New Wave of ERISA Class Action Lawsuits Name Brokers as Defendants

A growing series of ERISA class action complaints has placed employer-sponsored voluntary benefit programs squarely within the fiduciary crosshairs.^[1] These actions, filed against major plan sponsors and nationally recognized benefits brokers, do not challenge core medical plan design or employer contributions. Instead, they target accident, critical illness, cancer and hospital indemnity benefits, i.e., programs long treated by many employers as peripheral, employee-paid offerings.

The complaints advance a unified and increasingly familiar theory: once voluntary benefits are offered through an ERISA-governed welfare plan, they are subject to ERISA’s full fiduciary framework. Employers that exercise discretion over carrier selection, pricing, broker compensation, or plan administration, and brokers that influence or control those decisions, may be held to the statute’s exacting standards of prudence and loyalty. According to the plaintiffs, failures in process, rather than outcomes alone, caused plan participants to pay excessive and unreasonable premiums, while brokers and other service providers reaped outsized financial benefits.

ERISA’s Fiduciary Standard Applies Regardless of Who Pays the Premium

ERISA does not condition fiduciary responsibility on whether a benefit is employer-paid or employee-paid. The statute focuses instead on discretion and control. Where an employer sponsors an ERISA welfare plan and retains authority over benefit offerings, service providers and administrative structure, fiduciary status follows. Courts have consistently held that ERISA fiduciary duties are the highest known to the law, hence requiring conduct that is both prudent and loyal, and undertaken solely in the interest of plan participants and beneficiaries.

The complaints involving Allied Universal, Laboratory Corporation of America, and other employers allege that the employers exercised discretionary authority over voluntary benefit programs integrated into ERISA welfare plans. That discretion, according to plaintiffs, triggered a duty to ensure that premiums were reasonable, commissions were justified, and carriers were selected through a prudent and well-documented process. The fact that employees bore the full cost of coverage did not, in the plaintiffs’ view, diminish the employers’ fiduciary obligations. Rather, it heightened them, because every dollar of inefficiency was borne directly by participants.

Prudence Is a Matter of Process, Not Tradition

A recurring theme across these complaints is the alleged absence of a meaningful fiduciary process. ERISA does not require fiduciaries to achieve perfect results or select the lowest-cost option in every instance. What it does require is a reasoned, diligent decision-making process grounded in objective analysis and periodic review. Courts have repeatedly emphasized that fiduciaries must engage in an ongoing duty to monitor service providers and plan arrangements.

The plaintiffs allege that plan sponsors failed to test the voluntary benefits marketplace, failed to benchmark pricing and loss ratios, and failed to scrutinize broker compensation structures that allegedly exceeded industry norms. According to the complaints, these failures were not isolated oversights but systemic deficiencies that persisted for years. In a competitive insurance market, particularly for plans covering tens of thousands of employees, plaintiffs argue that such passivity is incompatible with ERISA’s prudence requirement.

Broker Fiduciary Status and the Collapse of the “Mere Advisor” Defense

Perhaps the most consequential development in this litigation wave is the aggressive treatment of brokers and consultants as ERISA fiduciaries. The complaints allege that brokers exercised discretionary authority over plan administration and compensation structures by recommending carriers, designing benefit offerings, and embedding commissions into employee premiums. Under ERISA, a party that exercises discretionary authority or control over plan management or plan assets may be deemed a fiduciary regardless of title.

Even where fiduciary status is contested, the complaints advance alternative theories grounded in ERISA’s prohibited transaction rules. Brokers are alleged to be parties in interest who knowingly participated in self-dealing transactions by receiving excessive compensation tied to plan assets, while providing undisclosed or inadequately disclosed benefits to employers. ERISA prohibits fiduciaries causing a plan to engage in transactions that transfer plan assets for the benefit of a party in interest, and dealing with plan assets for their own account.

This framing challenges longstanding industry assumptions. For decades, many brokers have operated under the belief that embedded commissions and ancillary services fall outside ERISA’s reach. These complaints signal that courts may be asked to reexamine that premise through a fiduciary lens.

The Duty of Loyalty and the Problem of Conflicted Compensation

ERISA’s duty of loyalty is uncompromising. Fiduciaries must act solely in the interest of plan participants and beneficiaries and for the exclusive purpose of providing benefits and defraying reasonable administrative expenses. Plaintiffs allege that this duty was breached when employers and brokers tolerated compensation arrangements that enriched brokers at the expense of employees, particularly where loss ratios allegedly indicated that a disproportionate share of premiums was diverted outside of claims.

The complaints do not allege that commissions are per se unlawful. Instead, they assert that fiduciaries failed to evaluate whether commissions were reasonable in relation to services provided, and failed to mitigate conflicts inherent in compensation structures that incentivized higher premiums. Under established ERISA principles, a fiduciary’s failure to address known conflicts of interest may itself constitute a breach of loyalty.

Voluntary Benefits as the Next ERISA Litigation Frontier

These cases represent a natural extension of broader ERISA litigation trends. Over the past decade, plaintiffs have expanded their focus- retirement plan fees to healthcare pricing, pharmacy benefit management and welfare plan transparency. Voluntary benefits occupy a particularly vulnerable position because they often involve large aggregate premium volumes, limited oversight and legacy broker relationships that have gone unexamined for years.

For plan sponsors, the risk is not theoretical. Courts have made clear that ERISA permits plan-wide relief and derivative actions seeking to restore losses to the plan itself. Where fiduciary breaches are established, personal liability may follow.

A Fiduciary Imperative for Plan Sponsors

The lesson this wave of litigation provided is neither subtle nor novel. ERISA demands discipline, documentation and vigilance. Voluntary benefits are not exempt of these requirements simply because they are employee-paid or historically overlooked. Plan sponsors must be able to demonstrate that voluntary benefit programs are selected, priced, and administered through a prudent process, and that broker relationships are structured to avoid conflicts that undermine participant interests.

What once may have been treated as a benign administrative convenience is now a clear fiduciary risk area. ERISA has not changed. What has changed is the willingness of plaintiffs to test long-standing assumptions and the expectation that plan sponsors act like fiduciaries in every sense of the word.