Voluntary Benefits Are Not “Low-Risk”: A New Wave of ERISA Fiduciary Litigation
By: Angela M. Stockbridge, Esq.
For many years, employers and benefits professionals have treated voluntary benefits such as accident, critical illness, cancer, and hospital indemnity insurance, as a relatively low-risk corner of the benefits landscape. Because employees typically pay 100% of the premiums and must opt in to receive coverage, these programs are often described as being outside of the employer’s core ERISA obligations. A new cluster of class action lawsuits filed in late 2025 should put the assumption that there is no risk to rest.
Recent complaints against United Airlines, Laboratory Corporation of America (Labcorp), Community Health Systems (CHS), and Allied Universal all make the same allegation: that employers and their benefits brokers breached ERISA fiduciary duties by allowing excessive commissions, failing to monitor insurers and brokers, and engaging in conflicted arrangements within employers sponsored voluntary benefits programs.
While none of these cases has yet been adjudicated on the merits, they collectively signal the potential for a significant expansion of ERISA litigation risk for employers and benefits committees.
The Core Allegation: Voluntary Benefits as ERISA Plans
Across all of these cases, plaintiffs allege that the voluntary benefits programs at issue were ERISA-covered welfare plans, not exempt from the “payroll practice” or safe harbor arrangements.
The complaints emphasize that employers allegedly:
- Selected insurers and brokers
- Controlled enrollment and eligibility
- Filed Form 5500s acknowledging ERISA coverage
- Allowed embedded commissions and revenue sharing
- Played an active role in plan communications and administration
Taken together, these allegations attack each employer’s reliance DOL’s voluntary plan safe harbor and aim to establish fiduciary status under ERISA §3(21).
This is a critical point for employers: once a voluntary benefit plan is an ERISA plan, fiduciary duties apply, regardless of who pays the premiums.
Excessive Fees, Embedded Commissions, and “Invisible” Costs
The heart of each lawsuit is not plan design, but process.
Plaintiffs allege that employers and their brokers failed to:
- Monitor insurer loss ratios
- Benchmark premiums against market alternatives
- Evaluate the reasonableness of broker compensation
- Address conflicts created by commission-based compensation
The complaints describe a system in which brokers allegedly received substantial commissions embedded in employee premiums, sometimes coupled with indirect benefits to employers, such as discounted services, consulting support, or other “things of value.”
From an ERISA perspective, these allegations map directly onto duties of prudence and loyalty, as well as the prohibited transaction rules under ERISA §406.
Brokers and Consultants Are Squarely in the Crosshairs
Notably, these cases do not target employers alone.
Each complaint names one or more major benefits intermediaries- Mercer, Gallagher, Willis Towers Watson, or Lockton- as either:
- ERISA fiduciaries
- Parties in interest, or
- Knowing participants in fiduciary breaches
This reflects a broader litigation trend: courts and plaintiffs are increasingly willing to scrutinize whether brokers crossed the line from adviser to fiduciary, particularly when they exercise discretion or receive variable compensation tied to plan costs.
For employers, this underscores the importance of documenting fiduciary roles, compensation structures, and monitoring practices, not just internally, but across all service provider relationships.
Why These Cases Matter (Even If Employers Ultimately Prevail)
Even if some or all of these cases are dismissed or settled, the implications are significant:
- Voluntary benefits are no longer litigation-proof.
- “Employees pay the premiums” is not a fiduciary defense.
- Commission opacity creates ERISA risk.
- Form 5500 filings matters and can be used against plan sponsors.
Most importantly, these lawsuits reflect a judicial and regulatory environment that expects employers to treat voluntary benefits with the same fiduciary discipline applied to medical, retirement, and other ERISA plans.
Practical Takeaways for Employers and Benefits Committees
From a compliance standpoint, employers should consider:
- Confirming whether voluntary benefits are ERISA-covered
- Reviewing broker and consultant compensation disclosures
- Benchmarking voluntary benefits premiums and loss ratios
- Clarifying fiduciary governance and delegation structures
- Aligning Form 5500 reporting with actual plan operations
Voluntary benefits may be “optional” for employees, but fiduciary oversight is not optional for employers.
For guidance on evaluating ERISA risk in voluntary benefit programs, contact FRB’s Employee Benefits & Executive Compensation attorneys at (214) 420-6142 or fill out the form below.
DISCLAIMER: This summary is not legal advice and does not create any attorney-client relationship. This summary does not provide a definitive legal opinion for any factual situation. Before the firm can provide legal advice or opinion to any person or entity, the specific facts at issue must be reviewed by the firm. Before an attorney-client relationship is formed, the firm must have a signed engagement letter with a client setting forth the Firm’s scope and terms of representation. The information contained herein is based upon the law at the time of publication.