UnitedHealth CFO sued in retirement plan case
John Rex, chief financial officer of UnitedHealth Group, has been named in a class action lawsuit alleging the healthcare giant put its own business interests above retirement plan participants.
The suit alleges the company’s 401(k) retirement plan invested in low-performing target-date funds. 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 lawsuit alleges. The news was first reported by The Wall Street Journal.
The suit was launched by Kim Snyder who worked for UnitedHealth Group as a nurse and argues that UnitedHealth breached its fiduciary duty to plan participants under terms of the Employee Retirement Income Security Act. Snyder launched the lawsuit in 2021, and Rex was recently added as a defendant to the case Aug. 24.
The lawsuit is not the first time UnitedHealth Group has been alleged to put its own business interests first. Earlier this year, the company's subsidiary, United Behavioral Health (UBH), was ordered to pay more than $20 million for wrongly denying mental health coverage claims. A California court found UBH wrongfully denied claims in order to protect its bottom line and violated the Employee Retirement Income Security Act of 1974.
UnitedHealth’s retirement plan covers 200,000 current and former employees, according to court records. UnitedHealth Group is one of the largest insurers and healthcare companies in the United States. Its 401(k) plan has roughly $15 billion in assets under management.
The suit alleges the Wells Fargo funds underperformed by a measure of six benchmarks over an 11-year period. The funds had “a lower cumulative return and lower annualized return than every other comparator,” the lawsuit states. The suit further claims Rex personally overruled a plan that would have removed Wells Fargo funds from the plan after an independent investment consultant and the company’s investment committee recommended the Wells Fargo funds be removed, the WSJ reported. Rex has served as CFO since 2016 and part of the investment committee in early 2017.
UnitedHealth challenged the lawsuit update in a comment to the WSJ.
“Enterprising lawyers may choose to pursue baseless claims, but nothing in the law supports using hindsight and apples-to-oranges comparisons to question good faith investment decisions made in the best interests of retirement plan participants,” the company said. “There is no basis for adding our CFO as an individual defendant, and the allegations against him are completely without merit.”
UnitedHealth recently authorized payment of a cash dividend of $1.65 per share, to be paid Sept. 20, 2022, to common stock shareholders.
Amy joined TriMed Media as a Senior Writer for HealthExec after covering home care for three years. When not writing about all things healthcare, she fulfills her lifelong dream of becoming a pirate by sailing in regattas and enjoying rum. Fun fact: she sailed 333 miles across Lake Michigan in the Chicago Yacht Club "Race to Mackinac."