Class actions test whether employers monitored broker commissions on employee-paid coverage
A wave of proposed class actions under the Employee Retirement Income Security Act (ERISA) is targeting employers over voluntary benefits their workers pay for themselves, such as accident, critical illness and hospital indemnity insurance. The suits, which started in December 2025, claim employers failed to monitor the broker commissions built into those premiums. United Airlines, Allied Universal and Banner Health are among the employers named, along with several major benefits brokers.
Plaintiffs are relying on arguments developed over years of 401(k) fee litigation, including breach of the duties of prudence and loyalty, failure to monitor and prohibited transactions, according to Sarah Sise, who leads Quarles & Brady's employee benefits team in St. Louis, Missouri, and Lauren Schuster, a partner in the firm's St. Louis office. The complaints say the employers, as fiduciaries, never assessed whether compensation, premiums and the value employees received remained reasonable. High commissions are offered as evidence of that failure.
What the voluntary benefits complaints allege
Pimm v. United Airlines alleges Mercer received more than $14 million in commissions from 2020 to 2024, about 36 percent of premiums on average, while the products' historical loss ratio was well under 50 percent. In Fellows v. Allied Universal, plaintiffs allege Mercer and Lockton received about $23 million, an average of 39.8 percent. They contrast that with public filings showing commissions of about 10 percent or lower for some comparable large plans.
The complaint in Hannum v. Banner Health, filed in April 2026, alleges Lockton and BCInsourcing received roughly $20.8 million over six years, averaging 33.5 percent of premiums. According to the complaint, commissions rose from 13.2 percent to 67.6 percent after BCInsourcing came on as co-broker in 2020. The case also challenges "heaped" commissions, where a broker is paid much more in the early years of an arrangement and less later.
USI Insurance Services was sued in September 2026 by seven of its own employees, who allege the firm controlled its in-house voluntary benefits program while collecting commissions and administration fees on the products it picked. The complaint puts USI's take at about $3.46 million from 2020 to 2024, with alleged commission rates of 25 percent on one product and 33.72 percent on another. USI is being acquired by Aon for $17 billion, a deal HRD examined in its report on what the Aon and USI deal means for employer clients.
The allegations haven't been tested in court. The 10 percent comparisons were chosen by plaintiffs and aren't a benchmark set by courts or regulators. Still, Sise and Schuster cautioned that commissions in the range of 25 to 30 percent or above may draw more scrutiny.
How Form 5500 filings supply the evidence
Plaintiffs can get most of the data they need from public records, including the employer's own filings. Insured plans that file an annual Form 5500 with the Department of Labor (DOL) generally include Schedule A, which under the DOL's Schedule A rules reports premiums and the commissions or fees paid to agents and brokers. The Pimm and Fellows complaints both use Form 5500 data to compare the plans at issue with other employers' voluntary benefits programs.
Plaintiffs lean on loss ratios too. A low loss ratio doesn't prove overpricing or a fiduciary breach by itself, but the complaints cite it alongside commission figures to argue employees got back too little of what they paid in premiums.
When voluntary benefits fall outside ERISA
Some employee-paid programs aren't covered by ERISA at all. Under the DOL's voluntary plan safe harbor, a program can fall outside the law if the employer makes no contributions, participation is completely voluntary, the employer doesn't endorse the program, and the employer receives nothing beyond reasonable compensation for limited administrative work.
Endorsement can be easier to trigger than employers expect. The United complaint argues that putting the company logo on enrollment materials, sending exclusive enrollment reminders and accepting extra services from brokers can each bring a program under ERISA. HR and benefits teams make those communication choices routinely.
Courts have treated plan design and plan administration differently. A federal court dismissed a fiduciary claim against Progressive after concluding the company was acting as a plan designer when it set up its wellness surcharges, as HRD reported when Progressive defeated an ERISA challenge earlier this year. Selecting and monitoring brokers and carriers, the conduct at issue in the voluntary benefits cases, sits on the administration side, where fiduciary duties apply. Arbitration clauses may not offer much protection either, after a Ninth Circuit ruling in July kept a Capital Group retirement plan lawsuit out of arbitration.
The paper trail behind each placement
Sise and Schuster said employers should keep records of how premiums and commissions were evaluated, what market information they reviewed, which alternatives they considered and why they kept an arrangement in place. They also said compensation that varies by carrier or product, co-broker arrangements and discounts tied to voluntary benefits could raise conflict-of-interest questions.
