Snyder v. UnitedHealth Group, Inc.

Background

Kim Snyder brought a proposed class action for herself and similarly situated participants and beneficiaries of UnitedHealth Group’s 401(k) Savings Plans. She alleged that UnitedHealth Group, its board and board members, the plan’s investment committee and its members, and the plan’s administrative committee and its members breached fiduciary duties under the Employee Retirement Income Security Act (ERISA).

Snyder alleged that the defendants violated their duty of prudence by retaining Wells Fargo target-date funds as investment options and the plan’s default investment option. She also alleged that the defendants failed to monitor people to whom they delegated fiduciary responsibilities.

The complaint identified six benchmarks: four target-date funds classified by Morningstar as being in the same peer universe as the Wells Fargo funds, the S&P Target Date Indices, and the Dow Jones Global Target Indices. Snyder alleged that the Wells Fargo funds underperformed each benchmark over 11 years, although the funds outperformed some benchmarks in 2018 and 2021.

Motions and Legal Standards

The defendants moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), or alternatively for summary judgment. A motion to dismiss tests whether the complaint alleges enough facts to make liability plausible, while summary judgment may be granted only when the evidence shows no genuine dispute requiring a trial.

For an ERISA fiduciary-duty claim, a plaintiff must make an initial showing that the defendant acted as a fiduciary, breached a fiduciary duty, and caused a loss to the plan. At the pleading stage, the plaintiff must identify a meaningful benchmark and allege facts suggesting that a prudent fiduciary would have selected a different fund based on cost or performance.

Court’s Analysis

The court denied summary judgment as premature. Discovery had not begun, and Snyder submitted a declaration explaining how additional discovery could help her respond to the defendants’ claim that no genuine dispute of material fact existed. The court therefore denied the motion rather than deciding the merits through summary judgment.

The court also denied the motion to dismiss. It held that Snyder’s allegations of long-term underperformance against six benchmarks plausibly supported an inference that the defendants acted imprudently. The court emphasized that the complaint alleged cumulative underperformance over 11 years, rather than relying only on a single period or a single alternative fund.

The court treated the Morningstar comparators as meaningful benchmarks at the motion-to-dismiss stage because the complaint alleged that Morningstar placed them in the same peer universe as the Wells Fargo funds and that they had similar purposes, asset allocations, and approaches to reducing market risk. The defendants’ arguments that the funds used different risk strategies or had lower fees presented factual issues that could not be resolved in the defendants’ favor at that stage.

The court also found that the two indices supported the plausibility of Snyder’s allegations because the defendants themselves had used those indices as benchmarks. Although the defendants argued that the indices were used at different times and that short-term underperformance was insufficient, the court considered the allegations about all six benchmarks together.

Disposition

The court ordered that the defendants’ motion for summary judgment was DENIED and that the defendants’ motion to dismiss was DENIED. The opinion did not determine whether the defendants ultimately breached their ERISA fiduciary duties.