Avoiding ERISA Surprises Related to Voluntary Benefits: Practical Steps for Employer Plan Sponsors

On December 23, 2025, a coordinated wave of litigation targeted voluntary benefits, a space many employers have historically treated as low risk. These voluntary benefits include supplemental products such as accident, critical illness, and hospital indemnity coverage. Four major employers—United Airlines, Allied Universal, Laboratory Corporation of America, and CHS/Community Health Systems—all now face ERISA fiduciary breach allegations alongside their benefits consultants. The lawsuits raise a single, critical question: Are you providing the same level of fiduciary oversight for these programs as you do for your core health plan?

What the Lawsuits Allege

The complaints reframe voluntary benefits as potential ERISA plans with full fiduciary duties, and they examine whether brokers and consultants acted with appropriate fiduciary discipline where they exercised discretion or control over plan management. The allegations are consistent across all four defendants: employers failed to conduct competitive evaluations, did not obtain full disclosure of broker compensation, did not monitor loss ratios or plan performance, and did not maintain documented oversight of the vendor relationship. These cases raise important questions about how fiduciary responsibilities are assigned and overseen, which prudent employers and brokers should proactively consider.

What Constitutes ERISA Exposure in Voluntary Programs

Many employers assume that because employees pay 100% of premiums, their ERISA fiduciary exposure is minimal or non-existent. The four cases challenge this assumption. The Department of Labor's voluntary plan safe harbor under 29 C.F.R. § 2510.3-1(j) provides protection, but only if the following four conditions are met simultaneously:

1. The employer makes no contributions.
2. Employee participation is truly voluntary.
3. The employer's role is limited to neutral payroll deduction: no endorsement, no marketing, no logo.
4. The employer receives no compensation or services of value beyond reasonable administrative costs.

The lawsuits allege that the defendants stepped outside this safe harbor in various ways: through employer branding and marketing of products, through acceptance of services funded by voluntary product revenue, or through delegation of plan management functions without adequate oversight. When these conditions are not met, the ERISA framework applies, and fiduciary duties are absolute, regardless of premium source. The “employeepaid” label does not relieve the employer of the duty to act prudently and loyally in selecting and monitoring plan vendors and compensation structures.

The Compensation Dynamic That Creates Risk

Brokers are central to how these cases are being framed, and for important reasons. The complaints examine the dynamics of how brokers are compensated and whether those compensation structures naturally align with participant interests. This tension is real and worth acknowledging:

• ​Commissions are typically paid by the insurance carrier, not the employer.
• Broker commissions generally increase and decrease as premiums increase and decrease.
• Participants naturally prefer lower premiums.

This structure creates a natural tension that employers and brokers need to manage thoughtfully. It does not mean brokers are acting in bad faith. Rather, the way the incentives work simply requires intentional oversight.

According to the allegations, the four defendants did not take these basic oversight steps. They did not conduct RFPs, did not obtain transparent compensation data, and did not implement ongoing monitoring.

What Good Fiduciary Oversight Looks Like

Employers should treat voluntary benefits with the same fiduciary discipline as their core medical plan. This means employers should do the following:

• Clarify plan status upfront. Determine whether the program falls under the voluntary plan safe harbor or should be managed as an ERISA plan. If ERISA applies, establish clear oversight and regular monitoring from the start.
• Establish competitive processes. Every 2-3 years, check the market by comparing carriers through a competitive RFP process. Be sure to document this process, the options considered, along with the rationale for your decision.
• Request compensation transparency. Obtain written disclosure of all broker compensation. Compare these rates to market benchmarks. If rates are significantly higher than peers, understand why or consider a change.
• Monitor plan performance. Regularly review loss ratios, claims processing times, participant complaints, and carrier financial strength. Set clear triggers for follow-up (for example, if loss ratios fall below 55%, trigger a conversation with the carrier).
• Review annually. Meet with your broker and carrier to review performance against agreed metrics. Adjust terms or vendors if performance lags.
• Communicate with participants. Provide clear cost and coverage information so employees understand what they are purchasing and why.

The Broker’s Role in Effective Fiduciary Oversight

Brokers play an important role in this process, and strong brokers can add real value. Employers should be able to expect brokers to do the following:

• Suggest periodic competitive reviews without waiting for employers to ask.
• Proactively disclose all forms of compensation and explain the value delivered for the fees charged.
• Recommend practical approaches for monitoring and agree on how often reviews will happen.
• Recognize the natural tension between broker compensation and participant costs, and suggest structures (such as fee arrangements tied to loss ratio targets) that help align interests.
• Stay current on market benchmarks and bring those insights into employer conversations.

Brokers who lean into fiduciary oversight often build stronger, longer-term client relationships and reduce their own risk in the process.

Why This Matters Now

The December filing was not random; it is part of a coordinated strategy by a law firm with a history of filing similar ERISA cases in waves. The voluntary benefits market, with its complex compensation and governance, is now squarely in the plaintiffs' bar's crosshairs.

This does not mean every voluntary benefits program is exposed to litigation, but it does mean that employers and brokers who are not running intentional fiduciary processes are now visible to plaintiffs' lawyers who are actively looking.

The regulatory environment is also evolving. The Department of Labor and the SEC are increasingly focused on ERISA fiduciary conduct, particularly around transparency and conflict management. The voluntary benefits space, with its complexity around broker compensation, naturally attracts regulatory attention.

Forging a Different Kind of Partnership

The employers and brokers involved in these lawsuits will spend years and potentially millions of dollars responding to discovery, motions, and settlement. The real cost, however, goes beyond dollars. It shows up in reputational damage and operational disruption. Employees feel betrayed when they discover their trusted employer was not adequately monitoring plan costs on their behalf.

That outcome is preventable. It requires nothing extraordinary, just standard fiduciary practices: clear oversight, transparent vendor relationships, documented decisions, and regular monitoring.

Employers and brokers who do this work now will have a defensible story later. More importantly, they will have created a voluntary benefits program that actually delivers on its promise: a transparent, competitively priced option that serves employee interests, not vendor interests.

We take this approach to voluntary benefits because strong oversight should be the norm, not the exception. We help employers clarify plan status upfront, put transparent processes in place, and maintain regular monitoring so brokers, including Hylant, earn their compensation by delivering real, measurable value to participants.

The four cases are a warning. They are also an opportunity to get ahead of the next wave of litigation and build the kind of employer-broker partnerships that withstand scrutiny and deliver genuine value to employees.

Reach out to your Hylant representative for further information. Don’t have one? Contact us here.

The above information does not constitute advice. Always contact your employee benefits broker or trusted advisor for insurance-related questions.