Riding the Latest Wave of ERISA Voluntary Benefits Class Actions: Tips for Staying on Your Surfboard
- Allison Martinez, née De Tal
- 3 minutes ago
- 5 min read
On December 23, 2025, four class action lawsuits were filed in the Northern District of Illinois and the Southern District of New York. These suits allege employers who sponsored voluntary employee benefits plans, and their insurance brokers, violated the Employee Retirement Income Security Act of 1974 (“ERISA”). This article explores the allegations in these complaints and offers suggestions as to what employers can do to avoid—or at least be best positioned to defend—similar lawsuits.
What are voluntary benefits?
The latest wave of cases focuses exclusively on “voluntary” health and welfare benefits offered to employees. These benefits—like accident, critical illness, cancer, and hospital indemnity policies—are typically offered by employers to help employees pay for costs not covered by traditional health insurance (“Voluntary Benefit Plans”)
Are Voluntary Benefit Plans subject to ERISA?
To fall within ERISA’s scope, a benefit offered to employees must meet the definition of an “employee benefit plan” (i.e., an “employee welfare benefit plan” and/or an “employee pension benefit plan”) as defined by statute. (ERISA Section 3(1)-3(3)). Not every benefit an employer offers to employees will be subject to ERISA—pet insurance, for example, is not likely an “employee welfare benefit plan", and some employee benefits do not even rise to the level of being a “plan.” (ERISA Section 3(3)). Further, some plans that otherwise meet these definitions are not subject to ERISA—or portions of ERISA—because they fall within an exception (e.g., governmental plans and church plans).
Many Voluntary Benefit Plans do meet ERISA’s definition of “employee benefit plan” and are subject to ERISA—requiring employers/plan administrators to comply with all of its requirements including satisfying demanding fiduciary obligations and filing Forms 5500. Voluntary Benefit Plans, however, are not subject to ERISA if they satisfy the exception carved out in Labor Regulations Section 2510.3-1(j). Generally, a group or group-type Voluntary Benefit Plan that is structured as an insurance program offered to employees by an insurer will be exempt from ERISA if the following four requirements are met:
(1) No contributions are made by an employer or employee organization;
(2) Participation in the program is completely voluntary for employees or members;
(3) The employer or employee organization’s sole functions with respect to the program are, without endorsing the program, to permit the insurer to publicize the program to employees or members, to collect premiums through payroll deductions or dues checkoffs, and to remit them to the insurer; and
(4) The employer or employee organization receives no consideration in connection with the program, other than reasonable compensation, for administrative services actually rendered in connection with payroll deductions or dues checkoffs.
The complaints allege the Voluntary Benefit Plans at issue were subject to ERISA because they did not qualify for the regulatory exception. Further, the complaints allege the defendant employers conceded their Voluntary Benefit Plans were subject to ERISA in their annual Form 5500 filings.
Tip #1 – Employers should carefully consider whether Voluntary Benefit Plans not intended to be subject to ERISA should be listed or included in an ERISA wrap document or summary plan description (“SPD”).
What are the core allegations in the complaints?
At bottom, the complaints all allege that because the Voluntary Benefit Plans did not qualify for the ERISA exception, the employers breached their fiduciary duties by failing to monitor the insurance brokers’ conduct, allowing them to collect millions in excessive commissions. The complaints also allege the insurance brokers—Gallagher, Mercer, WTW, and Lockton—were fiduciaries who breached their obligations to employees by knowingly collecting these inflated commissions knowing the employers were not monitoring their conduct. Each complaint specifically questions the sponsoring employers’ practices—inferring none of them conducted a request for proposal for many years which would have revealed their brokers’ allegedly exorbitant charges.
What does this mean for employers?
The plaintiffs’ allegations are built on the plans’ alleged failure to meet the regulatory ERISA exemption and the employers’ alleged failure to monitor premiums and broker commissions in accordance with ERISA’s requirements. These suits highlight the importance of the threshold inquiry when dealing with any employee benefits plan or program—is the plan or program subject to ERISA? How this question is answered will dictate an employer’s responsibilities.
Whether or not a plan (whether health or welfare or pension) meets the regulatory exemption is based on all of the facts and circumstances and some of those can be quite subtle.
Tip #2 – Employers and plan administrators who offer Voluntary Benefit Plans that are intended to be exempt from ERISA should review all of the facts and circumstances surrounding those plans to align with that intent (e.g., separate communications about those plans as much as possible from its ERISA plans), and a include clear written statement that such plans are intended to meet the ERISA exemption in the plan’s offering materials.
If ERISA applies, it is essential for an employer to have practices and procedures in place to comply with its many requirements (e.g., to monitor insurance brokers and other service providers). Having a plan committee in place and creating a committee charter which requires periodic review of fees and performance, adhering to the committee charter, and retaining records of compliance (i.e., well prepared meeting minutes) can be an employer’s first line of defense to fend off suits alleging breaches of ERISA’s fiduciary obligations.
If ERISA does not apply, it is equally important for an employer to avoid actions that give the appearance that a plan is subject to its requirements. As noted above, non-ERISA plans should not be included in a wrap plan document which covers an employer’s ERISA plans, it should not be included in an SPD or reported on a Form 5500.
Tip #3 – If a Voluntary Benefit Plan is not required to file a Form 5500 because it is not subject to ERISA, employers should not file one or include information relating to such benefits on the Form 5500 for its ERISA welfare plans.
What’s next?
Whether these cases have legs remains to be seen. To date, none of the defendants have filed an answer or responsive pleading. From a practical perspective, however, “once you are sued you have lost” because just being named in a lawsuit means unwanted costs—both time and money—will be incurred.
Tip #4 – Employers should review their fiduciary and other insurance policies which may provide defense coverage.
We will continue to monitor these cases— Braham et al. v. Laboratory Corp. of America Holdings, No. 1:25-cv-15583 (N.D. Ill.), Brewer v. CHS/Community Health Systems, Inc., No. 1:25-cv-15578 (N.D. Ill.), Pimm et al. v. United Airlines, Inc., No. 1:25-cv-15581 (N.D. Ill.), and Fellows v. Universal Services of America, LP, No. 1:25-cv-10659 (S.D.N.Y.).
If you have any questions about whether your Voluntary Benefit Plans are subject to ERISA or the processes you have in place for your employee benefit plans, please contact your Boutwell Fay attorney.
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