An employer should be cautious to not “endorse” a voluntary benefits program that the employer wants to be exempt from ERISA. The DOL’s safe harbor exempting certain plans from ERISA (often called “voluntary plans”) requires the sole function of the employer to be, without endorsing the program, to permit the insurer to publicize the program to employees and to collect premiums and remit them to the insurer. Federal courts have found impermissible endorsements where employers either encouraged their employees to participate in their voluntary benefits program or selected the insurer and limited eligibility criteria. For example, in October 2018, the U.S. Court of Appeals for the Third Circuit decided a case involving whether the employer’s endorsement of a volunteer disability benefits program caused it to be subject to ERISA. The Court found that (i) a reasonable employee would not view the program as being merely a third-party offering and (ii) there was sufficient evidence of the employer’s endorsement to preclude application of the ERISA safe harbor. First, the insurer was the sole provider of supplemental disability insurance coverage to the employer’s employees. Second, the court found a reasonable employee could conclude the employer was endorsing the program by stating that the insurer was the industry leader and was chosen by the employer. The court also found that the employer determined eligibility for the program and agreed to provide disability insurance as part of its standard employee benefits package. This case should serve as a cautionary tale to employers regarding the need to be careful about using language to describe or promote a voluntary benefits program that the employer intends to be exempt under ERISA.

View the case of McCann v. Unum Provident, No. 16-2014 (3d Cir. Oct. 5, 2018).