Federal Agencies Weigh in on Tobacco Surcharge Enforcement

New tri-agency FAQ guidance issued on August 26, 2026, addresses elements of the 2013 wellness program regulations have been the subject of dozens of class actions in recent years. While this non-binding guidance does not amend the existing regulations, it gives courts a window into the agencies’ interpretation of these longstanding wellness program rules.

In the new FAQs, the Departments of Labor, Treasury, and Health & Human Services (the “Departments”) do not directly address the recent wave of class-action litigation. Instead, they explain that the guidance is being issued in response to “requests from stakeholders.” They also express the FAQs are issued in furtherance of their position that “plans and issuers should have the freedom to establish innovative programs that motivate individuals to make efforts to improve their health.”

The FAQs go on to provide specific guidance on two elements of the wellness program regulations that have featured in many of the recent class-action complaints: :

• Payment of the “Full Reward”: The Departments acknowledge that the preamble to the 2013 wellness program regulations states that if a participant completes the “reasonable alternative” standard midway through a plan year, he or she must be refunded any surcharges that were paid during that year. However, the Departments note that the regulatory text itself does not require this result. Accordingly, the new FAQ guidance states that the Departments will not take enforcement action if a wellness program does not retroactively refund amounts that were paid prior to competion of the reasonable alternative.
• Reasonable Alternative Notice: The Departments reiterated that the notice of the “reasonable alternative” must be provided in all plan materials that describe the terms of the wellness program. However, they note that “if plan materials merely mention that such a program is available, without describing its terms, this disclosure is not required. For example, a summary of benefits and coverage required under PHS Act section 2715 that notes that cost sharing may vary based on participation in an outcome-based wellness program, without describing the standards of the program, would not trigger this disclosure.”

As noted above, this guidance explains the Departments’ position with respect to their own enforcement actions. Importantly, these FAQs are not binding authority with respect to private litigation, and they do not restrict a participant’s private right of action to enforce the wellness program regulations. In fact, in a post-Loper-Bright world where deference to agency interpretations has been dialed back, the impact of this guidance in courtrooms remains to be seen. That said, as with all sub-regulatory guidance, courts may find this interpretive guidance useful when evaluating tobacco surcharge complaints in the future.

Employers should continue to monitor legal developments with respect to wellness programs and carefully review any design features that are potentially within the scope of the 2013 wellness program regulations.