At a glance
- Judge Andrew Schopler of the Southern District of California found ERISA applied because the employer received commissions and fees and endorsed the policy as part of its own welfare benefit plan.
- For advisers who help sponsors choose voluntary-benefit carriers, the order puts employer endorsement and receipt of commissions or fees at the center of the ERISA question.
- The complaints generally argue that employers offering unsubsidized programs could and should have negotiated lower premiums.
A federal judge ruled Sept. 30 that an employer's supplemental disability policy fell under ERISA despite being labeled a 'voluntary plan,' PLANADVISER reported.
Judge Andrew Schopler of the Southern District of California found ERISA applied because the employer received commissions and fees and endorsed the policy as part of its own welfare benefit plan. Schlichter Bogard LLP filed four similar complaints last year against employers over premiums charged for voluntary benefits and another in May.
For advisers who help sponsors choose voluntary-benefit carriers, the order puts employer endorsement and receipt of commissions or fees at the center of the ERISA question. Both are usually visible in the carrier-search record, so the RFP file and the compensation disclosure are the documents most likely to decide whether a program stays outside ERISA, not the policy label.
The complaints generally argue that employers offering unsubsidized programs could and should have negotiated lower premiums. They typically cover accident, critical illness, cancer and hospital indemnity insurance, and the plaintiffs trace the higher cost to broker commissions and payments to the administrators. The complaints also fault employers for launching programs without a request for proposals.
Endorsement prong remains undefined
Voluntary benefits usually fall outside ERISA because the employer does not establish or maintain them. The Labor Department's safe harbor exempts a voluntary plan only if all four conditions are met.
Brea Dantin, a retirement plan consultant at Shepherd Financial, told PLANADVISER that applying the safe harbor can be 'as clear as mud.' She said the endorsement prong is often the hardest to satisfy, because the DOL has not defined what an endorsement is. The agency has said that setting eligibility criteria for enrollment and using the employer's name and logo on promotional materials may count.
'As a broad sweep, insurance benefits, whether medical or ancillary, are going to be the next wave of litigation,' Dantin said. 'We've already started to see it.'
Reported by the Policy & ERISA desk from PLANADVISER. Published . Corrections