Is Your "Voluntary" Benefit Actually an ERISA Plan?
Possibly not, and the label on it has nothing to do with the answer. Whether a voluntary benefit sits outside ERISA depends on four conditions about how the employer behaves. Miss any one of them and the program is an ERISA plan, with the fiduciary duties that come with that — regardless of what the enrollment materials call it.
Twelve lawsuits have been filed over voluntary benefits since December 2025. In September 2026, a federal court ruled for the first time that a specific employer's conduct had pulled a supplemental program inside. This is a reasonable moment for employers to check.
What are voluntary benefits, in this context?
Supplemental insurance programs offered through the workplace and paid for entirely by employees. Most commonly accident coverage, critical illness or cancer policies, and hospital indemnity insurance. Supplemental disability and life policies raise the same questions.
They are usually small, usually arranged through a broker, and usually set up once and then left alone. That combination is exactly why so few employers have looked closely at them.
What is the voluntary benefit safe harbor?
A Department of Labor regulation that keeps certain employee-paid insurance programs outside ERISA. It applies only when all four of the following are true:
● No employer contributions. The employer pays no part of the cost. Running premiums pre-tax through a cafeteria plan is widely read as breaking this condition, though guidance on that point is not uniform.
● Participation is completely voluntary. The employee chooses, freely. This is the condition almost every program satisfies.
● The employer's role stays ministerial, without endorsing the program. Permitting the insurer to publicize it, and collecting and remitting premiums through payroll. That is the whole permitted role.
● The employer receives no consideration. Nothing in cash or otherwise, beyond reasonable compensation for the administrative work of running the payroll deduction.
All four. Failing one is enough to bring the program inside ERISA.
What counts as endorsing a benefit?
There is no precise definition, which is the central practical problem. The Department of Labor has pointed to several activities that may amount to endorsement: putting the employer's name and logo on promotional materials, setting the eligibility rules for who can enroll, and negotiating the terms of the insurance coverage.
Notice what is on that list. Deciding which employees can enroll, branding the materials so staff know the offer is legitimate, and negotiating a better rate are all things a conscientious benefits team does without a second thought. None of them is wrongdoing. Each can contribute to a finding that the employer endorsed the program.
The test is also cumulative. A single action that would be harmless on its own can matter when combined with others and viewed as a whole.
What did the September 2026 ruling decide?
A federal district court found that a supplemental disability program an employer described as voluntary was governed by ERISA, because the employer's conduct failed two of the four conditions.
The employer had negotiated reduced rates on the policy and offered it alongside its broader welfare plan, which the court treated as endorsement — the arrangement would lead a reasonable employee to believe it was part of the company's own benefits. And the employer received a commission in connection with the plan, which broke the condition against receiving consideration.
The decision is worth reading carefully for what it did not say. It was not a finding that anyone had breached a duty or harmed anybody. It decided which body of law applied. But that is the threshold question in every one of the cases now being filed, and this is the first time a court has answered it this way.
Why are employers being sued over benefits they do not pay for?
Because paying nothing is not the same as owing nothing. The complaints generally allege that once these programs are inside ERISA, the employer owed employees a duty to act prudently — and that the premiums employees were charged were higher than they needed to be, because of the commissions and compensation flowing to the brokers and consultants who administered the programs.
Several complaints add a further allegation: that the programs were put in place without the employer ever running a competitive process to test what they should cost.
These allegations are unproven. They are denied, and no court has ruled on their merits. But they are worth understanding on their own terms, because they describe a gap that is easy to verify in your own organization — and verifying it does not require waiting for anyone to win.
There is also a structural reason this theory is attractive to plaintiffs. In employer-paid coverage, a participant trying to show personal harm runs into the fact that the employer decides what employees contribute. With voluntary benefits, the employee pays the entire premium. The link between an inflated price and an individual's loss is much shorter.
Does running an RFP protect the safe harbor?
No. If anything it does the reverse, and anyone telling you otherwise is selling something.
Negotiating the terms of coverage is on the Department of Labor's own list of activities that may count as endorsement. A competitive process in which the employer tests the market and negotiates on behalf of its employees is, by its nature, the employer involving itself in the program. That is evidence for being inside ERISA, not against it.
This is the genuine bind employers face right now. The litigation says you should have tested the pricing. The safe harbor says testing the pricing may cost you the exemption. Both of those are true at once, and there is a real risk that employers respond by withdrawing from negotiation altogether — which would leave employees paying more, in order to protect the employer. That is a worse outcome than the problem.
The bind is only unresolvable if you are trying to stand in both places. It dissolves once you decide which one you are in.
What should an employer do now?
Decide deliberately which side of the line each program is on, then make your conduct match the decision. That is the one action available to every employer regardless of how their programs are structured.
In practice:
● Inventory the programs. List every employee-paid supplemental benefit offered through your workplace. Many organizations find one or two nobody has thought about in years.
● Test each against all four conditions. Honestly, using what you actually do rather than what the paperwork says. Branding, eligibility rules, rate negotiation, and anything flowing back to the employer are where programs fail.
● Check what your filings already say. Plaintiffs have pointed to employers' own annual reports treating these products as part of an ERISA plan. A filing that names you as plan sponsor is difficult to reconcile with a later claim that you merely permitted an insurer to market something.
● Then choose, and align. Staying outside means genuinely ministerial conduct, consistently. Being inside means the fiduciary duties apply — including a duty to understand what employees are paying and what the intermediaries are earning from it.
● Write down the decision and the date. The record of a deliberate choice is worth far more than the choice itself being arguably correct. Documented fiduciary process is essential.
The part that generalizes
The uncomfortable position here is not being inside ERISA or outside it. Either can be managed. It is the undecided middle — behaving like a sponsor while assuming you are exempt, because nobody ever made the call.
That describes a great many voluntary benefit programs. It is also, usefully, a problem an organization can fix in a quiet quarter, before anyone is asking.
Frequently asked questions
Are voluntary benefits covered by ERISA?
Usually not, but only if all four conditions of the Department of Labor's safe harbor are met: no employer contributions, completely voluntary participation, a purely ministerial employer role without endorsement, and no consideration to the employer beyond reasonable payroll-administration costs. Failing any one condition brings the program inside ERISA.
What counts as employer endorsement of a voluntary benefit?
There is no precise definition. The Department of Labor has indicated that using the employer's name and logo on promotional materials, setting eligibility rules, and negotiating the terms of coverage may all count. The test considers the employer's actions as a whole rather than in isolation.
Does offering a voluntary benefit alongside our other benefits create a problem?
It can. In a September 2026 ruling, a court treated the fact that a program was offered together with the employer's broader welfare plan as supporting a finding of endorsement, because it would lead a reasonable employee to see it as part of the company's own benefits.
Can we receive a commission on a voluntary benefit program?
Not without losing the safe harbor. The employer may receive reasonable compensation for the administrative work of running payroll deductions, and nothing else. A commission breaks that condition.
Will running an RFP keep our voluntary benefits outside ERISA?
No. Negotiating the terms of coverage is on the Department of Labor's list of activities that may count as endorsement, so a competitive process is evidence of involvement rather than protection from it. The useful step is deciding deliberately which side of the line the program is on and acting consistently.
How many voluntary benefits lawsuits have been filed?
Twelve since December 2025, according to analysis published by Encore Fiduciary in October 2026. The allegations in those cases are unproven and no court has ruled on their merits.
Talk it through with someone who has nothing to sell you.
Culpepper RFP evaluates plan service providers and sells nothing else — no brokerage, no insurance, no investment products. Thirty minutes, and no proposal unless you ask for one.
