November 2025 Compliance Corner: Voluntary Plan Safe Harbor

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By: Colin Clark, Staff Attorney

Introduction

ERISA generally applies to all employee welfare benefit plans. While plans may be exempt from ERISA for a multitude of reasons, this month’s compliance corner focuses on the voluntary plan safe harbor. Completely voluntary arrangements between employers and employees that meet very specific requirements may be deemed to meet the “voluntary plan safe harbor.” This article will discuss these requirements and some other considerations for those seeking to meet this rather stringent safe harbor requirement.

The Basics

In order to satisfy the voluntary plan safe harbor, an employee welfare benefit plan must meet four distinct requirements, each with their own requirements – (1) no contributions are made by an employer or employee organization, (2) participation in the program is completely voluntary for employees or members, (3) the sole functions of the employer or employee organization with respect to the program are, without endorsing the program, to permit the insurer to publicize the program to employees or members, to collect premiums through payroll deductions or dues checkoffs and remit them to the insurer, and (4) the employer or employee organization receives no consideration in the form of cash or otherwise in connections with the program, other than reasonable compensation, excluding any profit, for administrative services actually rendered in connection with payroll deductions or dues checkoffs.

Compliance in Practice

Expanding on the four overarching requirements above, available guidance highlights some of the nuance plan administrators will want to exercise when considering whether or not a plan will mee the voluntary plan safe harbor. Employers must not contribute in any form. Various courts have determined that while direct contributions are clearly employer contributions, reimbursement of expenses (including premiums) will also cause a plan to not satisfy the safe harbor. Even a one-time contribution for a single employee can cause a plan to fall outside the safe harbor.

Next up is the requirement that program participation must be completely voluntary. If employees are automatically registered for participation, or otherwise required to participate, safe harbor status would be unattainable. Any factors that would point to participation as being involuntary will disqualify a plan from meeting the safe harbor.

Following the strictly voluntary requirement, available guidance provides for specific enumerated functions for employers to abide by.  The three basic functions are (1) permitting the insurer to publicize the program to employees, (2) collecting premiums through payroll deductions, and (3) remitting premiums collected to the insurer. Examples of publicizing the program would be allowing an insurer to give a presentation or simply providing contact information to potential participants. While employees must pay the entire cost of a voluntary plan (due to the prohibition on employer contributions) employers are permitted to deduct appropriate amounts from payroll and send it to the proper carrier.

Perhaps one of the more difficult requirements is not endorsing the program. As endorsement can take many forms, a likely pitfall is inadvertent employer endorsement of the program. While the following list is not exhaustive, these actions may be considered endorsement:

• Selecting the insurer
• Negotiating plan terms and/or linking coverage to employee status
• Using Employer’s name or associating the plan with other employer plans
• Recommending the plan to employees
• Simply saying “ERISA applies”
• Assisting Employees with claims or disputes

Accidental or inadvertent endorsement can quickly cause a plan to lose safe harbor status. Due to the rather loose interpretation of endorsement from various courts, employers should exercise vigilance in plan administration in order to avoid any issues surrounding endorsement.

Employer Takeaways

While fitting within the strict parameters of the voluntary plan safe harbor is possible, employers should take great care to ensure they do not run afoul of the requirements. If found to not satisfy the safe harbor, plans will generally be subject to ERISA. This could bring statutory penalties and other compliance concerns, such as Form 5500 filing obligations. In the case of a group health plan, compliance concerns surrounding various laws would arise – for example, HIPAA, COBRA, and the ACA, among others.