Voluntary Benefits Face New ERISA Fiduciary Litigation Risk

Four ERISA class action lawsuits filed December 23, 2025, by the law firm Schlichter Bogard target employer-sponsored voluntary benefit programs at United Airlines, LabCorp, Community Health Systems, and Universal Services of America. These cases challenge accident, critical illness, cancer, and hospital indemnity insurance offerings—all employee-paid supplemental coverage that employers previously considered low-risk from a fiduciary perspective. The litigation alleges ERISA fiduciary breaches despite no employer premium contributions, fundamentally changing the compliance landscape for voluntary benefits.

The lawsuits name both employers and their benefits brokers as defendants, claiming employers failed to monitor broker compensation arrangements and negotiate competitive rates for employees. This represents a significant expansion of ERISA litigation beyond traditional targets like retirement plans and core medical benefits, creating immediate compliance exposure for New York employers offering voluntary coverage.

Why Employee-Paid Coverage Creates Fiduciary Risk

Employers often assume that employee-paid voluntary benefits carry minimal fiduciary responsibility since no company funds are involved. However, these recent cases argue that employers still have fiduciary duties when they select carriers, negotiate terms, and facilitate payroll deductions for voluntary coverage.

The litigation focuses on broker commission transparency and rate competitiveness. Plaintiffs allege that employers failed to understand how broker compensation affected employee costs and didn't negotiate rates that reflected the employer's purchasing power. Under this theory, employers who simply accept carrier proposals without conducting competitive processes may breach their fiduciary duties to employees.

ERISA compliance obligations extend to voluntary benefits when employers exercise discretionary authority over plan management, even if employees pay all premiums. The cases suggest that employers who actively promote voluntary benefits, facilitate enrollment, and manage vendor relationships assume fiduciary responsibility for prudent plan administration.

Broker Compensation as a Compliance Risk Factor

Commission opacity emerges as a central issue in these lawsuits. Many employers don't know exactly how their brokers are compensated for voluntary benefit sales, creating potential conflicts of interest that may not serve employee interests. Brokers receiving higher commissions from certain carriers might steer employers toward those options regardless of competitiveness.

The litigation argues that employers must monitor and evaluate broker compensation arrangements as part of their fiduciary duties. This includes understanding whether brokers receive different commission rates from various carriers and how those arrangements might influence recommendations. Employers who haven't documented their broker's compensation structure face potential liability for failing to identify conflicts of interest.

New York employers should request detailed commission disclosures from their benefits brokers, particularly for voluntary benefit programs. This includes understanding base commission rates, bonus arrangements, and any additional compensation that might create carrier preferences. Documentation of these discussions becomes critical for demonstrating prudent fiduciary oversight.

Operational Changes Required for Compliance

Employers must now treat voluntary benefit selection with the same fiduciary rigor applied to major medical plans. This means conducting competitive processes, documenting selection criteria, and regularly reviewing carrier performance and pricing. The informal approach many employers take with voluntary benefits—accepting broker recommendations without independent analysis—no longer provides adequate fiduciary protection.

Documentation becomes essential for defending voluntary benefit decisions. Employers should maintain records showing how they evaluated carriers, what factors influenced their selections, and how they monitored ongoing performance. This includes documenting rate comparisons, claims experience reviews, and employee satisfaction assessments.

Legal experts recommend that employers establish formal voluntary benefit governance processes similar to those used for retirement plans. This includes regular committee meetings, documented decision-making processes, and periodic benchmarking against market alternatives.

New York Market Implications

New York employers face particular exposure due to the state's competitive benefits market and high employee expectations for comprehensive coverage. Many New York companies offer extensive voluntary benefit packages to attract talent, potentially increasing their fiduciary obligations under the theories advanced in these lawsuits.

The litigation may affect broker relationships throughout the New York market. Employers who haven't previously requested commission disclosures or competitive analyses for voluntary benefits should initiate these conversations immediately. Brokers who resist transparency about compensation arrangements may create additional compliance risk.

Multi-location employers with New York operations should ensure consistent voluntary benefit governance across all states. Inconsistent approaches to carrier selection or broker oversight create potential liability, particularly if New York employees receive less favorable terms than employees in other locations.

Immediate Risk Assessment Actions

Employers should immediately review their voluntary benefit arrangements for potential fiduciary compliance gaps. This includes evaluating how carriers were selected, whether competitive processes were conducted, and how broker compensation might influence recommendations. Document these reviews to demonstrate proactive fiduciary oversight.

Request detailed commission disclosures from benefits brokers covering all voluntary benefit products. Understanding the full scope of broker compensation helps identify potential conflicts of interest and demonstrates prudent monitoring of service provider arrangements.

Establish formal processes for voluntary benefit decision-making, including documented selection criteria, regular performance reviews, and periodic market benchmarking. Voluntary benefit program design should reflect the same fiduciary standards applied to other employee benefit plans.

Preparing for Expanded ERISA Scrutiny

These cases represent the beginning of expanded ERISA litigation targeting previously overlooked benefit areas. Employers should anticipate similar scrutiny of other ancillary benefits, including dental, vision, disability, and life insurance programs. The legal theories advanced in voluntary benefit litigation could extend to any employee benefit where employers exercise selection or administrative authority.

Industry observers note that voluntary benefits are no longer "low-risk" from a fiduciary perspective. Employers must adapt their governance processes to address this expanded compliance environment while maintaining the cost-effective benefit offerings that support workforce retention.

The litigation trend also affects benefits consulting relationships. Employers may need more detailed documentation of advisor recommendations, competitive analyses, and ongoing monitoring services. This shift toward greater transparency and accountability benefits employees but requires more sophisticated vendor management processes.

For New York employers, the key is implementing proactive compliance measures before facing litigation. This includes establishing voluntary benefit committees, documenting selection processes, and ensuring broker compensation transparency. Employers who demonstrate prudent fiduciary practices are better positioned to defend their voluntary benefit programs against future challenges.

The December 2025 lawsuits signal a permanent change in how employers must approach voluntary benefit administration. Companies that adapt their governance processes to address these new fiduciary expectations will maintain competitive benefit offerings while protecting against litigation exposure.

This content is for informational purposes only and does not constitute legal, tax, or benefits advice. Requirements vary based on employer size, location, and plan structure. Information is current as of 2026-02-05. Employers should consult qualified advisors for guidance on their specific circumstances.