These class action lawsuits typically allege that employers exercise sufficient control over these plans to trigger fiduciary duties under the Employee Retirement Income Security Act (ERISA) and that those duties were breached. Once ERISA applies, employers can face claims tied not just to plan design, but to the prudence of benefit selection and monitoring.

If these lawsuits gain traction, they may open a new category of potential liability tied to benefit offerings that many employers have historically overlooked.

At the center of the litigation is the claim that certain voluntary benefit arrangements are not exempt from ERISA, either because they fail to meet the voluntary plan safe harbor or because employers exercise sufficient control to trigger fiduciary duties.

Five areas drawing scrutiny

Four recent class action lawsuits filed against large employers include similar allegations that the employers and their benefits brokers breached ERISA fiduciary duties by allowing excessive commissions, failing to monitor insurers and brokers and engaging in conflicted arrangements within employer-sponsored voluntary benefits programs.

Each of these companies was sued by an employees’ union benefit or welfare plan:

• United Airlines
• Laboratory Corporation of America
• Community Health Systems
• Allied Universal

Key areas of alleged exposure include:

1. Benefits selection processes — Employers are being accused of failing to run competitive requests for proposals, benchmark offerings or document why certain carriers or products were chosen. A casual selection process that keeps the same plan each year can be portrayed as imprudent once fiduciary standards apply.

2.  Contracts — Agreements with insurers, brokers and enrollment vendors are under the microscope. Vague terms, unclear delegation of responsibilities or contracts that fail to spell out fiduciary status can make it harder for employers to defend their role as plan sponsors.

3. Broker and vendor compensation provisions — Embedded commissions, overrides and incentive payments are a central theme in the lawsuits. Plaintiffs argue that employers failed to monitor compensation levels or allowed conflicted arrangements that inflated employee premiums.

4. Premium levels — Even when employees pay the full cost, plaintiffs contend that employers must ensure premiums are reasonable relative to the benefits provided. A lack of benchmarking can be framed as a breach of the duty of prudence.

5. Insurance product loss ratios — Loss ratios are being used as a proxy for value. Low ratios may be cited as evidence that plans were overpriced or structured to favor intermediaries rather than participants.

Steps employers can take

While none of these cases has been decided on the merits, they send the message that voluntary benefits are no longer viewed as litigation-proof. Employers and HR leaders may want to consider:

• Confirming whether each voluntary benefit arrangement is intended to be ERISA-covered or exempt — and documenting that determination.
• Reviewing contracts to clarify fiduciary roles, responsibilities and delegation.
• Increasing transparency around broker and vendor compensation, including commissions and incentives.
• Benchmarking premiums and insurer loss ratios against the broader market.
• Documenting benefit selection decisions and the rationale behind them.
• Strengthening employee decision support and education to demonstrate a focus on participant outcomes.

Voluntary benefits may remain optional for employees, but the lawsuits suggest fiduciary oversight is becoming less optional for employers. Employers that pay closer attention now to ensure compliance with any applicable fiduciary duties can reduce their risk of becoming the next test case.

Rising deductibles, higher out-of-pocket maximums and the soaring cost of care are pushing workers to look for other ways to fill the gaps. Employers can step in to meet that need with voluntary benefits.

Once considered optional add-ons, voluntary benefits such as accident, hospital indemnity, critical illness, group life, dental and vision insurance are increasingly becoming essential parts of a well-rounded benefits package. Wellness programs, employee assistance plans and financial counseling options are also now viewed as integral to overall well-being.

A shift in expectations

Prudential’s “2025 Benefits and Beyond” study found that nearly a quarter of employees expect these voluntary benefits to be included as part of a modern workplace offering. But often, employers are not providing the benefits that employees say they need. The poll found that 86% of employers say their benefits are modern, but only 59% of employees agree.

This discrepancy has started to resonate with employers. As a result, 70% of employers plan to make changes to their benefits offerings within the next two years, with 22% expecting significant overhauls.

