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`UNITED STATES DISTRICT COURT
`FOR THE NORTHERN DISTRICT OF ILLINOIS
`BRANDON HATHEWAY, on behalf of himself
`and all others similarly situated,
` Plaintiff,
`vs.
`INTERNATIONAL MOTORS, LLC,
`Defendant.
`Civil Action No.: 1:25-cv-7989
`CLASS ACTION COMPLAINT
`P
`laintiff Brandon Hatheway (“Plaintiff”), individually and on behalf of the Class defined
`below of similarly situated persons, alleges the following against International Motors, LLC (f/k/a
`International Motors , Inc. ) (“International Motors” or “Defendant”) based upon personal
`knowledge with respect to himself and on information and belief derived from, among other things,
`investigation of counsel and review of public documents as to all other matters:
`NATURE OF THE ACTION
`1. It is both unfair and unlawful for entities like International Motors to impose
`discriminatory and punitive health insurance surcharges on employees who use tobacco products.
`This lawsuit challenges International Motors ’s unlawful practice of charging a “tobacco
`surcharge” without complying with the regulatory requirements under the Employee Retirement
`Income Security Act of 1974 (“ERISA”) and the implementing regulations. Under ERISA,
`wellness programs must offer, and provide notice of, a reasonable alternative standard that allows
`all participants to ob tain the “ full reward ”—including refunds for surcharges paid while
`completing the program. 29 U.S.C. § 1182(b)(2)(B); 42 U.S.C. § 300gg-4(j)(3)(D). Instead, under
`Navistar Inc., Health Plan (the “Plan”), International Motors imposes a discriminatory tobacco
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`surcharge without providing participants with a reasonable alternative standard and fails to provide
`notice of the availability of a reasonable alternative standard , violating federal regulations and
`depriving employees of benefits to which they are entitled under ERISA.
`2. Tobacco surcharges have become more prevalent in recent years but to be lawful
`plans can impose these surcharges only in connection with compliant “wellness programs,”
`meaning they must adhere to strict rules set forth by ERISA and the implementing regulations
`established by t he Departments of Labor, Health and Human Services, and the Treasury
`(collectively, the “Departments”) over ten years ago in 2014. ERISA imbues the Departments with
`the authority to promulgate regulations interpreting ERISA § 702, 29 U.S.C. § 1182, the statute’s
`non-discrimination provision. Accordingly, the Departments have issued clear regulatory criteria
`that “must be satisfied” to qualify for the statutory exception or safe -harbor, which they may
`invoke only if they can affirmatively demonstrate full compliance with all these strict requirements
`in response to claims that their program is discriminatory. Moreover, courts must defer to the
`agency’s interpretation of its own regulations, if that interpretation is neither plainly erroneous nor
`inconsistent with the regulatory framework, Auer v. Robbins , 519 U.S. 452 (1997), ensuring that
`plans cannot evade ERISA’s anti-discrimination protections by selectively or improperly applying
`these rules.
`3. The strict regulatory requirements are meant to ensure that wellness programs
`actually promote health and preclude discrimination, instead of wellness programs that are
`“subterfuge[s] for discriminating based on a health factor.” The regulations make clear that for
`plans to be compliant, they must provide a clearly defined, reasonable alternative standard that
`allows all participants to obtain the full reward, including retroactive refunds of surcharges paid
`while completing the alternative standard. A well ness program must be genuinely designed to
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`improve health or prevent disease, rather than functioning as an improper penalty imposed on
`certain participants under the guise of a health initiative. International Motors’s Plan fails to clearly
`establish a reasonable alternative standard, does not notify employees that such an alternative is
`available, does not ensure that employees who complete the alternative receive the “full reward,”
`and unlawfully shifts costs onto employees in violation of ERISA’s wellness program regulations.
`4. The need for regulatory safeguards surrounding these types of wellness programs
`is underscored by studies showing little evidence that wellness programs effectively reduce
`healthcare costs through health improvement. Instead, the savings employers claim often result in
`cost-shifting onto employees with higher health risks, disproportionately burdening low -income
`and vulnerable workers who end up subsidizing their healthier colleagues.
