UnitedHealth's headquarters in Minnetonka, Minnesota. Credit: wolterke/Adobe Stock;
The attorneys who negotiated a $69 million settlement with UnitedHealth Group over the “poorly performing” Wells Fargo target date funds in its 401(k) plan – believed to “the largest ever ERISA settlement alleging breach of fiduciary duty for failure to remove underperforming investment options” – has asked a Minnesota federal judge for $23 million in attorneys’ fees.
The request, which was filed last week by attorneys at Sanford Heisler Sharp and Halunen Law, represents one-third of the settlement in fees, along with $735,163 in litigation cost reimbursements and a $50,000 service award for class plaintiff Kim Snyder, the former UnitedHealth employee who initiated the lawsuit, Snyder v. UnitedHealth Group, et al., in April 2021, on behalf of UnitedHealth’s 200,000 current and former employees.
Recommended For You
The service award, the lawyers argue, is justified by Snyder’s 340 hours of personal time invested over four years. The $69 million deal represents up to 25% of the case’s potential damages, the attorneys told Judge John R. Tunheim.
The case, which spanned nearly four years, stemmed from allegations that UnitedHealth violated its fiduciary duties, under the federal Employee Retirement Income Security Act of 1974, by “imprudently and disloyally selecting, retaining, and monitoring a suite of poorly performing target date funds—the Wells Fargo Target Fund Suite—for the Plan’s investment menu,” according to the suit.
As alleged in the complaint, Wells Fargo was a critical customer and financier for UnitedHealth and UnitedHealth’s executive leadership personally intervened to keep the poorly performing Wells Fargo Target Fund Suite on UnitedHealth’s 401(k) Plan to garner favor with, and benefit, Wells Fargo. UnitedHealth denied these allegations and contended that their monitoring and selection processes complied with the fiduciary standards under ERISA.
Snyder, who worked for UnitedHealth as a nurse, filed the lawsuit, alleging 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 claim said that "United had breached its duty of loyalty and prudence in retaining the Wells Fargo Target Date Suite, one of the worst-performing target date options in the entire market," according to a statement from Sanford Heisler Sharp. The funds trailed behind 70–90% of peer funds over a decade, costing employees hundreds of millions in lost gains, according to the complaint.
Related: UnitedHealth agrees to Z$69M settlement in lawsuit over ‘low-performing’ 401(k) funds
The case “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 at Sanford.
© Touchpoint Markets, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more inforrmation visit Asset & Logo Licensing.
Lynn Cavanaugh
Lynn Varacalli Cavanaugh is Senior Editor, Retirement at BenefitsPRO. Prior, she was editor-in-chief of the What's New in Benefits & Compensation newsletter. She has worked for major firms in the employee benefits space, Vanguard and Willis Towers Watson, as well as top media companies, including Condé Nast and American Media.
