On August 26, 2026, the Departments of Labor, Health and Human Services, and the Treasury (“Departments”) issued FAQs addressing their view of certain requirements for health-contingent wellness programs.
Health-Contingent Wellness Programs
Health-contingent wellness programs are wellness programs that condition a reward on satisfying a health factor, such as not smoking, meeting exercise targets, or attaining certain results on biometric screening. To be compliant, among other things, a health-contingent wellness program must offer a reasonable alternative standard (RAS) to individuals who do not satisfy the health factor that allows those individuals to obtain the “full reward” that is given to individuals who do satisfy the health factor. The availability of a RAS must be disclosed in all plan materials describing the terms of the health-contingent wellness program.
Since the rules for health-contingent wellness programs were issued in 2013, there has been confusion as to whether individuals who complete the RAS partway through the year must be given the reward retroactive to the beginning of the year. For example, if a tobacco cessation program implemented a premium surcharge for tobacco use, it was unclear whether that surcharge only needed to be removed for the remainder of the year or if the surcharges needed to be refunded to the participant who completed the RAS partway through the plan year.
It has also been unclear what information about the wellness program in plan materials triggers the requirement to provide notice of a RAS.
Full Reward When Reasonable Alternative Standard is Completed Partway Through the Plan Year
The Departments state in the FAQs that, until further guidance or regulations are issued, they will not take enforcement action if a reward for satisfying a RAS partway through the plan year is not provided retroactively to the beginning of the plan year. The Departments emphasize that all other requirements for a health-contingent wellness program must continue to be met.
Disclosure of Reasonable Alternative Standard
The Departments clarify that the notice of a RAS is only required when the terms of a wellness program are described in plan materials. If plan materials merely mention a wellness program exists but do not describe its terms, the RAS notice is not required.
Litigation Risk Remains
While the FAQs reduce the risk of regulatory enforcement action, private litigation remains a risk for health-contingent wellness programs. In recent years, health-contingent wellness programs, tobacco cessation programs in particular, have been the target of numerous lawsuits alleging ERISA violations for not following wellness program rules.
Often, the lawsuits allege that failing to provide the full reward retroactively to those who complete the RAS partway through the year and failing to provide notice of a RAS in all plan materials violate the wellness program rules. Court rulings on this topic have been mixed, with no clear answers. Courts are not bound by the Departments’ non-enforcement decision, so employers sponsoring health-contingent wellness programs may be well served to discuss retroactively providing the full reward to those who complete the RAS partway through the plan year with legal counsel to understand potential risks.
Key Takeaway
The Departments will not take enforcement action against an employer that sponsors a health-contingent wellness program for not retroactively providing a wellness program reward or for failing to provide notice of a reasonable alternative standard if a wellness program is merely mentioned in plan materials. However, the non-enforcement policy does not eliminate the risk of litigation surrounding the terms of the wellness program.
The information provided is a summary of laws and regulations relating to employee benefit plan compliance. This information should not be construed as legal advice. In all cases, employers should consult with their own legal counsel.