Employees say their biggest concerns are:

• Saving for retirement (45%),
• Covering everyday expenses (44%),
• Paying for housing (29%), and
• Simply making it from paycheck to paycheck (26%).

When a single medical event can upend financial stability, benefits that offer supplemental protection can provide an important financial backstop and save an employee from financial disaster.

Why voluntary benefits matter now

Voluntary benefits provide cost-effective coverage options that protect employees from the unexpected.

For example:

• Accident, critical illness and hospital indemnity policies help offset out-of-pocket costs that major medical insurance doesn’t cover, such as co-pays, deductibles, transportation, lodging and lost income during recovery.
• Dental and vision plans promote preventive care that can reduce larger medical costs over time.
• Wellness and mental health programs, another key element of today’s voluntary benefits landscape, help employees manage stress and anxiety that affect productivity and retention. (In Prudential’s research, 63% of employees said they have mental health concerns for themselves or a family member, yet only about the same share feels their benefits help them manage overall well-being.)

Benefits for both sides

Expanding voluntary benefit offerings and ensuring you have the benefits your employees really want support recruitment and retention while containing costs.

Because these plans are typically employee-paid through payroll deduction, they add value without significantly raising the employer’s benefit budget. Employers also gain a competitive advantage in a labor market where workers expect more comprehensive protection and well-being support.

Employees gain access to affordable coverage that helps them manage risk and avoid financial hardship. For many, paying a few extra dollars per paycheck for supplemental coverage can prevent a small setback from becoming a financial crisis.

While larger companies have long embraced these options, small employers are increasingly seeing the value in building voluntary benefit programs that reflect the makeup and priorities of their workforce.

For small businesses that may not be able to afford rich employer-funded benefits, voluntary offerings help level the playing field. They increase employee satisfaction and improve recruitment, especially when competitors already provide these options.

What are voluntary benefits?

Voluntary benefits are supplemental insurance and service options that employers make available to their staff. Employees choose which benefits they want and typically pay the premiums through a payroll deduction. Some employers contribute a portion of the cost, but it’s not required.

Examples of voluntary benefits include:

• Dental and vision insurance
• Critical illness and cancer insurance
• Hospital indemnity coverage
• Accident insurance
• Life and disability insurance
• Legal assistance plans
• Identity theft protection
• Long-term care coverage
• Pet insurance
• Wellness benefits, caregiving support and fitness memberships

Why voluntary benefits matter

There is wide support for voluntary benefits among American workers. In fact, studies show:

• More than three-quarters of employees say they are more likely to work for an employer that offers voluntary benefits.
• Most small businesses with 10 to 49 employees now offer at least one voluntary benefit.
• Nearly 70% of businesses with 50 to 99 employees offer several voluntary benefit options.
• Employees report strong interest in products like critical illness, cancer, hospital indemnity and identity theft protection — even when they are not already enrolled in them.

However, priorities may vary depending on the age of your employees. If your workplace is like many others, you have multiple generations working together. Consider that:

• Gen Z may seek mental health support and pet insurance,
• Millennials might prioritize family building benefits or debt relief,
• Gen X may be focused on caregiving and long-term care insurance, while
• Baby Boomers may be most interested in discounts on health services or disability insurance.

Choosing benefits for your team

Adding voluntary benefits doesn’t have to be overwhelming. A thoughtful approach will ensure your offerings align with your employees’ needs and your business goals.

In addition to working with us, here are some practical steps small employers can take:

• Poll your team early: At least six months before your annual open enrollment, survey employees to find out which voluntary benefits they value most. This helps you choose offerings that will see the most uptake.
• Start small, then expand: Begin with a few high-demand options like dental, vision or accident insurance. You can add more over time based on your budget and employee interest.
• Think generationally: Consider what different age groups might prioritize.
• Work with a broker or advisor: We can guide you through the process, help manage administration and educate your employees on how to take advantage of these benefits.
• Communicate regularly: Don’t assume your team knows what’s available. Use e-mails, posters and meetings to highlight benefits and remind them of enrollment deadlines.
• Make enrollment easy: Choose a carrier with online enrollment and mobile access to increase participation and reduce your administrative burden.

