Voluntary Benefit Plans Facing New Wave of ERISA Fiduciary Suits 

January, 2026

Deanna Sizemore, Associate Director Benefits Compliance

Diana Craig, Director Benefits Compliance

In late December 2025, a series of lawsuits were filed alleging that employers and their benefits advisors violated their fiduciary duties under the Employee Retirement Income Security Act (“ERISA”). The litigation targeted voluntary benefits, including hospital indemnity plans, critical illness plans, and certain accident plans. The key allegations highlighted excessive premium rates, higher than average commissions, and poor benefit value (the benefits received compared to the cost of the premium). When these plans fall under ERISA, fiduciary rules requiring reasonable compensation will apply. Although employers can offer these benefits as ERISA-exempt under a “safe harbor” for voluntary plans, many of these plans fall under ERISA due to employer “endorsement.”

Many employers believe that because employees pay 100% of the premiums for voluntary benefits, these plans are not subject to ERISA. However, to stay exempt, a plan must strictly adhere to the ERISA Voluntary Plan Safe Harbor requirements. If an employer oversteps, the plan becomes an “ERISA-covered” benefit, making the employer a fiduciary who would be responsible for the plan’s cost and quality.

To qualify for the Safe Harbor Exemption, four conditions must be met:

• No Employer Contributions: The employer cannot pay any portion of the premiums.

• Voluntary Participation: Participation must be entirely at the employee’s discretion.

• No Endorsement: The employer cannot “endorse” the plan. This is where most plans fall outside of the safe harbor. Endorsement can include putting company logos on brochures, negotiating specific terms, or telling employees the plan is a “great value.”

• Limited Employer Role: The employer’s role must be limited to collecting premiums paid on a post-tax basis and remitting them to the insurer.

Determining whether an employer has endorsed a benefit, making it subject to ERISA, is a facts and circumstances analysis, but paying premiums on a pre-tax basis or integrating claims with other ERISA benefits would constitute endorsement. Also, much of the education designed to improve utilization can constitute endorsement. To mitigate risk, employers should review their voluntary benefit offerings and either ensure the plan is truly ERISA exempt or formally accept fiduciary status and manage the plan accordingly.

Employer Action Items

To Maintain “Safe Harbor” Status (ERISA Exemption)

• Audit Communications: Remove company logos from voluntary benefit marketing materials.
• Avoid “Selection” Language: Do not tell employees you have “selected” the best provider.
• Review Premium Payments: Ensure premiums are paid post-tax.
• Limit Compensation: Ensure the company does not receive any cash or “credits” from the insurer beyond reasonable reimbursement for administrative costs.

To Fulfill Fiduciary Duties (if subject to ERISA)

• Benchmarking: Periodically benchmark premium rates and benefit advisor commissions to ensure they are “reasonable.”
• Monitor Performance: Review utilization compared to premium cost. Low utilization may indicate poor value for plan participants.
• Formal Documentation: Maintain a written plan document and include these benefits in the plan’s ERISA Wrap Summary Plan Description. Include these benefits in the plan’s Form 5500 filing if the plan has over 100 participants.
• Fee Transparency: Understand commissions and fees paid, as well as overrides benefit advisors may receive from insurance companies, and if any of these payments are used to offset cost for benefit administration systems, enrollers, wellness, etc.