Lawsuit Filed Against UnitedHealth Alleging Misuse of Forfeited 401(k) Plan Assets

UnitedHealth Group Inc. is the latest company to face a federal class action complaint alleging that it misused forfeited employee retirement plan assets. Numerous similar cases have been filed in the last several years.

The complaint, Kotalik et al. v. UnitedHealth Group Inc. et al., filed April 28 in U.S. District Court for the District of Minnesota, accuses UnitedHealth Group and the administrative committee for the UnitedHealth Group 401(k) Savings Plan of breaching their fiduciary duties under the Employee Retirement Income Security Act. The plaintiffs include four current and former employees who intend to represent more than 250,000 plan participants.

Like a slew of recent cases, the complaint centers on the allegation that the company improperly used 401(k) forfeitures. The plaintiffs’ complaint states that UnitedHealth used the funds to offset its own plan contributions, rather than using them to pay costs for the plan, a move the participants argue violates ERISA.

According to the complaint, UnitedHealth has reduced its employer contributions by more than $19 million since 2019 by using plan forfeitures, while failing to apply any of those funds toward administrative costs. When compounded, the complaint estimates that plan participants lost more than $25 million in potential value as a result.

The lawsuit alleges five counts of ERISA violations, including breach of fiduciary duty of loyalty and prudence, engaging in prohibited transactions and failure to monitor fiduciaries. The plaintiffs are seeking monetary relief for the alleged misuse of funds.

The UnitedHealth 401(k) Savings Plan has more than $22 billion in assets and more than 267,000 participants.

In a separate case, UnitedHealth settled earlier this year for $69 million a complaint that it mismanaged investments in its Wells Fargo Target Fund Suite.

Recent Case Law

The UnitedHealth complaint joins recent litigation that has so far included dismissals, settlements and cases surviving a motion to dismiss. No court has yet ruled in favor of the plaintiffs on the merits of a forfeiture misuse allegation.

Last week, the Cigna Group was hit with a lawsuit for allegedly misusing forfeited funds in its 401(k) plan, and a settlement was reached in a case against Intuit Inc. 

Earlier this month, a federal judge dismissed a class action complaint accusing Kaiser Foundation Health Plan of improper use of forfeited funds, and a district court in Arizona also dismissed a complaint against Knight-Swift Transportation Holdings Inc., which accused the truck loading company of the same misdeed.