge overseeing the case, John R. Tunheim, U.S. District Judge, discussed the mutually beneficial relationship between United and Wells.
“There was a large, two-way business relationship between United and Wells,” Tunheim wrote.
“United generated between $50 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.”
Tunheim added: “And United was Wells's largest client and lifeline in the TDF industry. In the balance between the two companies, the (401k) plan constituted around 45% of the business flowing from United to Wells.”
UnitedHealth Group 401(k) Savings Plan, Minnetonka, Minn., had $26.1 billion in assets as of Dec. 31, 2023, according to its most recent Form 5500 filing.
A spokesperson for United Health said: “Our 401(k) plan fiduciaries have always acted in the best interests of plan participants, and we strongly deny any allegations to the contrary. If approved by the court this settlement will enable all parties to put this matter behind them and move forward.”
Allspring could not be immediately reached for comment.
