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A new report has found that employers are increasingly wrestling with two challenges in their human resources departments: growing employee benefits fiduciary liability issues, and administrative difficulties in managing employee leaves.
Employers are facing lawsuits by employees who allege they mismanaged their health and wellness benefits, and recently enacted legislation has increased their fiduciary responsibilities, the 2025 “NFP U.S. Benefits Trend Report” found.
Additionally, firms are spending more time ensuring that employee leave requests comply with federal laws, their own state’s laws and their company policies.
The report highlights the importance of employers putting in place processes for vetting vendors and taking steps to comply with federal and local laws to avoid penalties and lawsuits.
Growing fiduciary risk
A new class of lawsuit has emerged in the last year: Employees suing their employers over how they handle their health plans or for choosing vendors they allege do not have patients’ best financial interest in mind.
Any party with discretionary decision-making authority over the plan or plan assets must adhere to ERISA fiduciary standards and responsibilities, including acting solely in the best interest of plan participants and beneficiaries.
Recent legislative developments have expanded employers’ fiduciary obligations. The Consolidated Appropriations Act of 2021 introduced comprehensive reforms, requiring group health plans and insurers to enhance fee disclosures and pricing transparency.
These laws mandate that employers ensure their health plans are cost-effective, provide quality care, and comply with mental health parity and pharmacy benefit requirements.
The rules apply to all employer-sponsored plans regardless of the funding methodology selected, whether fully insured or self-insured.
As well, employers are facing legal challenges over allegations of that they or their health plans failed to properly vet pharmacy benefit managers, leading to inflated prescription drug costs for employees.
In parallel, there has been a surge in litigation where employees allege that employers have breached their fiduciary duties under ERISA.
Notably, class-action lawsuits have been filed challenging the imposition of tobacco surcharges in employer-sponsored health plans, asserting that such surcharges violate ERISA, the Affordable Care Act and the Health Insurance Portability and Accountability Act.
The NFP report recommends that level-funded or self-insured plans regularly review vendor contracts to ensure compliance with contract terms. This improves cost-containment provisions of the plan and is essential to proper plan oversight.
Leave administration headaches
Employers are increasingly struggling to manage the complexities of leave requirements thanks to a tapestry of federal and state laws, as well as company policies.
More than 70% of employers spend more than four hours on administration for each leave request they receive from employees to ensure they comply with the Federal Family Medical Leave Act.
Here’s why the administrative burden is so challenging:
Unpaid leave laws — The FMLA requires that employees can take job-protected leave for up to 12 work weeks for health reasons or to care for a family member with health issues. In addition to this federal law, states have their own laws that may expand the acceptable reasons for taking leave and providing additional time off.
Paid leave laws — These are typically at the state level, but there are a few cities or municipalities that require that certain time off should be compensated to some degree. Paid leave laws provide benefits that are typically for shorter-term absences, while mandated state disability or paid family leave benefits cover leaves for longer-term absences (serious health conditions).
More states are enacting laws that require employers to provide a certain amount of paid sick leave as well.
Employer leave policies — Many employers will also have their own in-house rules for leave. The most common, according to the report, are:
- Medical — 68% of firms
- Family care — 65%
- Personal — 53%
- Bereavement — 53%
- Parental (bonding) — 34%
- FML-like — 23%
The takeaway
With employers facing a significantly higher fiduciary compliance burden and with the threat of lawsuits, ensure that your human resources team conducts comprehensive evaluations, while also emphasizing cost management and optimizing plan performance.
The focus should be on insulating your employees against more costs than necessary. As your broker, we can help with this.
Meanwhile, administration of leave requests must be approached with care to ensure compliance with local and federal law, which takes time. If you have a large workforce, the report recommends implementing tools like technology-supported or outsourced leave management.
Another option is a third party administrator that is skilled at handling leave requests under local and federal law.
