Navigating ERISA’s Voluntary Plan Safe Harbor

Voluntary benefits (also referred to as supplemental or worksite benefits) are gaining traction as a budget-sensitive strategy for enhancing total rewards. With options like critical illness, accident, hospital indemnity, life, disability, dental, vision, pet insurance, and ID theft coverage, these offerings allow employers to support diverse employee needs without significant financial outlay. Often structured to minimize employer involvement, they can be offered with limited administrative burden and no additional employer funding. As a result, voluntary benefits have become a powerful tool to attract and retain talent in a competitive labor market. However, as the scope and customization of these offerings expand, so do the risks of inadvertently triggering ERISA compliance obligations. While vendors might present these offerings as turnkey solutions, employers should understand when ERISA applies and how the DOL safe harbor provisions can help them avoid unintended liability.

Voluntary Benefits vs. Point Solutions — What's in a Name?

As employers consider their benefit strategies, it’s important to understand the differences between voluntary offerings and point solution programs. While both aim to enhance employee wellbeing, their compliance implications can differ significantly.

Voluntary benefits are often offered to enhance an employer’s total rewards strategy, providing employees with access to desirable coverage options – such as life, disability, critical illness, or even pet insurance – without requiring an additional financial commitment from the employer. These benefits are typically structured for the employer to simply make them available but otherwise take a “hands-off” approach, avoiding endorsement of the products, contributions to their cost, or administrative responsibilities. This limited role helps ensure that many voluntary benefits remain outside ERISA’s scope.

In contrast, “point solution” programs have emerged as targeted offerings designed to address specific health and wellbeing needs that may not be fully covered by an employer’s primary group health plan. These solutions ‒ ranging from mental health counseling, chronic condition management, fertility services, or musculoskeletal care ‒ are offered by specialized vendors and typically marketed as enhancements to the overall health benefits package. Because they often involve deeper employer engagement and relate directly to health coverage, point solutions may be considered group health plans subject to ERISA (and to additional compliance obligations under COBRA, HIPAA, the ACA, MHPAEA, and other federal laws). Importantly, legal responsibility for employee benefit compliance rests with the employer, not the vendor. For more information on determining whether a point solution is a group health plan, please see our NFP Observation article, Determining Whether Your Point Solution Program Is a Group Health Plan, in Compliance Corner.

Voluntary Plan Safe Harbor Exemption

Employers might assume that offering fully employee-paid options keeps them safely outside the scope of ERISA (and its compliance obligations). In some cases, that’s true — but only if the benefit meets specific criteria.

Vendor representations and the “voluntary” label aren’t indicative of whether the safe harbor has been met. Ultimately, responsibility for ERISA compliance falls on the employer. Under ERISA, the term “voluntary” has a specific legal meaning tied to a narrow exemption known as the voluntary plan safe harbor. This safe harbor allows certain insured benefits to avoid ERISA’s requirements, but only when the employer’s involvement is strictly limited. To qualify, the employer must not endorse the program or contribute to its cost. Instead, the employer’s role must be confined to administrative tasks such as permitting payroll deductions, forwarding premiums to the insurer, notifying employees of the program’s availability, and allowing the insurer to market the program directly to employees.

The benefit must also satisfy the following requirements to fall within the safe harbor:

1. Benefits are not paid for by employer contributions or through employee pre-tax salary reductions under a Section 125 plan/cafeteria plan (i.e., only post-tax employee contributions are permitted).
2. Employee participation in the program is completely voluntary.

3. The employer must not receive any profit from the program.

4. The employer does not endorse the benefit.

Endorsement Factors

The nonendorsement requirement is often difficult to satisfy because voluntary benefits are made available to employees due to their employment relationship. The DOL and courts have outlined the following activities that suggest plan endorsement:

• Using the employer’s name and logo on program communication materials.
• Designating the employer as plan administrator or plan sponsor.
• Distributing information that associates the voluntary benefit with other ERISA benefits, such as including it in ERISA plan documents.
• Recommending the benefit to employees or showing enthusiasm about the benefit.
• Saying the employer arranged the program.
• Seeking out a specific insurer.
• Negotiating or designing coverage terms.
• Assisting employees with enrollment or claims.