`1 The regulatory
`safeguards seek to prevent wellness programs from being misused as thinly veiled revenue -
`generating schemes at the expense of employees who are least able to afford the additional costs
`by shifting the burden to plan sponsors to demonstrate compliance once a participant alleges
`discriminatory surcharges. The goal is to ensure that wellness programs operate equitably and in a
`non-discriminatory manner, and to promote genuine health improvements
`5. Outcome-based programs,
`2 such as smoking cessation programs, must offer a
`clearly defined “reasonable alternative standard,” which is an alternative way for “all similarly
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`1 Horwitz, J. R., Kelly, B. D., & DiNardo, J. E. (2013). Wellness incentives in the workplace: Cost
`savings through cost shifting to unhealthy workers. Health Affairs, 32(3), 468–476, 474 (“wellness
`programs may undermine laws meant to prevent discrimination on the basis of health status. Since
`racial minorities and people with low socioeconomic status are more likely than others to have
`more health ris ks, they are also more likely to be adversely affected by cost shifting”); see also
`Dorilas, E., Hill, S. C., & Pesko, M. F. (2022). Tobacco surcharges associated with reduced ACA
`marketplace enrollment . Health Affairs, 41(3), Abstract (finding that tobacco surcharges are
`significant barriers to affordable health insurance).
`2 “An outcome -based wellness program is a type of health- contingent wellness program that
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`situated individuals” to obtain the reward (or avoid a penalty) if they are unable to meet the initial
`wellness program standard (i.e., being tobacco- free). Critically, ERISA’s implementing
`regulations require that “the same, full reward” must be provided to individuals who complete the
`alternative standard, regardless of when they do so during the plan year.3 The Department of Labor
`(“DOL”) has made clear that participants should not be forced to rush through the program under
`the threat of continued surcharges and that every individual participating in the program must
`receive the same reward as provided to non-smokers. Id. The Departments made this requirement
`clear when they stated it is “[t]he intention of the Departments . . . that, regardless of the type of
`wellness program, every individual participating in the program should be able to receive the full
`amount of any reward or incentive . . . .” Id. , 33160 (emphasis added). International Motors
`violates these requirements by failing to offer a reasonable alternative standard that provides full
`reimbursement to employees who com plete th at standard, operating a non- compliant penalty
`structure rather than a lawful wellness incentive, and failing to clearly communicate the
`availability of a reasonable alternative standard in all plan materials referencing tobacco -related
`premium differentials, including plan documents and summary plan descriptions (“SPDs”). Id.
`These failures constitute direct violations of ERISA’s wellness program regulations.
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`requires an individual to attain or maintain a specific health outcome (such as not smoking or
`attaining certain results on biometric screenings) in order to obtain a reward.” 29 C.F.R. §
`2590.702(f)(1)(v).
`3 Incentives for Nondiscriminatory Wellness Programs in Group Health Plans , 78 Fed. Reg.
`33158, 33163 (June 3, 2013) (hereinafter the “Final Regulations”) (“while an individual may take
`some time to request, establish, and satisfy a reasonable alternative standard, the same, full reward
`must be provided to that individual as is provided to individuals who meet the initial standard for
`that plan year. (For example, if a calendar year plan offers a health -contingent wellness program
`with a premium discount and an individual who qualifies for a reasonable alternative standard
`satisfies that alternative on April 1, the plan or issuer must provide the premium discounts for
`January, February, and March to that individual.)” (emphasis added)).
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`6. International Motors cannot qualify for the statutory safe harbor because the Plan
`fails to satisfy the essential regulatory criteria, which “must be satisfied,” ( id., 33160) for a
`wellness program to be lawful under ERISA. Final Regulations, 33160. The core deficiency of
`International Motors’s wellness program is that it does not offer a reasonable alternative standard
`that provides the “full reward” to all participants who satisfy the alternative standard, as explicitly
`required by Section 702 of ERISA, 29 U.S.C. § 1182, 42 U.S.C. § 300gg-4(j)(3)(D), and 29 C.F.R.
