A federal judge on Wednesday granted UnitedHealth Group workers class-action status in their fight over the company's alleged failure to manage their $7 billion retirement accounts.
Judge John Tunheim of the U.S. District Court of Minnesota ruled the employee's complaint met federal class certification standards, saying the more than 150,000 people participating in UnitedHealth Group's health plan had enough in common to consolidate their complaints into a single question of whether executives upheld the fiduciary duties required under the Employee Retirement Income Security Act.
Former UnitedHealth Group nurse Kim Snyder sued the healthcare giant in April, alleging that the company's 401(k) plans underperformed compared with industry benchmarks over the course of 11 years. UnitedHealth Group, its board of directors, former CEO David Wichmann and the company's employee benefit plan investment and administrative committees failed to effectively oversee Wells Fargo, which was managing the 11 underperforming funds that were part of workers' retirement suite, the complaint said.
UnitedHealth Group believes this case is without merit and will continue to defend itself, a spokesperson wrote in an email.
Some of the retirement investments were in the bottom 90th percentile, and all of them were in the lowest 70th percentile compared with other target date retirement funds, according to plaintiff attorney Charles Field. Half of the total plan, or $7 billion, was invested in these plans, which tens of thousands of UnitedHealth Group workers participated in and could join the class, he said.
"UnitedHealthcare did have quarterly meetings, people met, they looked at the plans," Field said. "But to allow this to have gone on, they couldn't have been paying careful attention to what was happening."
The original lawsuit compiled 33 tables comparing UnitedHealth Group's retirement portfolio performance to other plan managers, like Morningstar. The company and its workers are still debating what the appropriate benchmark for gauging the effectiveness of the funds, Field said. He believes Wells Fargo's investments should be compared to the best performing plans in the market, but the court could also average all the available funds or look to standards outlined by S&P Global Ratings Agency. He said his law office will argue that UnitedHealth Group breached its fiduciary duty for six years, and expects the company will try to cut down that time period as a way to minimize costs.
Field expects the workers to reach a settlement agreement with UnitedHealth Group by October, and estimated the damages could reach at least tens of millions of dollars.
