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On December 23, 2025, Schlichter Bogard LLC, a law firm well-known for filing lawsuits against retirement plan fiduciaries (and recently health and welfare plan fiduciaries), filed separate class action lawsuits against four employers, their employee benefit plan fiduciaries, and their employee benefit brokers/consultants, alleging these parties breached their fiduciary duties with respect to voluntary accident, critical illness, and hospital indemnity plans. The lawsuits, which allege millions of dollars in plan losses, seek to hold the plan-sponsor employers, plan fiduciaries and brokers/consultants jointly and individually liable for breaching their fiduciary duties to the voluntary benefit plans.

Background

Voluntary Benefits

Many employers offer voluntary benefits, such as accident, critical illness and hospital indemnity plans, to their employees. Employees usually pay all the premiums for voluntary benefits. While many voluntary benefit plans are excepted from ERISA, the requirements to qualify for this exemption are complicated. Voluntary benefit plans create a significant ERISA compliance risk, because if any one of the regulatory requirements to establish an ERISA exception fails, then the plan is subject to ERISA’s many requirements, including fiduciary rules.

ERISA Fiduciary Duties and Prohibited Transactions

Under ERISA, a person is a fiduciary with respect to a plan to the extent he or she exercises any discretionary authority or discretionary control respecting management of the plan or exercises any authority or control respecting management or disposition of the plan’s assets. ERISA imposes strict duties on plan fiduciaries. ERISA requires fiduciaries to discharge their duties with respect to a plan solely in the interest of the participants and beneficiaries, for the exclusive purpose of defraying reasonable expenses of administering the plan, and with the care, skill, prudence and diligence under the then-prevailing circumstances that a prudent person acting in a like capacity and familiar with such matters would use.  

ERISA also lists certain “prohibited transactions.” One prohibited transaction is the furnishing of goods or services between the plan and a “party in interest” (such as a service provider, plan fiduciary or employer). Another prohibited transaction is transferring any plan assets to a party in interest. Further, fiduciaries are prohibited from engaging in self-dealing. However, certain ERISA party-in-interest prohibited transactions, and fiduciary self-dealing transactions are allowed and are defensible if they meet specific criteria, including that the transactions are for reasonable compensation.  

The Lawsuits

The law firm filed lawsuits against Laboratory Corporation of America Holdings; United Airlines; CHS/Community Health Systems; and Allied Universal. The lawsuits also named the fiduciaries from each of these companies and their insurance brokers/consultants—Willis Towers Watson, Mercer, Gallagher and Lockton.     

The four lawsuits are nearly identical. They contend that all the voluntary benefit programs are ERISA plans. They allege that the employers and the employers’ voluntary benefits brokers are plan fiduciaries. They contend the fiduciaries violated their duties with respect to the management and administration of the voluntary benefit plans by failing to monitor, negotiate and ensure prudent and reasonable selection of insurance carriers for the voluntary benefits. The fiduciaries also allegedly failed to ensure prudent and reasonable broker commissions, insurance loss ratios, and premiums for the voluntary benefits. Specifically, the fiduciaries failed to use any fiduciary process to monitor and control premiums and broker commissions, use competitive bidding, or leverage the plans’ sizes to reduce premiums and broker fees. The lawsuits further allege the employer-fiduciaries breached their duties by failing to monitor or evaluate the performance of their brokers, including failing to ensure the brokers had a prudent process in place to evaluate voluntary benefits and the related premiums, commissions and loss ratios.  Additionally, the lawsuits assert that the employers and their brokers engaged in prohibited transactions and knowingly participated in the other’s violation of the prohibited transaction rules. The lawsuits seek to hold the employers, their brokers and the plan fiduciaries personally liable for all plan losses, have them disgorge any profits, and remove the plan fiduciaries who breached their duties.

Important Actions for Employers and Plan Fiduciaries

With the increased attention on health and welfare plans and related litigation, employers should consider taking the following steps to help reduce their exposure to litigation and personal liability:

• If an employer does not have a fiduciary committee in place for health and welfare benefits, it should consider forming such a committee, adopting a committee charter, and delegating fiduciary responsibilities to the committee.
• Review the criteria for classifying certain benefits as voluntary and assure the regulatory components for the exception apply.
• Review and negotiate all administrative service agreements and broker/consultant agreements. Avoid simply signing the vendor’s standard form agreement.
• Request and review service and fee disclosures from health plan brokers and consultants.  
• Consider whether the brokers’ and consultants’ direct and indirect compensation is reasonable and whether there are any conflicts of interest.
• Ensure broker and consultant compensation information is accurately reported on annual Form 5500 filings.
• Periodically conduct a request for proposal (“RFP”) process for all insurer, third-party administrator, pharmacy benefit manager, and broker/consultant services.
• Periodically collect and review benchmark information for all benefits and vendors and compare to current and prospective arrangements or proposals. 
• Document the process the fiduciaries used to obtain, review, monitor and benchmark proposals, agreements, and vendor performance.  It is critical that health plan fiduciaries document their procedural prudence.  

If you have questions about fiduciary governance or these action items, please contact a member of Kutak Rock’s Employee Benefits and Executive Compensation group, including the ERISA Fiduciary and Benefits Litigation team.