`§ 2590.702(f)(4). The Plan fails to offer a clearly defined, reasonable alternative standard that
`ensures employees who satisfy that standard receive a full refund of the “additional premium of
`$50 per month ($600 per year) for medical coverage.” Instead, International Motors retains these
`ill-gotten funds in its own accounts, earns interest on them, and therefore contributes less to the
`Plan. By failing to administer its surcharge program in compliance with ERISA’s wellness
`regulations, International Motors cannot claim the protections of the statutory safe harbor and is
`liable for its unlawful surcharge scheme.
`7. By failing to provide a n alternative standard or a mechanism for retroactive
`reimbursement to those who satisfy that standard, International Motors operates an unlawful
`surcharge program that den ies employees who smoke the opportunity to avoid the penalty, as
`required by law. This is not a minor technical failure —it is a fundamental violation of t he
`regulation’s core purpose: ensuring that participants have an opportunity to avoid the smoking
`surcharge and receive the same financial benefit as those who meet the initial standard (i.e., non-
`smokers).
`8. Further, International Motors failed to provide notice of a reasonable alternative
`standard. Because International Motors does not offer an alternative standard, it also violated the
`notice requirements regarding the alternative standard. It failed to notify participants of an
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`alternative standard that would provide them with the full reward and failed to include contact
`information for obtaining the alternative standard, despite the Departments’ clear instructions that,
`for ERISA plans, wellness programs are required to be disclosed in these documents if compliance
`affects premiums. Final Regulations, 33166 (“a plan disclosure that references premium
`differential based on tobacco use . . . must include this disclosure”). These standalone notice
`violations of the Final Regulations disqualify International Motors from asserting the affirmative
`defense in response to the allegations herein that its tobacco surcharge program is discriminatory
`and violates ERISA. Upon information and belief, International Motors failed to include the
`required notice in all Plan/Benefits materials as required. Again, because Defendant does not offer
`a tobacco wellness program , it cannot satisfy the criteria for a “program[] of health promotion.”
`By failing to offer an alternative standard, the tobacco surcharge International Motors imposes on
`participants is unlawful and discriminatory in violation of ERISA.
`9. International Motors bears the burden of proving that its tobacco surcharge program
`fully complies with every regulatory requirement under ERISA and its implementing regulations,
`including providing a reasonable alternative standard that allows all participants to avoid the
`surcharge and receive a full refund if they satisfy the alternative. International Motors cannot meet
`this burden because its Plan does not offer an alternative standard. Without a reasonable alternative
`standard, International Motors’s surcharge is not a lawful wellness incentive, but an impermissible
`penalty imposed on employees based on a health factor. Also, International Motors fails to provide
`notice of a wellness program in all plan materials discussing the surcharge. Its failure to offer and
`communicate a reasonable alternative standard makes its tobacco surcharge facially unlawful
`under ERISA, and no amount of post hoc justifications can cure this fundamental defect.
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`10. Plaintiff is a former employee of Navistar, Inc. (“Navistar”) who paid the unlawful
`tobacco surcharges to maintain health insurance coverage under the Plan. This surcharge imposed
`an additional financial burden on Plaintiff and continues to impose such a burden on those similarly
`situated.
`11. Plaintiff brings this lawsuit individually and on behalf of all similarly situated Plan
`participants and beneficiaries, seeking to recover these unlawfully charged fees and for Plan-wide
`equitable relief to prevent International Motors from continuing to profit from its violations under
`29 U.S.C. § 1109. Under 29 U.S.C. § 1109, Defendant is a fiduciary of the Plan who has a legal
`obligation to act in the best interests of Plan participants and to comply with federal law. Plaintiff,
`on behalf of herself and the Plan as a whole, seek appropriate equitable relief under 29 U.S.C. §§
`1132(a)(2) and (a)(3) to address Defendant’s ongoing violations of ERISA’s anti -discrimination
`provisions.
