District Court: ERISA Does Not Require Retroactive Reimbursement of Wellness Program Tobacco Surcharges

In Williams v. Bally’s Management Group, LLC, No. 1:25-00147-MSM-PAS, 2025 WL 3078747 (D.R.I. Nov. 4, 2025), the U.S. District Court for the District of Rhode Island dismissed an employee’s challenge to a workplace wellness program that imposed a monthly tobacco surcharge, rejecting claims that the surcharge violated ERISA’s nondiscrimination and fiduciary duty provisions.

Background

Plaintiff Williams, an employee of Bally’s Chicago and participant in its self-funded group health plan, was charged a $65 per-month tobacco surcharge (about $780 per year) unless she enrolled in and completed a smoking cessation program. The program’s expenses were covered by the plan, and completion resulted in removal of the surcharge going forward.

Williams sued Bally’s Management Group, the plan sponsor, alleging two violations of ERISA:

1. Count I – Discrimination under 29 U.S.C. § 1182: She claimed the plan’s “tobacco surcharge program” failed to qualify as a lawful wellness program because (a) it did not retroactively reimburse prior surcharges once a participant completed the cessation program, and (b) plan materials failed to provide proper notice of a “reasonable alternative standard,” such as accommodating a participant’s physician’s recommendations.
2. Count II – Breach of fiduciary duty under §§ 1104 and 1106: Williams alleged that Bally’s used the tobacco surcharges to offset its own plan contributions, constituting a prohibited transaction and breach of loyalty to participants.

Bally’s moved to dismiss, arguing that Williams lacked standing to bring fiduciary-breach claims, that the plan satisfied all regulatory requirements for wellness programs, and that she failed to exhaust administrative remedies.

The Court’s Decision

Judge Mary McElroy granted Bally’s motion to dismiss in full, finding both counts legally deficient.

No Standing for Fiduciary Breach

The court first held that Williams lacked Article III and statutory standing to assert fiduciary-breach claims under ERISA § 502(a)(2). Her complaint contained only “speculative and conclusory” allegations that Bally’s “enriched itself at the expense of the Plan.” Because she failed to allege a concrete, particularized injury to the plan itself—as opposed to individual participants—her fiduciary-duty claim was dismissed for lack of subject-matter jurisdiction.

Exhaustion Not Required—but Irrelevant

Although Bally’s argued that Williams failed to exhaust internal claim procedures, the court found that her statutory ERISA claims were not the type requiring exhaustion. The plan’s administrative process applied only to denied benefit claims, not to challenges to the structure or legality of a wellness program.

“Full Reward” Does Not Require Retroactive Reimbursement

On the merits of Count I, the court rejected Williams’s argument that ERISA requires retroactive refunding of tobacco surcharges once a participant completes the cessation program.

Williams had relied on Department of Labor guidance in the preamble to the 2013 wellness-program regulations, which stated that participants who satisfy an alternative standard mid-year “must be provided the premium discounts for [earlier months].” But the court held that this interpretation was not binding under the “anti-parroting doctrine,” because the regulation merely repeated the statutory language referring to a “full reward.” Citing Gonzalez v. Oregon and Sun Capital Partners III, LP v. New England Teamsters, the court declined to defer to the agency’s interpretation and instead found that neither the statute nor the regulation mandates retroactive reimbursement.

Accordingly, a wellness program that prospectively removes a surcharge upon completion of cessation requirements satisfies ERISA’s “full reward” condition.

Sufficient Notice of Reasonable Alternative Standard

The court also rejected Williams’s notice-based claim. It found that Bally’s Summary Plan Descriptions (“SPDs”) contained language that was “almost verbatim” to the Department of Labor’s sample disclosure—stating that employees could earn the same reward by different means and that the plan would work with their doctor to find an appropriate program. That satisfied ERISA’s notice requirement as a matter of law.

The court further determined that the Benefits Guides, which briefly referenced the surcharge but warned that official plan documents controlled, merely mentioned the availability of the wellness program and did not “describe its terms.” Thus, the Guides were not required to include the full disclosure language.

Takeaway

The Williams decision departs from recent district court rulings that have been more receptive to participants’ challenges to wellness-program surcharges, such as Bokma v. Performance Food Group, Inc. and Mehlberg v. Compass Group USA, Inc. Those courts deferred to the Department of Labor’s interpretation requiring retroactive reimbursement. The Rhode Island court, by contrast, rejected such deference under the anti-parroting doctrine and sided with employers.

The case underscores the growing judicial split over how far ERISA’s wellness-program rules extend and whether agency interpretations in preambles are binding. For now, at least in Rhode Island, employers can structure tobacco-surcharge programs that remove charges prospectively—so long as they provide clear notice consistent with the DOL’s model language.