Employers may need to give more thought to voluntary benefits oversight, according to Alex Smith. Credit: Pressmaster/Shutterstock
A law firm recently startled the benefits legal community by filing federal suits over voluntary benefits programs at four big employers. The plaintiffs in the lawsuits allege that the employers violated Employee Retirement Income Security Act (ERISA) fiduciary-duty obligations by failing to check to see whether the voluntary insurance products offered a good level of value for the money spent.
Alex Smith, a benefits attorney with Holland & Hart, says in a new commentary that many employers should respond to the suits by working with their benefits advisers and others to evaluate their own voluntary benefits offerings. Smith says employers should look at the following aspects of their voluntary benefits programs:
- Benefits selection processes
- Contracts
- Broker and vendor compensation provisions
- Premium levels
- Insurance product loss ratios
One reason employers need to take a new look at their voluntary benefits offerings is that many have assumed they qualify for an exemption from the ERISA fiduciary-duty obligations, through a safe harbor provided for voluntary benefits, Smith says. But to qualify for the safe harbor, employers must make employees pay the full cost of the premiums and avoid helping to promote the programs, Smith says.
The plaintiffs in the new federal lawsuits may be wrong about the defendant employers’ plans being subject to the ERISA fiduciary-duty requirements, but the argument that the employers’ plans are subject to the fiduciary-duty obligation “serves as a reminder to employers who do wish to avoid ERISA that the exemption for voluntary benefits is not automatic,” Smith says.
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From: BenefitsPRO
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