`PARTIES
`12. Plaintiff Brandon Hatheway is, and at all times mentioned herein was, an individual
`citizen of the State of Oklahoma residing in the County of Tulsa . Plaintiff was an employee of
`Navistar, who paid a tobacco surcharge of $ 12.50 per paycheck ($600 annually) associated with
`the health insurance offered through Navistar during his employment. Plaintiff was required to pay
`this tobacco surcharge to maintain health insurance under the Plan.
`13. Plaintiff is a participant in the Plan pursuant to 29 U.S.C. § 1002(7).
`14. Plaintiff has satisfied all conditions precedent to bringing this action, including the
`exhaustion of administrative remedies. Specifically, Plaintiff timely submitted a written claim
`under the terms of the Plan and thereafter submitted a written appeal challenging the denial of that
`claim. The appeal was submitted in accordance with the procedures set forth in the Plan and in
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`compliance with ERISA. The Plan denied Plaintiff’s appeal, thereby exhausting Plaintiff’s
`administrative remedies.
`15. International Motors is a major American manufacturer of commercial vehicles and
`engines. It is a Delaware corporation with its headquarters in Lisle, Illinois. Traton SE is the parent
`company of International Motors.
`16. International Motors (formerly Navistar) is the sponsor of the Plan and the Plan
`Administrator under 29 U.S.C. § 1002(16). As of December 31, 2023, the Plan had over
`employees. International Motors’s employee benefit plan is subject to the provisions and statutory
`requirements of ERISA pursuant to 29 U.S.C. § 1002(3).
`JURISDICTION AND VENUE
`17. The Court has subject matter jurisdiction pursuant to 29 U.S.C. §1132(e)(1) and §
`28 U.S.C. 1331, as this suit seeks relief under ERISA, a federal statute. It also has subject matter
`jurisdiction under the Class Action Fairness Act, 28 U.S.C. § 1332(d)(2). The amount in
`controversy exceeds $5 million, exclusive of interest and costs. Upon information and belief, the
`number of class members is over 100, many of whom have different citizenship from Defendant .
`Thus, minimal diversity exists under 28 U.S.C. § 1332(d)(2)(A).
`18. This Court has personal jurisdiction over Defendant because it is headquartered in
`this District. Defendant has purposefully availed itself of the privilege of conducting business in
`Illinois.
`19. Venue is proper in this District under 2 U.S.C. 1132§ (e)(2) because Defendant is
`headquartered in this District and this is a District in which Defendant may be found.
`FACTUAL BACKGROUND
`I. DEFENDANT’S TOBACCO SURCHARGE VIOLATE S ERISA’S ANTI -
`DISCRIMINATION RULE
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`A. Statutory and Regulatory Requirements
`20. To expand access to affordable health insurance coverage, the Affordable Care Act
`(“ACA”) amended ERISA to prohibit any health insurer or medical plan from discriminating
`against participants in providing coverage or charging premiums based on a “health- related
`factor,” including tobacco use. Under this rule, a plan “may not require any individual (as a
`condition of enrollment or continued enrollment under the plan) to pay a premium or contribution
`that is greater than such premium or contribution for a similarly situated individual enrolled in the
`plan based on any health -related factor in relation to the individual or to an individual enrolled
`under the plan as a dependent of the individual.” ERISA § 702(b)(1), 29 U.S.C. § 1182(b)(1).
`21. The statute permits group health plans to “establish[] premium discounts or
`rebates . . . in return for adherence to programs of health promotion and disease prevention” (29
`U.S.C. § 1182(b)(2)(B) (emphasis added)); however, these “wellness programs”—to qualify for
`this statutory safe-harbor exception—must strictly adhere to the mandated regulatory
`requirements.
