Compliance May 20, 2025

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

The plaintiffs include four current and former employees who intend to represent more than 250,000 plan participants.

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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.

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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.

The Markets May 20, 2025

Surge in Bond ETFs Driven by Institutional Investors

According to BlackRock , actively managed strategies currently account for 14% of U.S. fixed-income ETF assets under management and 8% of total U.S. ETF assets.

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Bond exchange-traded funds have been racking up investment inflows over the last few years and continue to gather steam, thanks in large part to institutional investors, according to BlackRock. The asset management giant forecasted bond ETF assets to more than triple, to $6 trillion worldwide, by the end of the decade.

According to a BlackRock report, it took 17 years for bond ETF assets to reach $1 trillion in 2019 and then just another five years for that figure to climb to $1.7 trillion as of the end of September 2024.

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“The global bond ETF industry is growing faster than expected,” the report stated. “A key driver of this growth has been the adoption of fixed-income ETFs by institutional investors.”

According to BlackRock, the 10 largest asset managers—and nine of the 10 largest insurance companies—along with some central banks, are using the investment vehicle.

The report also stated that growing use of actively managed ETFs has contributed to the sharp rise in bond ETF assets. The report found that while bond ETF growth has traditionally been fueled by index-based investments, that source has expanded to now include actively managed ETFs, which provide access to sub-asset classes that are more difficult to index.

“Historically, active strategies have only been available in mutual funds or separate accounts,” the report stated. “Today, however, the expanding landscape of active fixed income ETFs enables institutional investors to access these same strategies.”

The report cited a recent PricewaterhouseCoopers survey of institutional investors that found that nearly 25% of respondents are considering investing in active ETFs over the next year or two.

“Increasingly, active ETFs are becoming critical components in fixed-income portfolios alongside index and enhanced index strategies,” the report stated. “In fact, over the past three years, U.S. actively managed bond ETFs have outpaced the growth of index ETFs at an annualized 26% rate.”

According to the BlackRock report, actively managed strategies currently account for 14% of U.S. fixed-income ETF assets under management and 8% of total U.S. ETF assets.

“The growth rate of active ETF assets is expected to outpace total ETF growth in coming years, in part driven by the evolving demands from the institutional investor base,” the report stated.

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