Once limited to supplemental life or disability insurance, today’s voluntary benefits options can include health savings accounts (HSAs), accident and critical illness coverage, hospital indemnity plans, legal services, identity theft protection, and even things like pet insurance, student loan assistance programs, and financial wellness tools. Surveys indicate that a notable majority of workers consider voluntary benefits a deciding factor in their employment choice, a finding echoed by employers.[i]
These “voluntary” programs are often positioned as “employee-paid,” or “optional.” However, recent lawsuits filed by the Schlichter Bogard law firm have brought renewed scrutiny to voluntary benefit programs, particularly where employer involvement, fee structures, or revenue-sharing arrangements suggest fiduciary oversight may have been required.[ii]
Here’s What You Really Need to Know
- Voluntary benefits often sit in a gray zone — managed by HR, payroll, brokers, or third-party platforms with limited formal oversight.
- ERISA litigation or regulatory audit exposure can arise through endorsement, discretion, or compensation, even when employees pay 100% of the cost for the benefit.[iii]
- Recent litigation alleges failures of fiduciary prudence, monitoring and loyalty in benefit arrangements that were traditionally assumed to be low risk.
Let’s Dive In
What Are Voluntary Benefits?
Voluntary benefits are employer-facilitated benefit offerings that employees may elect and typically pay for through payroll deductions. Unlike core benefits (medical, dental, and retirement, for example), participation is optional, and costs are often fully borne by the employee. From an employee perspective, these offerings are convenient and often competitively priced. From an employer perspective, they’re attractive because they expand benefits to employees without adding costs to the employer.
When Does ERISA Cover Voluntary Benefits?
ERISA applies to employee welfare benefit plans established or maintained by an employer to provide certain benefits — including insurance — to employees. However, the Department of Labor (DOL) has long recognized a safe harbor for certain voluntary benefit arrangements. To stay outside of ERISA, all the following must generally be true:
- No employer contributions: The employer does not pay any portion of the premium or cost.
- Voluntary participation (no automatic enrollment): Employees are free to opt in or out.
- Limited employer involvement: The employer’s role is limited to allowing marketing, collecting premiums through payroll deduction, and remitting premiums to the provider.
- No endorsement: The employer does not endorse the program and does not receive consideration beyond reasonable compensation for administrative services.
If all these conditions are met, the arrangement typically falls outside of ERISA. If one applies, ERISA rules may be applicable.
The Endorsement “Trap”
The most common way employers inadvertently trigger ERISA coverage is through endorsement, which can include things like:
- Presenting the benefit as part of the company benefits package
- Using employer branding or logos in materials
- Actively recommending or sterring employees toward certain benefits
- NEgotiating plan terms or coverage design on employees’ behalf
- Limiting vendor options to a single provider without transparency
Guidance from the DOL makes clear that endorsement is evaluated based on facts and circumstances, including whether a reasonable employee would conclude that the employer has exercised discretion or stands behind the program. The employer’s intent is irrelevant.
Compensation and Revenue Sharing: A “Quiet” Risk
Another increasingly scrutinized area involves compensation flows. ERISA may apply if:
- The employer receives commissions, overrides, or marketing allowances
- A broker or advisor receives compensation that is not clearly disclosed
- Fees are embedded in premiums without transparency
- Vendors provide indirect benefits (technology, services, sponsorships) tied to placement
Just as with retirement plans, under ERISA, fiduciaries must ensure that compensation paid from plan assets — direct or indirect — is reasonable, and that conflicts of interest are prudently managed.
Recent litigation also cites the DOL Advisory Opinion 1994-25A that states “An employer … will be considered to have endorsed a group or group-type insurance program if the employer or employee organization expresses to its employees or members any positive, normative judgment regarding the program.”[iv]
The Schlichter Bogard Lawsuits: Why They Matter
Schlichter Bogard — best known for landmark 401(k) fee litigation — has recently expanded its litigation strategy to include health and welfare benefit arrangements, naming four national employers and the consultants involved with these programs.[i] While cases vary, common allegations include:
- Employers and fiduciaries failed to act prudently in selecting and monitoring benefit vendors
- Excessive or unreasonable fees were paid through opaque compensation structures
- Revenue sharing and commissions were not adequately disclosed
- Participants bore unnecessary costs without meaningful employer oversight
Many employers never considered themselves fiduciaries with respect to these programs, and, therefore, never applied the governance rigor common in retirement plans.
As recent lawsuits underscore, the line between convenience and compliance is thinner than many plan sponsors realized. ERISA does not stop at the 401(k) plan, and plaintiffs’ firms are increasingly willing to test that boundary.
The goal isn’t to eliminate voluntary benefits. It’s to understand when ERISA applies, manage conflicts proactively, and bring governance discipline to programs that have outgrown their informal origins. In some instances, plan sponsors may wish for ERISA to apply; however, for the many times employers wish to remain outside of ERISA, it is important to understand the safe harbor framework described above.
Action Items for Plan Sponsors
- Inventory all voluntary benefits, including offerings, vendors and intermediaries, compensation arrangements, and related agreements, to ensure a complete understanding of the benefits available to employees.
- Assess and document the ERISA status of each voluntary benefit, including: (a) whether it is intended to fit within a DOL safe harbor and (b) whether it actually meets the safe harbor criteria.
- Clean up communications to ensure all materials clearly state when benefits are voluntary and employee-paid and remove or avoid any language that could be interpreted as employer-endorsed.
- Consider establishing ongoing oversight of these programs. Governance doesn’t require ERISA, but ERISA requires governance.
[i] Corestream, “Survey: 3 in 4 Employees Consider Voluntary Benefits as a Deciding Factor for Whether They Work for and Stay with an Employer,” Business Wire, September 20, 2021, https://www.businesswire.com/news/home/20210920005321/en/Survey-3-in-4-Employees-Consider-Voluntary-Benefits-as-a-Deciding-Factor-for-Whether-They-Work-for-and-Stay-with-an-Employer
[ii] Nevin E. Adams, “Schlichter Bogard Unleashes a New ERISA Suit Genre,” NAPA-Net, December 23, 2025, https://www.napa-net.org/news/2025/12/schlichter-bogard-unleashes-a-new-erisa-suit-genre/
[iii] 29 C.F.R. § 2510.3-1(j) (Department of Labor voluntary plan safe harbor regulation).
[iv] U.S. Department of Labor, Employee Benefits Security Administration, Advisory Opinion 1994-25A, July 11, 1994, https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/advisory-opinions/1994-25a.pdf
[v] Nevin E. Adams, “Schlichter Bogard Unleashes a New ERISA Suit Genre,” NAPA-Net, December 23, 2025, https://www.napa-net.org/news/2025/12/schlichter-bogard-unleashes-a-new-erisa-suit-genre/