`22. Under ERISA § 505, 29 U.S.C. § 1135, Congress granted the Department of Labor
`the authority to issue regulations , including the power to establish regulations prohibiting
`discrimination against participants and beneficiaries based on their health status under ERISA §
`702, 29 U.S.C. § 1182. This authority empowers the Secretary of Labor (the “Secretary”) to
`“prescribe such regulations as he finds necessary or appropriate to carry out the provisions of ”
`Title I of ERISA. (29 U.S.C. § 1135). Furthermore, ERISA § 734, 29 U.S.C. § 1191c, explicitly
`reinforces the Secretary ’s authority to issue regulations concerning group health plan
`requirements, which grants the power to “ promulgate such regulations as may be necessary or
`appropriate to carry out the provisions” of ERISA Title I, Part 7. 29 U.S.C. § 1191c.
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`23. Exercising this delegated authority, in 2006, the Secretary issued regulation s
`through the notice-and-comment rulemaking process outlining the criteria that a wellness program
`must meet to qualify for the premium non- discrimination exception under ERISA § 702(b). See
`Final Regulations, 33158–59. Following the amendments by the Affordable Care and Public
`Health Service Acts in 2010, the Departments, published proposed regulations in November 2012
`to “amend the 2006 regulations regarding nondiscriminatory wellness programs.” Id. , 33159.
`These regulations (i.e., the Final Regulations) were approved and signed in 2013 to be effective
`January 1, 2014. Id., 33158.
`24. The Final R egulations specify that health promotion or disease prevention
`programs, such as outcome -based wellness initiatives (i.e., smoking cessation programs) , must
`meet detailed requirements to qualify for the safe harbor. As the Department s explained, these
`criteria “must be satisfied in order for the plan or issuer to qualify for an exception to the
`prohibition on discrimination based on health status.” Id., 33163. “That is,” the Departments
`explained, “these rules set forth criteria for an affirmativ e defense that can be used by plans and
`issuers in response to a claim that the plan or issuer discriminated ” against participants . Id.
`(emphasis added). That means once a participant alleges a discriminatory surcharge, the burden
`shifts to the employer to prove that the surcharge is non-discriminatory because the wellness plan
`qualifies as a “program[] of health promotion and disease pre vention” that satisfies all the
`necessary regulatory criteria.
`25. Compliance with the regulatory criteria is not optional. These criteria serve as the
`standard by which these wellness programs can be evaluated and are the only lawful pathway for
`plans to impose health-based premium differentials without violating ERISA’s anti-discrimination
`provisions. See Final Regulations, 33160 (“ these [F]inal [R]egulations set forth criteria for a
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`program of health promotion or disease prevention . . . that must be satisfied in order for the plan
`or issuer to qualify for an exception to the prohibition on discrimination . . . .” (emphases added)).
`26. Only by satisfying all of the criteria, can employers ensure their plans are wellness
`programs and “not a subterfuge for underwriting or reducing benefits based on health status .” Id.
`The criteria provide guidelines for employers to prevent them from using surcharges as a revenue-
`generating mechanism dressed up as a program of health promotion. If a program fails to meet
`even one of these requirements, the program does not qualify as a “program[] of health promotion”
`and cannot qualify under ERISA’s statutory carve-out. In that case, any premium differentials
`imposed based on a health factor violat e the statute’s anti- discrimination provisions. See §
`2590.702(f)(4) (describing the “[r]equirements for outcome-based wellness programs,” stating that
`a program “does not violate the provisions of this section only if all of the [] requirements are
`satisfied.” (emphasis added)).4 In sum, a wellness program that fails to satisfy each criterion is not
`a legitimate health promotion initiative but an unlawful penalty that discriminates based on health
`status, in direct violation of ERISA’s protections.5
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`4 Congress codified parts of the 2006 regulations regulatory criteria when, through the Patient
`Protection Act (“PPA”) and ACA, it amended the PHSA, and incorporated (nearly verbatim) the
`regulatory language into ERISA. See 42 U.S.C. § 300gg-4(j)(3); 29 U.S.C. § 1185d(a)(1) (“[T]he
`provisions of part A of title XXVII of the [PHSA] [42 U.S.C. § 300gg et seq.] (as amended by the
`[PPA and ACA]) shall apply to group health plans, and health insurance issuers providing health
`insurance coverage in connection with group health plans, as if included in this subpart[.]”). Since
`then, the Departments have , in accordance with the they were granted, updated the regulatory
`framework through the Final Regulations, refining and clarifying the requirements to ensure
`compliance with ERISA’s nondiscrimination provisions and the statutory criteria established by
`Congress. See 42 U.S.C. § 300gg-4(n) (“Nothing in this section shall be construed as prohibiting
`the Secretaries of Labor, Health and Human Services, or the Treasury from promulgating
`regulations in connection with this section”); see also 45 C.F.R. § 146.121(f) (adopting identical
`language to § 2590.702(f)).