Employers must evaluate the totality of the facts and circumstances involving the voluntary benefit offering with legal counsel to decide whether the safe harbor applies. While there is no bright-line rule for what counts as endorsement, the DOL or a court reviewing a benefit arrangement is more likely to find endorsement when multiple indicators are present.

Compliance Strategy

Given the specific factors that may indicate endorsement, employers must carefully assess their role in offering voluntary benefits. Permitting the benefit offering in order to attract and retain employees while maintaining a nonendorsement position to avoid ERISA’s application can prove to be a difficult balancing act. In particular, if the intention is to offer voluntary benefits as an employment perk, it might seem inconsistent to assert a stance of nonendorsement. Instead, for many employers, treating voluntary benefits as subject to ERISA is a more practical compliance strategy. Because voluntary benefits are typically offered alongside employer-sponsored benefits, employers typically already have an ERISA compliance framework (e.g., plan documents, SPDs, Form 5500s, and fiduciary standards) that can be extended to include the voluntary benefit. This approach requires cooperation from the voluntary benefits carrier, notably in creating a Schedule A for Form 5500 purposes and confirming carrier certificates accurately reflect the benefit’s ERISA status.

On the other hand, some employers may prefer to avoid ERISA applicability for their voluntary benefits. In that case, the employer should take a strictly hands-off approach and avoid any communications or practices that suggest endorsement. Failing to maintain ERISA’s voluntary safe harbor can lead the DOL or a court to find an unintended compliance failure — potentially exposing an employer to significant penalties.

ERISA Applicability and Consequences of Noncompliance

Even with careful structuring, some benefit offerings will trigger ERISA obligations. As background, ERISA governs health and welfare benefit plans “established or maintained” by an employer. It applies to most private-sector employers, with exceptions for nonfederal governmental plans (such as those sponsored by states, cities, counties, and school districts) and church plans. Additionally, benefit programs maintained solely to comply with state law requirements ‒ such as workers’ compensation, unemployment insurance, statutory disability, or paid family and medical leave ‒ are not subject to ERISA.

While ERISA doesn’t apply to every benefit, it does govern a wide range of employer-sponsored offerings, including medical, dental, vision, prescription drugs, telehealth, disability, life, critical illness, hospital indemnity, accident benefits, HRAs, and health FSAs. In contrast, benefits like identity theft protection and pet insurance typically fall outside ERISA’s scope as they are not considered health or welfare benefits under the law.

ERISA imposes significant fiduciary, disclosure, and reporting obligations on employers sponsoring covered benefits. Overlooking an ERISA-governed benefit can subject employers to potential penalties for failing to file a Form 5500 (up to $2,739 per day, adjusted annually) and failing to produce required plan documents upon request (up to $110 per day, beginning 30 days after a participant request). For further information on these compliance obligations, please ask your broker or consultant for a copy of the NFP publication ERISA Compliance Considerations: A Guide for Employers.

Final Thoughts

The term “voluntary,” commonly used to describe fully employee-paid post-tax benefits, is often misleading and should not be conflated with ERISA’s voluntary plan safe harbor, which applies only under strict and specific conditions. As voluntary offerings become more sophisticated and employer involvement deepens – through activities like selecting vendors, promoting enrollment or facilitating pre-tax salary reductions – many employers mistakenly assume these benefits remain outside ERISA’s reach. Because the safe harbor prohibits employer endorsement, maintaining the exemption can be challenging, particularly when the benefits are positioned as part of the employer’s broader rewards strategy.

Employers should review their voluntary benefit offerings with their legal counsel to ensure that any intended ERISA exemption is being properly maintained. Alternatively, the employer may choose to treat the benefit as subject to ERISA and confirm that all applicable compliance requirements (e.g., documentation, disclosures, and reporting) are being met. Please see the navigation chart below to guide an assessment of ERISA’s voluntary plan safe harbor.