ERISA and voluntary benefits: Why the line matters and how to approach it with confidence

For many organizations, voluntary benefits are an important part of a well-rounded total rewards strategy. They expand employee choice, help fill coverage gaps and do so cost-efficiently. In many cases, they represent a thoughtful response to evolving employee needs.

While class-action litigation involving voluntary benefit plans remains relatively limited, some employers have faced legal challenges when plans failed to satisfy the Department of Labor's (DOL) safe harbor requirements. As a result, employers should periodically review voluntary benefit offerings, such as accident, critical illness, cancer and hospital indemnity plans, to help ensure ongoing compliance with ERISA safe harbor requirements.

At the same time, recent litigation highlights the importance of how these programs are structured and administered. The key takeaway is to establish voluntary benefits based on an informed and intentional foundation.

The ERISA “Safe Harbor” is still a valuable framework

ERISA governs most employer-sponsored benefit plans, but the DOL provides a safe harbor that allows certain voluntary benefit programs to remain outside ERISA if specific requirements are met.

In general, those requirements include:

• the benefit is 100% employee-paid;

• participation is voluntary;

• the employer does not endorse the program; and

• the employer receives no compensation beyond limited administrative reimbursement.

When structured thoughtfully, many voluntary benefit programs can comfortably fit within this framework. The safe harbor remains a practical and achievable standard; it just requires clarity around the employer’s role.

What’s changed: A new wave of litigation

Recent lawsuits filed in late 2025 and into 2026 are bringing increased attention to voluntary benefit programs. According to Ropes & Gray’s alert, “Voluntary Benefits Under Scrutiny: Multiple Plan Sponsors and Consultants Sued for Alleged ERISA Breaches,” several large employers and consulting firms have been named in class actions alleging breaches of fiduciary duty related to these offerings.

Nixon Peabody’s alert, “New ERISA Class Actions Challenge ‘Voluntary’ Accident, Critical Illness and Hospital Indemnity Benefits,” further highlights litigation involving accident, critical illness and hospital indemnity coverage, benefits that employees widely use and value. The core legal question is whether certain programs truly qualify for the ERISA safe harbor, or whether employer involvement effectively brings them within ERISA’s scope.

Importantly, this isn’t a challenge to the concept of voluntary benefits themselves. Rather, it’s an effort to apply established ERISA fiduciary principles to how these programs are structured and overseen.

What plaintiffs are focusing on

Across these cases, plaintiffs are applying familiar arguments from the retirement plan space, particularly around process, oversight and transparency.

Common allegations include:

• employers failed to monitor premiums and pricing levels;

• employers did not adequately evaluate carrier or broker arrangements;

• compensation structures such as commissions were not reasonable or not well understood; and

• there was insufficient oversight of vendors and program design, as mentioned in DLA Piper’s article,”Voluntary benefit programs face increased ERISA fiduciary scrutiny: Top points."

Frier Levitt’s article, “Self-Funded Employee Health Benefit Plans and Consultants/Brokers Face String of ERISA Fiduciary Breach Lawsuits for Mismanagement of Voluntary Benefit Programs,” also points to several instances where plaintiffs have argued that employees paid more than necessary for coverage due to mismanagement of voluntary benefit programs.

For plan sponsors, these cases underscore the importance of a prudent decision-making process behind voluntary benefit offerings.

The importance of drawing the line clearly

At the center of these cases is the concept of “endorsement.”

To remain outside ERISA under the safe harbor, an employer’s role should be limited, making the benefit available without actively steering or managing it.

However, as voluntary benefit strategies have evolved, employers often take a more active role in:

• selecting vendors;

• coordinating enrollment;

• communicating program value to employees; and

• integrating offerings into broader benefits platforms.

These are all reasonable and often beneficial activities for employees. The challenge is that, in certain cases, they can blur the line between facilitator and sponsor.

The Nixon Peabody alert also notes that recent ERISA class actions specifically point to activities such as assisting with communications, managing enrollment processes or maintaining ongoing involvement as potential indicators of endorsement.

These aren’t reasons to avoid voluntary benefits, which have proven to be highly valued by employee groups. However, it highlights the need for employers to be intentional about how the program is positioned and governed.

Why this matters

If a voluntary benefit program is determined to fall under ERISA, the implications are straightforward:

• the employer may be considered a fiduciary;

• ERISA standards of prudence and loyalty apply;

• there may be additional compliance and reporting obligations; and

• the program could be subject to participant litigation.

For many plan sponsors, these are familiar concepts. They’re already operating within this framework for retirement plans and core health benefits.

The shift isn’t toward something entirely new, but toward applying consistent governance principles across a broader set of offerings.

A practical, confident approach for plan sponsors

Plan sponsors should take this moment as an opportunity to strengthen their approach.

1. Be explicit about intent

Determine whether each program is intended to fall within the ERISA safe harbor or be treated as an ERISA plan. Either approach can be appropriate; what’s important is clarity and consistency.

2. Align structure with that intent

If the goal is to remain within the safe harbor:

• limit employer involvement to permitted activities; and

• avoid actions that could be interpreted as endorsement.

If the program may fall outside the safe harbor:

• apply a level of fiduciary oversight consistent with ERISA expectations.
  
  

3. Elevate vendor oversight

The recent litigation places particular emphasis on premium reasonableness; carrier selection; and broker and consultant compensation structures. Understanding and periodically reviewing these elements is a practical step that aligns with broader fiduciary best practices.

4. Document the process

As with retirement plans, documentation is critical. A clear record of how decisions are made, particularly around vendor selection and pricing, can significantly strengthen a plan sponsor’s position.

5. Integrate, don’t isolate

Voluntary benefits should be part of the broader benefits governance framework, not treated as an exception. Applying consistent standards across all programs creates both clarity and efficiency.

6. Ask for assistance

Your employee benefit consultant and ERISA attorney can help provide clarity on a prudent process and potential risks.

The bigger picture

The attention on voluntary benefits is part of a broader evolution in ERISA litigation. The legal theories that reshaped retirement plan governance with a focus on fees, conflicts of interest and fiduciary process, are now being applied in new areas. That doesn’t diminish the value of voluntary benefits. If anything, it reinforces their importance and the need to support them with the same level of discipline that plan sponsors already apply elsewhere.

Final thoughts

Voluntary benefits remain a powerful tool for enhancing employee choice and strengthening benefits offerings. What’s changed is the expectation around how these programs are structured and overseen.

Plan sponsors should lean in with intent and clarity:

• be clear about whether a program is intended to be inside or outside ERISA;

• be thoughtful about the employer’s role; and

• be disciplined in governance and documentation.

Approached this way, voluntary benefits can continue to play an important role in a benefits strategy, supported by a foundation that is both compliant and confident.

Please note that TruePlan Benefit and Retirement Advisors® are not attorneys. As such, we recommend you consult ERISA counsel regarding your approach to your retirement and benefit plans.