`5 Congress adopted these regulatory criteria when, through the Patient Protection and Affordable
`Care Act, it amended the Public Health Service Act, incorporating these criteria into ERISA. See
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`B. Regulatory Criteria
`27. To comply with ERISA and avoid unlawful discriminat ory surcharges, outcome-
`based wellness programs must meet the following five (5) criteria:
`(a) Frequency of opportunity to qualify: Participants must be given at least one chance
`annually to qualify for the reward associated with the program to ensure ongoing
`accessibility and fairness. 29 C.F.R. § 2590.702(f)(4)(i).
`(b) Size of reward: penalties or rewards cannot exceed 50% of the cost of employee -only
`coverage. § 2590.702(f)(4)(ii)
`(c) Reasonable design: programs must be “reasonably designed” to promote health and
`cannot be “a subterfuge for discriminating based on a health factor.” This determination
`is based on all the relevant facts and circumstances. “To ensure that an outcome-based
`wellness program is reasonably designed to improve health and does not act as a
`subterfuge for underwriting or reducing benefits based on a health factor, a reasonable
`alternative standard to qualify for the reward must be provided to any individual who
`does not meet the initial standard based on a measurement, test, or screening. . . .” §
`2590.702(f)(4)(iii)).
`(d) Uniform availability and reasonable alternative standards: “The full reward under the
`outcome-based wellness program must be available to all similarly situated
`individuals.”29 C.F.R. § 2590.702(f)(4)(iv).
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`42 U.S.C. § 300gg-4(j)(3); 29 U.S.C. § 1185d(a)(1) (“[T]he provisions of part A of title XXVII of
`the Public Health Service Act [42 U.S.C. § 300gg et seq.] (as amended by the Patient Protection
`and Affordable Care Act) shall apply to group health plans, and health insurance issuers providing
`health insurance coverage in connection with group health plans, as if included in this subpart[.]”).
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`(e) Notice of availability of reasonable alternative standard: notice must include (a)
`instructions on how to access the reasonable alternative standard; (b) c ontact
`information for inquiries about the alternative standard; and (c) a n explicit statement
`that participants’ personal physician’s recommendations will be accommodated. See §
`2590.702(f)(4)(v).
`28. The Departments provided valuable insight into each of the criteria, reflecting their
`intent to operationalize the statute’s protections in a manner that both promotes health and prevents
`discriminatory practices under ERISA.
`29. Regarding the first criteria, “ the once -per-year requirement was included as a
`bright-line standard for determining the minimum frequency that is consistent with a reasonable
`design for promoting good health or preventing disease.” Final Regulations, 33162. The once-per-
`year requirement ensures that participants have a meaningful opportunity to participate in a
`reasonable alternative standard. Plans must ensure that at least once every 12 -month period,
`participants are provided with an opportunity to avoid the surcharge for the entire plan year. Final
`Regulations, 33163 (“while an individual may take some time to request, establish, and satisfy a
`reasonable alternative standard, the same, full reward must be provided to that individual as is
`provided to individuals who meet the initial standard for that plan year.” (emphasis added)).
`30. A key requirement of the fourth criterion for outcome -based programs is that the
`“full reward” must be available to “all similarly situated individuals[,]” regardless of when they
`meet the reasonable alternative standard during the plan year. See Final Regulations, 33165.
