Compliance December 13, 2024

UnitedHealth Group Settles 401(k) Fund Complaint For $69 Million

If approved, participants will get payment for allegations that the company did not replace underperforming Wells Fargo funds.

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After more than three years of litigation, UnitedHealth Group Inc. has agreed to a $69 million settlement in a class action lawsuit involving fund selection for its 401(k) Savings Plan, according to a court filing on Friday.

The proposed settlement, which awaits court approval, aims to resolve claims that the company mismanaged investments in the Wells Fargo Target Fund Suite, potentially affecting more than 300,000 current and former participants in the plan.

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The lawsuit, filed under the Employee Retirement Income Security Act, alleged that UnitedHealth failed to act in the best interest of plan participants by offering target-date funds managed by Allspring Global Investments, formerly Wells Fargo Asset Management. The settlement covers individuals who invested in the Wells Fargo Target Fund Suite between April 23, 2015, and the date of judgment.

In an April 2021 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. The lawsuit, Snyder v. UnitedHealth Group, claims the company mishandled its 401(k) plan by “imprudently and disloyally” managing the Wells Fargo Target Fund Suite, which remained on the plan’s investment menu despite poor performance.

Snyder asserted in a prior court filing that the majority of the funds in the Wells Fargo Target Fund Suite underperformed. The performance was framed in the complaint as being worse than between 70% and 97% of peers within the respective Morningstar categories over three-, five- and 10-year periods.

The plan had assets of $22.4 billion as of June 2024, according to a Form 5500 filing.

UnitedHealth Group had sought to have the charges dismissed before coming to the recent settlement. The company does so as it manages a national discussion of business practices after the December 4 murder of its divisional CEO, Brian Thompson.

Protracted Legal Battle

The resolution follows a lengthy and complex legal process, including two motions for summary judgment, extensive fact and expert discovery, and mediation facilitated by an independent third party. Over the course of the litigation, the parties exchanged thousands of documents, conducted 20 depositions and reviewed reports from four expert witnesses.

Class counsel Sanford Heisler Sharp McKnight LLP stated that the settlement represents a fair and reasonable resolution, balancing the value of the claims against the risks of continued litigation.

“This is a tremendous and historic result for our Plaintiff and Plan participants,” Charles H. Field, Sanford Heisler Sharp McKnight’s managing partner, said in a statement.

In an opinion written in March by U.S. District Judge John R. Tunheim, he found the possibility that UnitedHealth prioritized its business relationship with Wells Fargo over its duty to act prudently and loyally. The opinion also highlighted questions about the reasonableness of Wells Fargo’s fees and whether UnitedHealth engaged in prohibited transactions.

“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 also noted that in the TDF industry, United was Wells Fargo’s largest client. The 401(k) plan made up about 45% of the business flowing from UnitedHealth to Wells.

Details of the Settlement

Under the proposed terms, UnitedHealth and its insurers will 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 eligible participants.

The agreement also includes a request for court orders to notify class members, appoint a settlement administrator and schedule a final fairness hearing. At the hearing, the court will evaluate the fairness of the settlement and decide on the approval of attorneys’ fees and other awards.

Data and Research December 13, 2024

Women in Public Service Express Heightened Concerns About Retirement Savings

A new MissionSquare report found that women working in state and local government roles were less likely than their male counterparts to report having personal savings, pensions or defined contribution plans.

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When compared with their male colleagues, women in public service jobs expressed more concern about their finances and outliving their retirement savings, according to a new national survey conducted by MissionSquare.

After surveying 1,009 state and local government workers regarding retirement issues, MissionSquare found that women were significantly less likely to report having personal savings, pensions or defined contribution plans than men in the same public service roles.

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For instance, 69% of women reported that personal savings, individual retirement accounts or investment accounts will be a source of income in retirement, compared with 82% of men. In addition, 42% of women said they will rely on a defined contribution or deferred compensation plan in retirement, compared with 54% of men.

Women in public service jobs were also less likely to report that the retirement benefits provided by their employer were sufficient to meet their retirement needs. The MissionSquare report pointed out that since defined benefit pensions and deferred compensation plans are among the most common retirement benefits provided by public employers, and since women were less likely to report having such plans, their dissatisfaction is not surprising.

Fewer female than male respondents said their retirement benefits made them more inclined to stay with their current job. For example, 54% of women said their employer’s retirement benefits made them more inclined to stay, compared with 68% of men.

However, a positive finding from the report was that women showed a clear interest in receiving more information and financial education. As a result, MissionSquare recommended that public service employers consider ramping up their retirement and benefits-related communication beyond the open enrollment period.

According to MissionSquare, 86% of public sector workers have access to DB pensions, while 39% have access to deferred compensation plans. But, according to a previous survey of employees younger than 35, 20% of respondents said they did not know what type of plan they had.

Women in the recent survey reported the areas of financial planning in which they feel they could benefit from more education, including: how their employer’s retirement plan is taxed; how to identify the benefits most relevant or important to them at the current stage of their career; and the vesting schedule of their retirement plan, among others.

This hope for additional information was also reflected in the plans that surveyed employees reported having for drawing down their assets in retirement. Among women, the most common response was, “I don’t know,” whereas among men, the most common response was, “I will do my own calculation.” MissionSquare found that men’s responses may either reflect a robust understanding of drawing down assets in retirement or a lack of consideration of available alternatives.

About 20% of women and 23% of men said they plan to hire or consult with an adviser or financial planner to decide how they are going to draw down their assets. But overall, nearly one-quarter of women (24%) said they are unsure how they will use their retirement savings—almost double the rate of men (13%).

Separately, a recent report from Corebridge Financial found that women tend to struggle more with retirement savings, as they are faced with large pay gaps and often experience career interruptions due to caregiving responsibilities. For example, Corebridge found that 56% of retired women took at least one month out of work to care for someone or provided care for someone while still working. These are all factors that can impede women’s ability to prepare for retirement.

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