Montana charges its state employees an extra $60 a month for using nicotine, plus another $60 if a covered spouse does. That is $1,440 a year for a two-smoker household, and Washington State’s public employee plan runs a smaller version of the same thing at $25 a month. Neither one is a fine. Both are the flip side of a wellness program incentive, and the federal rules say you get a second path to that money even if you never quit. Almost nobody uses it, because the deadline for asking is buried in an enrollment packet you clicked through in four minutes.
The timing of that second path started mattering this year. On August 26, 2026, the Departments of Labor, Health and Human Services, and the Treasury issued FAQs Part 74, which rewrote the math on when you claim the reward. Claiming late used to cost you nothing. Now it can cost you a few hundred dollars.
Your premium already assumes you will do the screening
Employers do not hand out wellness money because they feel generous in October. They build the discount into the rate and then collect the full amount from everyone who does not claim it.
KFF’s 2025 Employer Health Benefits Survey put the average annual premium for single coverage at $9,325, with workers covering about 16 percent of it out of their paychecks. Among large firms, 43 percent give workers the chance to complete a biometric screening, and of those with a screening program, 62 percent attach an incentive or a penalty to finishing it. Eighty-three percent of large firms run some kind of wellness promotion program.
So when your enrollment screen shows two premium numbers and you pick the higher one by doing nothing, you have not avoided a program. You have opted into paying for other people’s discounts. It belongs in the same pile as the plan choice itself, which is worth running as a total cost comparison rather than a premium comparison.
Wellness program incentives are capped, and the tobacco cap is nearly double
Federal rules put a ceiling on this. The total reward across all health-contingent wellness programs on a plan cannot exceed 30 percent of the total cost of employee-only coverage. For programs designed to prevent or reduce tobacco use, the ceiling rises to 50 percent.
Run those against KFF’s $9,325 average and the outer limits are roughly $2,800 a year for a standard program and about $4,660 for a tobacco program. Actual programs land far below the ceiling. Montana’s $720 and Washington’s $300 are closer to what most plans put on the table, which is the useful thing to know, because a number that size gets ignored in a way that $2,800 would not. It is still a set of tires.
The reward also comes with two conditions attached to the plan rather than to you. It has to be available at least once a year, and it has to be available to everyone in your situation, which is the rule that does the real work in the next two sections.
The August 2026 guidance moved the deadline that decides your number
When the 2013 final rules came out, the preamble said something generous. If a calendar year plan offers a premium discount and you satisfy the alternative standard on April 1, the plan had to give you the discount for January, February, and March too. The language never made it into the actual regulatory text, which is the gap plans kept asking about.
FAQs Part 74 resolved it in the plans’ favor. Until further guidance, the Departments will not take enforcement action against a plan that pays the reward only for the period after you satisfy the alternative standard, rather than retroactively to the start of the plan year.
Put Montana’s numbers through that. A $60 monthly surcharge avoided for a full calendar year is $720. Satisfy the alternative on April 1 instead, and a plan relying on the new enforcement relief owes you nine months, or $540. Waiting one quarter costs $180. If your spouse is on the same surcharge, double it to $360. The reward did not shrink. The window did.
If you cannot hit the number, the plan owes you a second path
All of which assumes you can hit the target. Plenty of people cannot, and that is where the rule most workers have never heard of kicks in.
An outcome-based program that ties money to a measurement, a test, or a screening has to offer a reasonable alternative standard to anyone who does not meet the initial target, or waive the standard outright. Complete the alternative and you get the same full reward as the person whose cholesterol came in under the line. The plan also has to accommodate your own doctor’s recommendations, so if your physician says the walking program is not appropriate for you, the plan works around that.
Plans are required to say so, too. Any plan materials describing the terms of the program, and any notice telling you that you missed the target, must disclose that an alternative is available, include contact information for getting it, and state that your personal physician’s recommendations will be accommodated. If your packet describes the tobacco surcharge in detail and never mentions an alternative, that is a compliance problem worth raising with HR in writing.
You are asking at a good moment. Roughly 50 ERISA class actions over tobacco surcharges were pending in federal courts as of 2026, and two July 2026 rulings went the employers’ way, including Williams v. Target Corporation in the District of Minnesota. Employers won those cases and still came out of them rechecking their notice language, which means a plain question about the alternative standard and where it is disclosed tends to get answered quickly and in writing. Put it in an email rather than a hallway conversation, and keep the reply.
What to do before your enrollment window closes
Open the enrollment screen and find the two premium numbers, not the one. Most systems show the surcharge as a separate line labeled tobacco, nicotine, wellness, or non-participation. Write down the monthly difference and multiply by twelve, because that is the actual size of this decision.
Then send one email to HR or the benefits administrator asking for the reasonable alternative standard for the program, the contact for arranging it, and the deadline to complete it for the coming plan year. Ask for the completion date in writing. Under earlier guidance, if a plan gives you a reasonable chance to enroll in a cessation program at the start of the plan year, it does not have to offer you another shot until the next annual enrollment. Enrollment is the moment. February is not.
If you can hit the target, do the screening early rather than in the last week, since labs and vendor portals bottleneck in December. If you cannot hit it, take the alternative now, while the reward still covers the whole year. While you are in the packet, the same ten minutes is enough to check whether the voluntary add-ons your employer is selling are worth their payroll deduction.
Wellness program incentives are unusual in a benefits package. The money is already budgeted and the rules for getting it are written down in federal regulation. What stands between you and $720 is a form and a date, and only one of those is still moving.
