Join us on Wednesday, January 28th, for a NAPEO webinar presented with Groom Law Group focused on what recent class actions mean for PEOs when it comes to ERISA fiduciary risk and voluntary benefits.
On December 23, 2025, a plaintiffs’ firm filed four putative class action lawsuits asserting violations of the Employee Retirement Income Security Act of 1974 (ERISA) in connection with accident, critical illness, and hospital indemnity insurance offered to employees. Although the complaints name benefits consulting and brokerage firms as defendants, they also assert direct fiduciary duty and prohibited transaction claims against certain employer defendants, raising issues of consequence for the PEO community—especially where a PEO sponsors one or more ERISA plans and receives compensation tied to voluntary insurance.
The lawsuits allege the employer defendants acted as ERISA fiduciaries and breached their duties of loyalty and prudence by approving or permitting voluntary insurance arrangements that allegedly charged employees excessive premiums and generated commissions for intermediaries. Plaintiffs further allege that the employers caused or participated in prohibited transactions under ERISA by permitting employee premium payments to be used, in part, to pay commissions to brokers and consultants.
These cases are significant for PEOs, because they frequently act as ERISA plan sponsors and named fiduciaries over their ERISA-governed plans while also offering the types of voluntary insurance benefits that are at issue in the litigation. A PEO’s active endorsement of the insurance and/or receipt of commissions or other remuneration, directly or indirectly, in connection with its offering of the voluntary insurance benefits, could give rise to a claim that the safe harbor does not apply. In addition, the arguments raised in these complaints, if embraced by a court, could theoretically extend to ERISA-governed benefits, which would materially increase a PEO’s potential legal exposure in connection with how it administers its benefit plans.
Our panelists will review the cases, the underlying legal arguments, and steps PEOs should be taking to protect themselves and their plans from similar litigation.