BENEFITS DIGEST

Mayer Brown reads the August 26 FAQs as a reversal of the Labor Department's own prior litigation positions on retroactive wellness rewards, with plans now required only to provide the reward for the period after a reasonable alternative standard is satisfied. The firm also explains the disclosure rules in plain terms. If plan materials only mention that a wellness program exists, nothing more is required, but once materials describe how the program works they must also explain the alternative standard and the option to follow a doctor's recommendations. Mayer Brown recommends auditing participant-facing materials against the new standard.

With employer health costs expected to jump 11.1% in 2027 by WTW's count, finance chiefs are moving into territory HR used to own. WTW's Tim Stawicki says employers are mostly avoiding drastic benefit cuts and instead scrutinizing vendors, hunting fraud and waste, steering employees to lower-cost providers, and looking at spousal surcharges and waiting periods. Big employers have largely locked their 2027 strategies; midmarket companies are deciding now.

Seyfarth focuses on where the alternative-standard notice has to appear. Any plan material that describes how a wellness program works must include it, and for outcome-based programs it must also show up in the message telling an employee they failed the initial test, with contact information for requesting the alternative. The enforcement relief changes none of these design requirements.

Bradley's version adds a concrete example on the notice question. If your summary of benefits and coverage says cost sharing may vary based on a wellness program but does not describe how the program works, that alone does not trigger the obligation to disclose the reasonable alternative standard. A useful line to hand whoever drafts your enrollment materials.

Squire Patton Boggs adds two practical details to the FAQs Part 74 coverage. The enforcement relief means an employee who completes tobacco cessation counseling in June need not be refunded surcharges for January through May, and plan materials that merely mention a wellness program's existence, without describing its terms, do not trigger the obligation to disclose reasonable alternative standards.

Bricker tells the story of how we got here. A stray phrase in the 2013 regulations' preamble suggested employees who quit smoking mid-year had to get their surcharges refunded back to January, a reading plaintiffs' lawyers ran with. The new FAQs say prospective relief is enough, no refunds required. But the program still has to be reasonably designed with a properly disclosed alternative standard, so this is relief from one theory, not from the lawsuits.

Lockton reviews the tri-agency FAQs Part 74 non-enforcement position, under which the Departments will not act against health-contingent wellness programs that pay the full reward prospectively once a participant completes a reasonable alternative standard, rather than retroactively to the start of the plan year. The piece cautions that FAQ guidance does not bind courts and the surcharge class actions continue, so plans already paying retroactive rewards may want to stay the course.

Groom collects its August publications in one place, spanning DB plan funding rules, 45S credit and Saver's Match guidance, dependent care nondiscrimination, the wellness program enforcement relief, the e-delivery proposal, and the tobacco surcharge litigation.

The Departments of Labor, Treasury, and Health and Human Services have issued new joint guidance in the form of FAQs offering some enforcement relief for employer-sponsored wellness programs.

The agencies will not take enforcement action against plans that apply a tobacco surcharge reward prospectively once an employee satisfies a reasonable alternative standard, so employers need not refund amounts already collected. Bricker Graydon cautions that the relief is enforcement discretion, not a safe harbor. Programs must still be reasonably designed, properly documented, and disclosed, and the guidance does not resolve the private class actions already in the courts.

The quarterly survey tracks health plan design challenges after Barbich v. Northwestern, the forfeiture line following the Eighth Circuit's standing dismissal in Matula, actuarial-equivalence rulings in the Sixth and Eleventh Circuits, and the Supreme Court's withdrawal-liability decision in M&K Employee Solutions, with the Fifth Circuit's en banc surcharge case and Anderson v. Intel on the watch list.

Remote financial wellness programs can improve retirement saving behavior, but surveyed consumers still prefer personal or hybrid communication with advisers.