Offering voluntary benefits isn’t just about checking a box. It’s about showing your team you understand and support their full lives. That can pay off in loyalty, morale and long-term retention.

As the economy continues roaring, the market for top talent stays exceedingly competitive. Multiple studies have consistently shown that a robust set of employee benefits is a vital component of an overall compensation package.

But it’s tough for smaller companies to compete with their large counterparts, who have the advantage of economies of scale. As a result, many employers are increasingly turning to voluntary employee benefits, which allow them to provide valued, high-demand benefits to employees at little or no cost to the company.

How voluntary benefits work

Voluntary benefits are arranged by employers but either paid for by staff via payroll deduction or by the employers themselves. Businesses generally set up a menu of options that their workers can select from for themselves, based on their own needs.

The employer deducts any fees or premiums for these benefits from employee paychecks and forwards them in a single batch to the benefit vendors.

Once the employee enrolls in a voluntary benefit plan, payroll services companies routinely automate this process for employers, making ongoing benefits administration hassle-free for small businesses.

And best of all, because premiums and fees are often paid by the employees, even small companies can provide popular and highly valued benefits for little or no cost.

Popular voluntary benefits

There are several types of voluntary employee benefits on the market today, with more innovative new benefits and perks rolling out every year. However, the following are among the most in-demand by employees and commonly offered by their employers:

• Dental and vision insurance coverage
• Disability insurance coverage
• Life insurance — can be term or cash value
• Legal assistance/prepaid legal services
• Identity theft insurance
• Fitness/health club memberships
• Long-term care insurance
• Financial planning/counseling services
• Accident insurance
• Hospital indemnity plans
• Pharmacy discount plans
• Critical illness insurance (e.g., cancer insurance)
• Pet insurance.

Employees can often buy these benefits and services via their employer’s group voluntary benefits plan much more cheaply than they could buy them on their own.

Voluntary benefits have been becoming more popular among employers in recent years as unemployment falls. One reason: More employers are offering high-deductible plans as health insurance costs continue to increase.

Critical illness and hospital indemnity policies have seen big gains in enrollment as workers turn to them to help cover those deductibles and copays if they have a costly health event like cancer or another critical illness diagnosis.

According to a recent LIMRA study, seven out of 10 employers surveyed reported that they believe offering voluntary benefits improves employee morale and satisfaction.

A 2023 Harris Interactive poll found that when employers offer voluntary benefits, 55% of workers, on average, report that they are satisfied with their employer’s overall benefit mix. Where the employer did not offer voluntary benefits, the satisfaction rating fell to 32%.

Best practices

• Don’t overwhelm employees with too many benefit choices at the same time. Roll them out a few at a time, starting with life insurance, dental/vision and/or disability insurance. These are proven high-participation programs.
• Match benefits to your employees’ life stages. Millennials have different needs and interests than baby boomers.
• Put effort into your benefits education and communication plan.

• Use a variety of different communication tools. Embrace digital and in-person communication, in addition to printed brochures — especially for millennials.
• Have a single enrollment period for both employer-paid and voluntary benefits. Research from Des Moines-based employee benefit firm ARAG shows that combining both types of benefits in a single enrollment period results in enrollment benefits that are up to six times higher.
• Include spouses and partners in your communication and benefits education plan.
• Consider offering to pay a portion or all of the costs for some of these benefits.

For employees, being able to enroll in an insurance product through a workplace voluntary benefits program offers them the advantage of group pricing, the convenience of paying through payroll deduction, and perhaps access to insurance that would be difficult to get on an individual basis.

