DOL Signals a More Flexible Approach to ACA Wellness Program Rewards

Employer-sponsored wellness programs have long been a valuable tool for encouraging healthy behaviors, managing healthcare costs, and supporting employee wellbeing. However, employers offering health-contingent wellness programs have long faced practical questions about how and when incentives must be provided to participants who qualify through a reasonable alternative standard.

In newly released FAQs, released on August 26, 2026, the U.S. Departments of Labor, Health and Human Services, and the Treasury provided welcome clarification and temporary enforcement relief regarding certain wellness program incentives and notice requirements. The guidance does not rewrite the existing wellness program rules, but it does offer a more flexible enforcement positions for plan sponsors administering reasonable alternative standards.  

Key Takeaway: No Enforcement Action for Certain Non-Retroactive Rewards

Under longstanding wellness program regulations, health-contingent wellness programs must make the "full reward" available to all similarly situated individuals. Historically, agency commentary suggested that if an employee satisfied a reasonable alternative standard during the middle of the plan year, the employer would need to provide the reward retroactively to the beginning of the year.

For example, if an employee completed an alternative tobacco cessation program on April 1, prior agency guidance suggested the employee should receive the premium discount for January through March as well.

Recognizing ongoing confusion around this issue, the Departments announced that, until further guidance is issued, they will not take enforcement action against plans or issuers that do not provide the wellness reward retroactively to the beginning of the plan year, provided that:

• The reward is provided prospectively for the period after the reasonable alternative standard is satisfied; and
• The plan or issuer otherwise complies with the applicable wellness program regulations.

This enforcement position reflects the Departments' acknowledgment that the regulatory text itself does not clearly require retroactive application of rewards, even though earlier preamble language appeared to support that interpretation.

What This Means for Employers

For employers sponsoring health-contingent wellness programs, the new guidance may reduce administrative complexity and financial uncertainty.

Rather than calculating and applying retroactive premium adjustments when an employee completes a reasonable alternative standard midyear, employers may be able to structure incentives to apply going forward from the date the employee satisfies the alternative standard. This may be particularly helpful for wellness initiatives tied to:

• Tobacco cessation programs
• Biometric screening outcomes
• Weight management programs
• Other outcome-based wellness incentives

Importantly, the FAQs do not eliminate existing wellness program compliance obligations. Health-contingent wellness programs must still be reasonably designed to promote health or prevent disease, avoid discrimination based on health factors, and provide a reasonable alternative standard, or waiver, if applicable, for individuals who cannot meet the initial health-related standard.

A Reminder on Notice Requirements

The FAQs also clarify participant disclosure obligations for health-contingent wellness programs.

Employers and health plans must continue to disclose the availability of a reasonable alternative standard, or waiver, if applicable, in all plan materials that describe the terms of the health-contingent wellness program. The disclosure must include contact information and explain that recommendations from an individual's personal physician will be accommodated.

For outcome-based wellness programs, the disclosure must also be included in any notice informing an individual that they failed to satisfy the initial outcome-based standard.  This is an important operational point for employers using biometric screening results, tobacco-use state, cholesterol levels, body mass index, or similar health outcomes to determine eligibility for a reward.

At the same time, the Departments reaffirmed that the notice requirement does not apply to materials that merely mention the existence of a wellness program without describing the program's terms. For example, a Summary of Benefits and Coverage that simply notes cost-sharing may vary based on participation in a wellness program generally would not, by itself, trigger the reasonable alternative standard disclosure requirement.

Action Steps for Plan Sponsors

Employers sponsoring health-contingent wellness programs should consider taking the following steps:

1. Review current wellness program designs and incentive structures.

Identify whether any rewards are tied to health outcomes or completion of health-related activities.

2. Evaluate current administrative practices.

Determine whether existing processes assume retroactive reward payments when a participant completes a reasonable alternative standard midyear.

3. Confirm reasonable alternative standards are available.

Ensure the program provides a compliant alternative standard, or waiver where appropriate, for individuals who cannot satisfy the initial health-related standard.

4. Reviewing participant communications.

Confirm that required disclosures are included in materials describing the terms of the health-contingent wellness program and in outcome-based wellness program failure notices.

5. Coordinate with vendors and advisors.

Work with legal counsel, carriers , third-party administrators, and wellness vendors to align program operations with the Departments' latest guidance.

Looking Ahead

While the FAQs do not formally amend the wellness program regulations, it provides meaningful insight into how federal agencies intend to approach enforcement until further guidance or regulations are issued. For many employers, the guidance offers welcome flexibility in administering wellness incentives while maintaining the core nondiscrimination principles underlying HIPAA and the Affordable Care Act.

As wellness programs continue to evolve, OneDigital will continue to monitor future regulatory guidance that could further clarify the treatment of participant rewards, reasonable alternative standards, and related disclosure obligations.