A new wave of ERISA litigation is emerging, and this time it isn’t focused on retirement plans.
In late December, Schlichter Bogard—the plaintiffs’ firm best known for challenging the 401(k) fee landscape—filed multiple federal lawsuits contesting the cost, structure and compensation models behind employer-sponsored voluntary benefits programs. For plan sponsors who have long treated voluntary benefits as peripheral or low-risk, this should command attention. Similar patterns have already played out in retirement plans, where fee structures once viewed as routine later became the subject of fiduciary scrutiny.
Why these cases matters
The most closely watched of these cases involve a host of large organizations, including Community Health Systems (CHS), LabCorp, United Airlines, and Universal Services of America. What distinguishes these lawsuits from earlier excessive fee claims is that the employers’ voluntary benefits consultants and brokers have also been named as defendants. Those firms include Gallagher, Mercer, Lockton, and Willis Towers Watson, all of which play a central role in the design, pricing, and placement of voluntary benefits such as accident, critical illness, hospital indemnity, and cancer insurance.
Across the complaints, plaintiffs allege that tens of thousands of employees felt compelled to purchase supplemental coverage to protect themselves from perceived gaps in their core health benefits. There are real-world factors that may help explain this dynamic, from plan design to utilization patterns, but those details are not what ultimately makes these cases important. What makes them compelling is that they expose three difficult realities any plan sponsor could face.
The illusion of “low risk” because employees choose
The first is the persistent belief that voluntary benefits are inherently low-risk because employees opt in and pay the premiums themselves, through payroll deductions. Choice, however, does not eliminate fiduciary responsibility, particularly when employers select and endorse offerings, allow their branding to appear on materials, or play a role in how products are communicated.
The lawsuits argue that these actions are enough to bring voluntary benefits squarely into ERISA territory. ERISA requires employer sponsors to act as “fiduciaries,” which means they must put the interests of the plan participants before anything else. That should give pause to any employer who has treated these programs as hands-off.
When compensation distorts plan design
The second reality is how broker compensation can quietly distort outcomes.
In the CHS case, the complaints allege that brokers received commissions far above industry norms (reportedly exceeding 20%) while comparable employers paid closer to 5–9%. At the same time, loss ratios—generally, claims paid compared to premiums collected—on certain voluntary products were so low that a significant share of premium dollars never returned to employees in the form of benefits or claims.
When employees are paying premiums, intermediaries are extracting outsized commissions, and claims payouts remain minimal, even with some portion of the commissions being returned to the plan sponsor, the optics become difficult to defend.
The fiduciary risk of not asking basic questions
The third, and perhaps most troubling, issue is governance.
The allegations raise straightforward questions that many employers are now expected to have asked: How much are employees paying in premiums? How much is being paid out in claims? Who is being compensated, how, and for what services? And where do those dollars ultimately go?
Long touted as a source of additional plan funds via returned commissions, voluntary benefits are now becoming the next ERISA fee battlefield. While not all voluntary plans are subject to ERISA, plan sponsors who continue to treat them as “off to the side” are exposed, especially when broker compensation is opaque.
The lawsuits also shine a light on bundling arrangements and cross-subsidization, where commissions generated from employee-paid voluntary benefits may have been used to offset or discount services tied to employer-paid benefits. That kind of mixing and matching crosses a long-recognized line. Commissions earned on voluntary products are expected to fund enrollment, administration, and participant services only for the benefits from which they were derived—not quietly subsidize other parts of the benefits program.
Why waiting is the riskiest option
The real exposure lies not in the existence of these lawsuits, but in how unprepared many employers may be to respond. The Consolidated Appropriations Act of 2021 made disclosure obligations explicit. “We didn’t know” is no longer a defensible position.
Doing nothing—particularly now, with full awareness that these cases are being filed—leaves plan fiduciaries, executives and board members exposed. This is not a call to eliminate voluntary benefits. It is a call to see them in a different light.
That means requesting full compensation disclosures, auditing voluntary benefits contracts, understanding loss ratios, and confirming whether commissions are being reinvested appropriately or simply flowing elsewhere.
And because fees, commissions and compensation structures can evolve quietly over time, particularly in voluntary programs that sit outside the annual renewal cycle of core health benefits, these fee reviews need to be done periodically, not just once. What may have been reasonable at one point can drift out of bounds without deliberate, ongoing oversight.
Voluntary benefits may have entered benefit programs quietly, but they are no longer flying under the radar. Now more than ever, plan sponsors must ensure these plans exist for the betterment of plan participants, not as an additional source of discount or fund generation.