Groom situates the new tri-agency FAQ relief against the litigation wave that produced it: by the firm's count, the HIPAA wellness program rules have drawn more than 80 putative class actions claiming that premium surcharges for tobacco use violate ERISA. The relief addresses the midyear reward-timing and notice-disclosure questions; the broader surcharge fights, including the pending Sixth Circuit appeal in the Progressive case, remain in the courts.

New tri-agency FAQ guidance issued August 26 addresses elements of the 2013 wellness program regulations that have been the subject of dozens of class actions in recent years.

HR Dive rounds up practitioner reaction to the tri-agency wellness surcharge FAQs, with attorneys noting that aspects of ERISA once seen as settled continue to be challenged.

Federal regulators will not enforce a rule requiring wellness program rewards to be paid retroactively to the start of the plan year when a participant meets a reasonable alternative standard midyear, as long as the plan pays the reward for the rest of the year. The guidance also confirms that the reasonable alternative standard notice is required only in materials that actually describe the program's terms, not in materials that merely mention it.

The employer advocacy group warned that litigation challenging wellness program incentives could discourage employers from offering health-related premium discounts.

A federal court in Tennessee denied Cracker Barrel's motion to dismiss in its entirety in a putative class action challenging the tobacco-user premium surcharge in its self-insured health plan, on claims that the plan failed to offer a compliant reasonable alternative standard and failed to give adequate notice of it, both required under the wellness-program nondiscrimination rules. Three days earlier, a Maryland federal judge reached a similar result in a class action over Marriott's $15-per-week tobacco surcharge, letting through a claim that plan communications named a smoking-cessation program without explaining how to enroll or whether enrolling would avoid the fee. Two courts in three days is the pattern worth watching: sponsors running a tobacco surcharge should treat “we offered an alternative” as necessary but not sufficient: notice design, placement, and reimbursement mechanics are now live issues in both cases. (The broader split runs both ways: earlier dismissals went the other way in Williams v. Target and Spencer v. Campbell Soup, so treat this as an emerging, unsettled pattern, not a rule.)

Groom surveys the tobacco-surcharge docket after the trio of July decisions favoring employers, including the Target and Campbell Soup dismissals covered here this week, and asks whether the 75-case wave has crested or is merely regrouping.

Holland & Knight on a pair of same-day district court dismissals of tobacco-surcharge class actions, against Target in Minnesota and Campbell Soup in New Jersey. The Digest covered the Target ruling August 11; per H&K's account, the companion decisions share a notable post-Loper Bright thread, reasoning that DOL wellness-notice requirements beyond the statutory text are unenforceable.

Financial Finesse research suggests employees approaching retirement who engage with virtual financial wellness programs are significantly more likely to take key planning actions and improve retirement readiness.

On July 22, 2026, the District of Minnesota dismissed a putative class action challenging Target's tobacco surcharge under its employer-sponsored health plan. McGuireWoods reads the decision as a roadmap for the 75-plus pending surcharge suits, a docket readers met in yesterday's Boutwell Fay litigation update.

There are now more than 75 tobacco surcharge class actions pending in federal courts across the nation. Since our last article in January 2026, tobacco cessation litigation continues to heat up as cases have now spread to the First, Second, Sixth, Seventh, and Eight Circuit Courts of Appeal.

This column explores IRS guidance on these arrangements and potential risks to employers under federal law.

As discussed in a previous Holland & Knight alert, there has been an emerging wave of Employee Retirement Income Security Act of 1974 (ERISA) class actions challenging employers' tobacco-free wellness programs.

The article explores the recent increase in litigation involving tobacco cessation programs and the compliance issues employers should consider.

The ERISA Industry Committee filed an amicus brief asking the Second Circuit to affirm dismissal of a challenge to PepsiCo's tobacco-surcharge wellness program, arguing that the reasonable alternative standard applies to employees who use tobacco rather than guaranteeing every employee an annual chance to avoid the surcharge. The appeal is a key test in the wave of tobacco-surcharge class actions.