What are voluntary benefit plans?

Voluntary benefit plans, sometimes called voluntary benefits or worksite benefits, are insurance products or services that employees may choose to purchase through their employer. Participation is optional, and these benefits are most often paid for entirely by employees through payroll deductions. Employers typically offer voluntary benefits alongside core benefits like medical and retirement plans as a way to expand employee choice without taking on significant additional cost.

At their best, voluntary benefits give employees flexibility. Rather than a one-size-fits-all approach, employees can decide which additional protections or services make sense for their personal situation.

Common Types of Voluntary Benefits

Voluntary benefit offerings vary widely by employer, industry, and workforce demographics, but commonly include products designed to help employees manage health-related and financial risks. Examples often include:

• Supplemental life and disability insurance
• Accident and critical illness coverage
• Hospital indemnity insurance
• Dental and vision coverage
• Identity theft protection, legal services, pet insurance, or financial counseling

The defining feature is choice. Employees decide whether to enroll, how much coverage to purchase, and whether the benefit is worth the cost.

Why Employers Offer Voluntary Benefits

From the employee perspective, voluntary benefits can be attractive because they provide access to coverage or services that may be difficult, inconvenient, or more expensive to obtain individually. Group access, payroll deduction, and simplified enrollment can make these options more practical.

For employers, voluntary benefits offer a way to enhance the overall benefits package without materially increasing benefit spend. They are often positioned as a way to support employee financial wellness, differentiate the organization in a competitive labor market, and address gaps left by core benefits.

Historically, voluntary benefits have also been viewed as relatively low risk from a compliance standpoint, largely because employees pay the premiums and participation is optional.

Where ERISA Comes Into the Picture

That low-risk perception is increasingly being questioned.

The Department of Labor has long recognized a “voluntary plan safe harbor” under ERISA, which allows certain employee-paid insurance programs to remain exempt from ERISA if specific conditions are met [1]. In theory, a voluntary benefit that fits squarely within that safe harbor is not an ERISA plan.

In practice, however, ERISA status often turns on employer involvement, not intent. Actions such as selecting carriers, endorsing particular products, integrating voluntary benefits into core enrollment materials, or exercising ongoing oversight can move a benefit outside the safe harbor, even if employees pay the full cost [1].

Why This Matters More Now

Recent litigation has brought new attention to how voluntary benefits are offered and administered. Legal commentary has highlighted lawsuits alleging that certain voluntary benefit programs functioned like ERISA welfare plans because employers played an active role in their design, promotion, and oversight, despite labeling them as voluntary and employee-paid [2].

These cases do not change the underlying ERISA rules, but they reinforce an important point: calling a benefit “voluntary” does not control the analysis. How the benefit operates in practice matters, and employer conduct may be scrutinized more closely than in the past.

A Practical Takeaway for Employers

Voluntary benefit plans can still be a valuable part of a competitive benefits strategy. The key is clarity. Employers should be intentional about how these benefits are structured, communicated, and administered, and should understand whether a particular arrangement is intended to fall within ERISA’s voluntary plan safe harbor or be governed as an ERISA plan.

Either approach can be appropriate. Problems tend to arise when voluntary benefits fall into a gray area with no clear governance framework or documentation.

As expectations around fiduciary responsibility continue to evolve, thoughtful design and documentation are becoming just as important for voluntary benefits as they are for traditional benefit plans.

For support in evaluating and documenting fiduciary responsibilities related to employee benefits, visit Fiduciary In A Box.

References

[1] U.S. Department of Labor. (2023). ERISA regulations relating to voluntary insurance programs (29 C.F.R. § 2510.3-1(j)). https://www.dol.gov/agencies/ebsa/laws-and-regulations 

[2] JD Supra. (2025). Voluntary benefits under scrutiny. https://www.jdsupra.com/legalnews/voluntary-benefits-under-scrutiny-1397416/