Departments Clarify Wellness Program 'Full Reward' Requirement and Disclosure Rules in New FAQ Guidance

On August 26, 2026, the U.S. Departments of Labor, Health and Human Services, and Treasury ("the Departments") published FAQs aimed at providing clarity on nondiscrimination and disclosure requirements for wellness programs in group health insurance and group health plans.

Nondiscrimination Requirements

Generally, the nondiscrimination requirements for group health plan coverage added by the Health Insurance Portability and Accountability Act (HIPAA) in 1996 prohibit discrimination based on health factors for eligibility, benefits, and premiums. One exception to these prohibitions is for wellness programs intended to promote health and prevent disease. The Departments' 2006 final regulations implementing these nondiscrimination requirements divided wellness programs into two categories: participatory wellness programs and health-contingent wellness programs. While participatory wellness programs do not require individuals to satisfy certain health-related standards, health-contingent wellness programs provide rewards, such as reduced premiums, to individuals who satisfy certain health-related standards (e.g., not smoking).

When the Affordable Care Act (ACA) codified the Departments' 2006 regulations with the addition of section 2705 to the Public Health Service Act in 2010 (PHS Act), the ACA stated that the "full reward" of health-contingent wellness programs should be given to all similarly situated individuals. In 2013, the Departments issued final regulations implementing section 2705 of the PHS Act and amending the 2006 regulations. The 2013 regulations explained that health-contingent wellness programs could take the form of either an activity-only or an outcome-based wellness program. Among other requirements, the 2013 regulations required outcome-based wellness programs to:

• give eligible individuals an opportunity to qualify for the reward at least once per plan year;
• be reasonably designed to promote health or prevent disease; and
• ensure the reward is available for all similarly situated individuals, meaning the program must provide a reasonable alternative standard, such as a waiver, for individuals who do not meet the initial standard.

Notably, the preamble to the 2013 regulations contained language that was not included in the regulatory text itself. The preamble stated that individuals who need time to request, establish, and satisfy a reasonable alternative standard must receive the same full reward as an individual who met the standard at the beginning of the plan year. However, the preamble also stated that plans and issuers have some flexibility in determining how to provide the reward for the period prior to satisfaction of the condition, as long as the method is reasonable and the individual ultimately receives the full reward. While preamble language can provide interpretive guidance, it is not binding like regulatory text.

In 2014, the Departments issued FAQs to further clarify the "full reward" requirement. The FAQs explained that if an individual is given an opportunity to attain a reasonable alternative standard at the beginning of the plan year (for example, enrollment in a tobacco cessation program instead of achieving the health standard of not smoking) and qualify for the reward, then the plan is not required to provide another opportunity to avoid the surcharge until renewal or reenrollment for coverage for the next plan year.

The Departments issued this most recent guidance (the Part 74 FAQs) to help clarify outstanding questions related to the "full reward" requirement. The Departments explained that they will not take enforcement action against plans or issuers that fail to provide the reward retroactively to the beginning of the plan year for an individual who satisfies the reasonable alternative standard midyear, so long as the reward is provided prospectively. The Departments will exercise this enforcement discretion so long as the plan or issuer, as applicable:

• has a reasonable alternative standard,
• provides sufficient time for individuals to attain the alternative standard,
• provides the reward for the period after the individual has satisfied the reasonable alternative standard, and
• otherwise meets the requirements of 26 C.F.R. § 54.9802-1(f), 29 C.F.R. § 2590.702(f), and 45 C.F.R. § 146.121(f) (providing the requirements for wellness programs including the size of rewards, nondiscrimination, and necessary disclosures).

Disclosure Requirements

In addition to addressing the nondiscrimination requirements, the 2013 regulations required plans and issuers to include certain information about outcome-based wellness programs in any notices informing individuals that they did not satisfy an initial outcome-based standard. Specifically, the regulations require the following disclosures:

• the availability of a reasonable alternative standard or waiver of the standard;
• contact information for obtaining this alternative standard; and
• notice that the statements of an individual's personal physician will be accepted.

In any plan materials describing the terms of the outcome-based wellness program, the same information must be provided unless the plan materials only mention the program but do not describe the terms. In that case, the information above is not required.

In the Part 74 FAQs, the Departments explain that for health-contingent wellness programs, including outcome-based programs, plans and issuers must provide the disclosures described above in all materials describing the terms of the program. The FAQs reiterate that this disclosure is not required for plan materials that merely mention the availability of the program, such as a summary of benefits and coverage that notes that participation in outcome-based wellness programs may impact cost-sharing.

Contact Us

Calfee's Employee Benefits and Executive Compensation team is advising sponsors and administrators on the implications of this guidance. Calfee can assist with:

• Reviewing wellness plan documents and participant communications, including all ERISA-required disclosures.
• Coordinating with your wellness plan vendor regarding the operation of the wellness plan, as necessary.
• Preparing and updating summary plan descriptions, summaries of material modifications, and other participant communications required under ERISA.

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