RopesTalk
Okaying a Premium Problem: When Voluntary Benefits Become Involuntary Lawsuits
RopesTalk
•March 9, 2026•15 min
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RopesTalk•Mar 9, 2026
Why It Matters
These lawsuits could expand ERISA litigation into a previously low‑risk area, forcing employers and benefits consultants to reassess how they offer and promote voluntary benefits. Understanding the narrow safe‑harbor rules is crucial for avoiding costly fiduciary breaches and protecting both plan participants and corporate reputations.
Key Takeaways
- •New ERISA class actions target voluntary benefit plans.
- •Safe harbor endorsement rule may be narrower than employers think.
- •Brokers face fiduciary liability for excessive commissions.
- •Proactive plan review and documentation can mitigate lawsuit risk.
- •Potential flood of litigation mirrors early 401(k) fee cases.
Pulse Analysis
The latest wave of ERISA class actions, filed by Schlichter Bogard, shifts litigation focus onto voluntary benefit plans such as accident, critical illness, and hospital indemnity coverage. Historically viewed as low‑risk, these supplemental products are now under scrutiny because plaintiffs allege that employers and their brokers breached fiduciary duties and engaged in prohibited transactions. By invoking the Department of Labor’s safe‑harbor exemption, the lawsuits aim to expand the reach of ERISA liability into a space previously considered outside the statute’s ambit, echoing the early 401(k) fee disputes that reshaped retirement‑plan compliance.
Central to the dispute is the DOL’s four‑point safe‑harbor test, especially the endorsement requirement. Courts will examine whether employers merely facilitated payroll deductions or crossed the line by using corporate branding, negotiating terms, or actively promoting the benefits. The lack of a bright‑line definition makes even modest communications vulnerable. Simultaneously, brokers and consultants are targeted for allegedly steering employees toward higher‑commission products, thereby violating fiduciary duties to act in participants’ best interests. This dual focus on employer endorsement and broker compensation creates a complex compliance landscape that could redefine how voluntary benefits are marketed and administered.
Practitioners should respond now by auditing existing voluntary benefit programs against the safe‑harbor criteria, revising enrollment materials, and establishing formal monitoring of broker fees, loss ratios, and market benchmarks. Documenting decision‑making processes and ensuring that any employer involvement is strictly limited to payroll facilitation can provide a defensible shield. As litigation risk intensifies, proactive risk‑management and clear documentation will be essential tools for both plan sponsors and benefits advisors seeking to avoid costly disclosures and potential disgorgement.
Episode Description
On this Ropes & Gray podcast, employment associate Kendall Dacey is joined by benefits consulting principals David Kirchner and Harvey Cotton to discuss a new twist on the relentless ERISA class action lawsuits targeting major employers—this time targeting both employers and their brokers—over voluntary benefit programs such as accident insurance, critical illness coverage, and hospital indemnity plans. The conversation explores how these lawsuits challenge long-held assumptions that voluntary benefits fall safely outside ERISA’s reach. If courts agree these plans are ERISA-covered, employers could face potential fiduciary liability for failing to prudently select insurance carriers and monitor broker commissions for reasonableness and brokers themselves are squarely in the crosshairs for allegedly prioritizing their own compensation over participants’ interests. The episode concludes with practical steps companies can take now to reduce their exposure before the next complaint lands.
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