UnitedHealth CFO Rex Is Named a Defendant in ERISA Lawsuit

Plaintiffs have filed an amended complaint against UnitedHealth Group, adding Chief Financial Officer John Rex as an individual defendant to the Employee Retirement Income Security Act lawsuit.

The amended complaint alleges Rex violated his plan fiduciary duties under ERISA when he intervened to retain the Wells Fargo Target Fund Suite on UnitedHealth’s retirement plan. The plaintiffs added two new ERISA violation claims against all defendants, including Rex, for breaching the fiduciary duty of loyalty by engaging in prohibited transactions and failing to adhere to plan documents and instruments, according to the complaint.

“The UnitedHealth defendants kept on the plan one of the worst-performing investment suites in the entire market—the Wells Fargo Target Fund Suite—and made it the default investment for the plan’s participants for over a decade,” the complaint states. “Throughout its entire existence, the Wells Fargo Target Fund Suite delivered abysmal investment results, and any prudent fiduciary would have swiftly removed the Wells Fargo Target Fund Suite.”

UnitedHealth Group responded to a request for comment on the litigation by blasting the law firm.

“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, which generated hundreds of millions of dollars in retirement income for our employees while reasonably aiming to protect them from outsize losses in bear markets,” a spokesperson says. “There is no basis for adding our CFO as an individual defendant, and the allegations against him are completely without merit.”

The complaint also alleges that UnitedHealth Group and Rex were informed that the underperforming target-date suite should be replaced.

The amended complaint’s additional allegations are based on documents obtained by the plaintiffs’ attorneys during discovery, according to a release from the firm Sanford Heisler Sharp.

The plaintiffs allege that the Minnesota-based insurer failed to put the interests of retirement plan participants and employees ahead of business interests by selecting underperforming target-date funds managed by Wells Fargo as the default investment option in the 401(k) plan. 

“After consulting with the plan’s independent investment consultant, Mercer, the Investment Committee itself recognized by 2016 that the Wells Fargo Target Fund Suite should be removed,” the complaint states. “But UnitedHealth’s executive leadership, led by CFO John Rex, focused on UnitedHealth’s lucrative business relationships with Wells Fargo and overruled the plan to remove the Wells Fargo Target Fund Suite.”

Plaintiffs further allege that UnitedHealth managed the retirement plan irresponsibly.   

“To justify keeping Wells Fargo, UnitedHealth sidelined the plan’s independent investment consultant from the decision-making process, threw out key findings that the investment committee had made about what type of target-date suite would best serve the plan’s participants, abandoned the investment committee’s established criteria for screening target-date managers, and concocted a pretext to justify retaining Wells Fargo’s target date funds on the plan,” the complaint states.

“Rather than acting with a singular focus on the needs of the plan’s participants and beneficiaries, the UnitedHealth defendants made the decision at least in part to curry favor with, and benefit, UnitedHealth’s key business partner, Wells Fargo, and advance UnitedHealth’s self-interests,” the complaint continues. “In doing so, the UnitedHealth Defendants flagrantly violated ERISA.”

The original complaint, made in 2021, was certified as a class action in February 2022. It was brought in the U.S. District Court for the District of Minnesota. The original complaint alleged two fiduciary breach violations for duty of prudence and duty to monitor the plan’s investments and performance.

The previously named defendants were United Health Group, its board of directors and the UnitedHealth Group employee benefits 

The lawsuit, Kim Snyder versus UnitedHealth Group; the board of directors of UnitedHealth Group; and its members David Wichmann; John Rex; and the UnitedHealth Group Employee Benefits Plan Investment Committee and its members is case 0:21-cv-01049-JRT-BRT.