For employers, offering a range of voluntary insurance products can help increase employee satisfaction – along with loyalty and morale – and make the business more competitive in attracting and retaining the best talent.

These advantages alone, however, do not ensure that a voluntary benefits program will be a success. Careful planning, including the selection of benefits to offer, choice of vendors and well-crafted communications, are keys to program success. Consider the following:

Get the right mix – Bring in the kinds of benefits that employees want and will enroll in. Survey employees as to what types of additional benefits they would participate in if given the opportunity. Depending on your employee demographics, these could include additional life insurance options, long-term care – or even pet insurance.

Voluntary benefits enable employees to self-customize an individual benefits package that is uniquely appropriate to them.

Look for gaps – Look for gaps in your company’s current benefits coverage, and consider how voluntary benefits plans can be used to fill them.

For companies that have had to scale back on their regular benefits package, voluntary benefits can be particularly helpful. If your benefits budget is tight and, for example, needs to be dedicated to helping fund medical benefits, offering dental and vision on a voluntary basis gives employees easy and affordable access to these benefits.

Get the word out – While we can often supply some communications materials, your internal communications concerning the program will help to incorporate it into your overall benefits program in the eyes of employees, making it more likely they will enroll.

Consider announcing new voluntary benefits offerings in a communication from top management, which will demonstrate the company’s commitment to the program.

Make voluntary benefits enrollment a part of your annual enrollment process, and incorporate descriptions and information on voluntary benefits offerings into the communications materials for your core plans.

Work closely with us – We are here to help you make a selection that best fits your company’s needs, and to help you communicate with your employees and enhance enrollment.

This will be particularly important if any of the voluntary benefits have minimum participation requirements. We can come in for presentations, individual meetings or enrollment sessions, all of which can be very effective in increasing participation in these programs.

The takeaway

Voluntary benefits can be a great add-on to any company’s benefits program. Careful planning and consideration of the various issues that can affect participation can increase the chances of program success.

Background

Appeal to workers

Appeal to employers

• 34% of all diabetes cases are first identified via eye exams, at a saving of $3,120 per employee, according to HCMS Group.
• 39% of all hypertension cases are first identified via eye exams, at an average saving of $2,233 per employee.
• 62% of high-cholesterol cases are first identified through eye exams — saving $1,360 in eventual health care costs thanks to early detection.

Who pays premiums?

• Only 6% of employers are currently paying the entire cost of employee dental benefits.
• At 24% of employers, the worker pays 100% of the cost via a payroll deduction program.
• 70% of employers share the premium cost with staff who sign up.

Plan structures

Solid voluntary benefits

• 36% of companies surveyed added accident insurance, half of them due to the pandemic.
• 32% added hospital indemnity insurance, nearly two-thirds of them adding the coverage in response to the pandemic.
• 29% added critical illness insurance, 84% of which did so due to the pandemic.
• 27% added life insurance, three-fourths of which did so due to the pandemic.
• 21 added long-term disability, nearly two-thirds of them doing so due to the pandemic.

A new focus on mental health

• 59% of workers said their company’s culture has been more accepting of mental health challenges this past year.
• 27% of employees said they struggle with depression or anxiety most days or a few times a week (up from 20% in March 2020).
• 70% of employers now recognize that employee mental health is a significant workplace issue, up from 59% in June 2020.

Engagement and tech

• 58% of workers surveyed said they would like a personalized recommendation for what insurance benefits they should be buying.
• 76% of employers said that they are offering personalized benefit recommendations during open enrollment, up from 71% in June 2020.
• Story-driven enrollment tools can offer an employee context. Presenting the material in a relatable way and tailoring the message based on an understanding of an individual’s benefits needs, influences and life stage, can help someone better evaluate whether a certain benefit is right for them.

Paid time off

• 46% of employers expanded their paid medical leave.
• 46% expanded their paid sick time.
• 39% expanded paid family leave.
• 30% expanded paid parental leave.
• 30% expanded paid time off or vacation time.