Fiduciaries are primarily tasked with managing retirement plans exclusively for the benefit of participants and beneficiaries, with the explicit purpose of providing benefits and covering plan expenses. Their duties involve prudent decision-making and the strategic diversification of plan investments to mitigate the risk of substantial losses.
Fiduciaries, when deviating from the established principles of conduct, may face personal liability for reimbursing the plan for incurred losses or restoring any gains acquired through the improper utilization of plan assets. In cases of breaching duties outlined by the Employee Retirement Income Security Act (ERISA), such as the ongoing class-action lawsuit against UnitedHealth Group (UHG), courts hold the authority to take necessary actions against fiduciaries.
The Lawsuit Explained
Compelling developments in the lawsuit hinge on emails from the company’s Chief Financial Officer, John Rex, which provide evidence of UHG’s bias towards Wells Fargo in the administration of its retirement portfolio.
Wells Fargo was set to be removed from the portfolio, due to the fact that the Wells Fargo Target Fund Suite was identified as underperforming. The legal action alleges that Rex intervened in the company’s investment committee’s choice to remove Wells Fargo from its retirement fund portfolio to uphold his growing business relationship with the company. This alleged favoritism, deemed contrary to the best interests of UHG’s stockholders, is at the heart of the legal dispute known as Kim Snyder v. UnitedHealth Group.
The lawsuit delves into the specific fiduciary responsibilities of UHG towards its vast cohort of approximately 200,000 retirement plan members, encompassing both current and former employees as well as beneficiaries. Currently, the legal proceedings are unfolding in the U.S. District Court for the District of Minnesota, the very state where UHG has its headquarters.
Initiated in April 2021 by the legal firm Sanford Heisler Sharp, the lawsuit represents Kim Snyder and others enrolled in UHG’s 401(k) plan. Filed under the Employment Retirement Income Security Act (ERISA), the legal action contends that UnitedHealth breached its duty of loyalty and prudence by retaining the Wells Fargo Target Date Suite, identified as one of the least effective options within the entire target date market, as outlined in a statement from Sanford Heisler Sharp.
This legal action not only underscores the importance of upholding fiduciary duties but also emphasizes the role of the courts in holding fiduciaries accountable for any breaches. As the legal proceedings continue, the outcome of Kim Snyder v. UnitedHealth Group will likely set a precedent for fiduciary responsibilities within retirement plans and their implications for financial accountability.
Reach out to an Advisor
The RCM&D Retirement Services team can assist you in furthering the financial wellness of your employees by improving the retirement incomes of plan participants and protecting plan fiduciaries. Reach out to an advisor to learn more.