Repeat after me: Luigi Mangioni was right.
UnitedHealth Group, one of the largest healthcare corporations in the United States, has been accused of prioritizing its own corporate interests over the financial well-being of its employees.
The lawsuit Snyder v. UnitedHealth Group, Inc. alleges that the company flagrantly violated fiduciary duties under the Employee Retirement Income Security Act (ERISA) by retaining an underperforming investment option—Wells Fargo’s Target Date Fund Suite—in its employee 401(k) plan.
This decision, motivated by the company’s desire to maintain lucrative business relationships with Wells Fargo, cost employees millions in retirement savings.
The case highlights not only UnitedHealth’s ethical failures but also broader systemic issues tied to corporate greed and neoliberal capitalism.
A Decade of Underperformance
From 2010 to 2021, UnitedHealth designated the Wells Fargo Target Date Fund Suite as the default investment option for its 401(k) plan participants.
These funds were designed to provide an asset allocation strategy tailored to employees’ anticipated retirement dates. However, throughout this period, the Wells Fargo funds consistently ranked among the worst-performing in their category. For example:
- The funds performed worse than 70% to 97% of their peers in Morningstar categories over rolling three-, five-, and ten-year periods.
- The Wells Fargo 2035 Fund alone underperformed by up to 18% compared to better-performing alternatives like Vanguard and T. Rowe Price funds.
- Over $7 billion in employee retirement savings were funneled into these poorly managed funds, resulting in significant financial losses for plan participants.
Despite these glaring performance issues, UnitedHealth not only retained these funds but actively blocked efforts to replace them with better-performing options.
Ignoring Fiduciary Responsibilities
ERISA mandates that fiduciaries act solely in the best interests of plan participants, exercising prudence and diligence when selecting and monitoring investment options. UnitedHealth’s actions starkly violated these principles:
- Failure to Monitor Investments: By 2015, independent investment consultant Mercer had flagged the Wells Fargo funds as imprudent and recommended their removal. Yet UnitedHealth ignored this advice.
- Abandonment of Investment Policy Standards: The company disregarded its own Investment Policy Statement, which required removing underperforming funds and adhering to strict criteria for investment selection.
- Opaque Decision-Making: Under CFO John Rex’s leadership, UnitedHealth sidelined Mercer from key decisions, failed to document critical meetings, and concocted a pretext to justify retaining Wells Fargo’s funds.
The Role of Corporate Self-Interest
The most egregious aspect of this case is how UnitedHealth prioritized its business relationship with Wells Fargo over its employees’ financial security:
- Wells Fargo was a “jumbo customer” for UnitedHealth, providing significant revenue through lending and underwriting services.
- Internal documents show that CFO John Rex intervened in the decision-making process to ensure Wells Fargo remained the plan’s target date fund provider.
- The decision was made despite clear evidence that retaining Wells Fargo would harm employees’ retirement savings.
This blatant conflict of interest demonstrates how corporate greed can override ethical and legal obligations.
Quantifying the Harm
The financial impact on employees was devastating. For instance:
- A $30 million investment in the Wells Fargo 2010 Fund grew by only $41.6 million over five years, compared to $46.2 million if invested in T. Rowe Price’s equivalent fund—a difference of $4.6 million.
- Similarly, a $700 million investment in the Wells Fargo 2025 Fund grew by $1.06 billion, while it could have grown by $1.215 billion if invested in T. Rowe Price—a loss of $155 million.
These losses are not just numbers; they represent diminished retirement security for thousands of employees who trusted their employer to act in their best interests.
Broader Implications
Economic Fallout
UnitedHealth’s actions exacerbate wealth inequality by eroding workers’ financial stability while enriching corporate executives and shareholders. Poorly managed retirement plans can lead to increased reliance on public safety nets like Social Security, shifting the burden onto taxpayers.
Erosion of Trust
Cases like this undermine public confidence in employer-sponsored retirement plans and corporate governance more broadly. When corporations prioritize profits over people, they betray the trust of their employees and stakeholders.
Systemic Issues
This case is emblematic of broader problems within neoliberal capitalism:
- Incentives for Short-Term Gains: Corporate executives are often rewarded for short-term financial performance rather than long-term sustainability or ethical behavior.
- Weak Regulatory Oversight: Agencies tasked with enforcing fiduciary standards often lack the resources or political will to challenge powerful corporations.
- Concentration of Power: Large corporations like UnitedHealth wield disproportionate influence over markets and regulators, enabling them to evade accountability.
The Anti-Worker Precedent
Unfortunately, it is extremely unlikely for the workers to beat UnitedHealthGroup in this lawsuit. Not just because corporations lobbied congress into writing laws that benefit themselves over the common people, but also because Deloitte recently won a fairly similar lawsuit against its own workers after failing to act in their best interests.
But that doesn’t mean there isn’t more that people can do outside of the legal system!
What Needs to Change
Stronger Legal Protections
Laws like ERISA must be enforced more rigorously to hold fiduciaries accountable for breaches of duty. Penalties should be severe enough to deter future misconduct. This likely will never happen :'(
Enhanced Transparency
Corporations should be required to disclose detailed information about their decision-making processes for retirement plans. This would enable employees and regulators to identify potential conflicts of interest more easily.
Empowering Workers
Unionization and collective bargaining can give employees a stronger voice in how their retirement plans are managed. Grassroots advocacy can also raise awareness about corporate misconduct and pressure companies to adopt more ethical practices.
Systemic Reforms
Addressing corporate greed requires systemic change:
- Shift incentives away from short-term profits toward long-term sustainability.
- Strengthen regulatory agencies and provide them with adequate resources.
- Promote alternative economic models that prioritize social welfare over shareholder value.
Conclusion
UnitedHealth Group’s betrayal of its employees’ trust is a stark reminder of the dangers posed by unchecked corporate power. By prioritizing its relationship with Wells Fargo over its fiduciary duties, UnitedHealth caused significant harm to thousands of workers who depended on their 401(k) plans for retirement security.
This case should serve as a wake-up call for policymakers, regulators, and consumers alike.
It is not enough to hold individual corporations accountable; we must address the systemic issues that enable such abuses in the first place. Only through collective action can we build a fairer economic system that prioritizes people over profits.
The fight for corporate accountability is not just about justice for those harmed—it is about creating a society where such harm is no longer possible.
UnitedHealthCare is a business segment of UnitedHealthGroup, along with Optum.