If the recent fiduciary duty lawsuits targeting voluntary benefit plans feel familiar, that is by design.
The four class action lawsuits filed in late December by Schlichter Bogard are not outliers or one-off experiments. They follow a litigation strategy that has been refined over decades in the retirement plan arena, one that has already reshaped fiduciary governance, fee transparency, and vendor oversight regulations and guidance. What is new is the plaintiffs’ target: health and welfare plans, and more specifically, voluntary benefits.
The retirement plan blueprint
For years, civil litigation firms that specialize in ERISA cases focused on large defined retirement plans, bringing claims that challenged improper fiduciary duty actions, including excessive fees, improper investments, misleading or improper information, and failures to monitor and manage contributions properly. Many of those cases initially survived motions to dismiss not because the alleged losses were massive, but because plaintiffs successfully framed process failures as fiduciary breaches under the rules of ERISA.
Over time, that strategy worked. Retirement plan sponsors were forced to adopt formal governance structures, conduct regular RFPs, document decision-making, and justify compensation arrangements for advisors and service providers. Entire segments of the industry changed their practices, not necessarily because courts issued sweeping rulings, but because the cost and risk of litigation demanded it.
The rules of ERISA have always applied not only to retirement plans but also to health and welfare benefit plans—suggesting that history is likely to repeat itself now that we are seeing litigation in this area as well.
The issue is about process
The complaints themselves do not argue that voluntary benefits such as accident, critical illness, hospital indemnity, or cancer coverage policies are inherently lacking in compliance. Instead, these cases highlight how improperly selecting, administering, determining service provider compensation, and managing compliance of such plans can lead to massive ERISA noncompliance implications.
The allegations mirror those long used in retirement plan cases:
- A failure to engage in competitive bidding or RFPs.
- A lack of meaningful oversight of service providers and advisors.
- Excessive and opaque compensation arrangements.
- The use of plan structure and participant contributions to subsidize advisor revenue.
This framing is deliberate. By emphasizing fiduciary process rather than benefit design, plaintiffs lower the bar for surviving early dismissal and shift attention to documentation, governance, and decision-making authority.
Why voluntary benefits are an attractive next step
From a litigation perspective, voluntary benefits present a compelling opportunity.
First, voluntary benefit plans often operate with minimal formal governance. Decisions are frequently made informally, with limited documentation, and with heavy reliance on advisors or brokers to curate options.
Second, compensation structures in the voluntary benefits market are often more complex and less transparent than in major medical plans or more traditional health benefit arrangements. Commissions, overrides, and carrier incentives may not be fully disclosed or benchmarked, creating fertile ground for excessive fee and prohibited transaction claims.
Third, participant harm is easier to illustrate. Plaintiffs can point to loss ratios, industry norms, and carrier pricing practices to argue that participants paid more than necessary for benefits that generated outsized revenue for intermediaries.
Finally, the voluntary plan safe harbor creates a pressure point. Plaintiffs need not prove that ERISA clearly applies; they need only plausibly allege that the exemption does not—and that fiduciaries knew or should have known as much.
Expanding the definition of “functional fiduciary”
Perhaps the most consequential aspect of these cases is their treatment of advisors and brokers.
R
ather than focusing solely on plan sponsors, the complaints increasingly frame brokers, consultants, and service providers as functional fiduciaries — entities that may not be named fiduciaries, but that exercise discretionary authority or control over plan management, vendor selection, or compensation structures.
This approach echoes recent litigation involving TPAs and PBMs, where courts have been asked to look beyond titles and contracts to evaluate actual conduct. In the voluntary benefits context, plaintiffs argue that brokers who curate carrier lists, recommend products, influence pricing, or structure compensation are effectively shaping plan outcomes and should bear fiduciary responsibility.
If courts are receptive to that framing, the implications for the benefits advisory industry could be significant.
What to watch next
While these cases are still in their early procedural stages, several developments will be worth close attention:
- How courts analyze ERISA applicability to voluntary benefits that have historically been treated as exempt.
- Whether fiduciary status claims against brokers survive motions to dismiss, meaning brokers in the health and welfare benefit space would be held to higher standards like their retirement plan counterparts.
- How compensation arrangements are evaluated, particularly where revenue is tied to participant-paid premiums.
- Whether process-based allegations alone are sufficient to move cases forward, as they were in retirement-plan litigation.
The outcome of these early decisions will likely determine whether voluntary benefits become the next sustained wave of ERISA fiduciary litigation or remain a niche benefits compliance topic.
Where this leaves the industry
Retirement plan litigation has demonstrated that fiduciary risk often reshapes behavior long before final rulings are issued. Even the possibility of expanded liability can drive changes in documentation, governance, and compensation practices.
In the next article in this series, we will shift the focus to plan sponsors, examining concrete steps employers can take now to evaluate ERISA exposure, strengthen fiduciary oversight of voluntary benefits, and reduce litigation risk in a rapidly evolving enforcement landscape.
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