`Critically, the Departments clearly state that it is “[t]he intention of the Departments . . . that,
`regardless of the type of wellness program, every individual participating in the program should
`be able to receive the full amount of any reward or incentive. . . .” Id. (emphases added). While
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`plans have flexibility in determining the manner in which they provide the “full reward,” providing
`the “full reward” to every participant is mandatory, regardless of when the participant satisfies the
`alternative standard. The Departments have made this clear:
`While an individual may take some time to request, establish, and satisfy a
`reasonable alternative standard, the same, full reward must be provided to that
`individual as is provided to individuals who meet the initial standard for that plan
`year. (For example, if a calendar year plan offers a . . . premium discount and an
`individual . . . satisfies that alternative on April 1, the plan or issuer must provide
`the premium discounts for January, February, and March to that individual.) Plans
`and issuers have flexibility to determine how to provide the portion of the reward
`corresponding to the period before an alternative was satisfied (e.g., payment for
`the retroactive period or pro rata over the remainder of the year) as long as . . . the
`individual receives the full amount of the reward.
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`Final Regulations, 33163 (emphases added).
`31. The Final Regulations provide an example of a non-compliant plan that imposes a
`tobacco use surcharge but does not facilitate the participant’s enrollment in or participation in a
`smoking cessation program. See id. , Example 8. Instead, the employer advises the participant to
`find a program, pay for it, and provide a certificate of completion. Id. The Final Regulations
`conclude that the plan is not compliant because it “has not offered a reasonable alternative
`standard . . . and the program fails to satisfy the requirements of paragraph (f) of this section.” Id.;
`Final Regulations, 33180.
`32. For health contingent wellness programs, the DOL Regulations require the notice
`be disclosed “in all plan materials describing the terms of” the program. 29 C.F.R. § 2590.702(f)(3)
`and (4) (emphasis added); see also 42 U.S.C § 300gg- 4(j)(3)(E). Further, the Final R egulations
`establish that “[f]or ERISA plans, wellness program terms (including the availability of any
`reasonable alternative standard) are generally required to be disclosed in the summary plan
`description (SPD), as well as in the applicable governing plan documents . . . if compliance with
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`the wellness program affects premiums . . . under the terms of the plan.” Final Regulations, 33166.
`Thus, plans that charge their participants more and fail to provide a reasonable alternative standard
`or the requisite notice violate these requirements, preventing these wellness programs from
`qualifying for the safe -harbor exception and establis hing them as discriminatory wellness
`programs.
`33. International Motors’ tobacco surcharge is unlawful because it is a surcharge and
`not a premium discount or a rebate. Further, even if imposing a surcharge were permissible under
`ERISA, it would be permissible only if International Motors offered a compliant wellness program.
`However, International Motors does not offer a wellness program.
`II. DEFENDANT CANNOT AVAIL ITSELF OF ERISA’S SAFE HARBOR
`34. International Motors’ tobacco surcharge is unlawful and discriminatory because it
`does not offer a tobacco cessation program (i.e., a wellness program) to nicotine-using participants,
`as required by ERISA . Rather than offering a structured tobacco cessation program directly to
`participants, the Plan forces employees to “discuss an alternative” with their doctor, then complete
`a form and return it to the benefits department. This practice impermissibly shifts the burden to
`participants, undermines the purpose of ERISA’s wellness program framework, and fails to satisfy
`the requirements for safe harbor protection under 29 U.S.C. § 1182(b)(2)(B).
`35. The Final Regulations provide clear examples of compliant and non- compliant
`tobacco surcharge programs. In Example 8, the group health plan imposes a tobacco “with
`smoking cessation program that is not reasonable.” Final Regulations, 33180 (emphasis added).
`In this hypothetical, “the plan does not facilitate participant F' s enrollment in a smoking cessation
`program. Instead the plan advises F to find a program, pay for it, and provide a certificate of
`completion to the plan.” Id.
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`36. The applicable SPD states