Employer-side wins in tobacco surcharge litigation have been piling up all year, making the ruling in Mehlberg v. Compass Group a notable break in the pattern. Judge Stephen R. Bough of the US District Court for the Western District of Missouri ruled against Compass Group USA on all claims, finding that the Fortune 500 foodservice company violated ERISA by failing to retroactively reimburse the $1,248-per-year tobacco penalty paid by employees who later completed a cessation program. It is the first summary judgment victory for plaintiffs in a litigation wave that now spans more than 80 cases, with more than 30 filed in 2026 alone.
The case is Mehlberg v. Compass Group USA, Inc., No. 24-cv-04179. Judge Bough certified four classes of employees in April 2026, covering those who paid the surcharge going back to October 2018. The summary judgment ruling resolves the merits question that class certification left open: whether failing to retroactively reimburse employees who completed the cessation program constitutes an ERISA violation.
Judge Bough held that it does. Under ERISA’s wellness program rules, employers that charge tobacco surcharges must give employees a reasonable alternative standard, typically a cessation course, and must then provide the “full reward” available to nonsmokers when that alternative is completed. The judge ruled that the full reward requires retroactive reimbursement of penalties already paid that plan year, rather than just prospective removal of the surcharge.
That ruling lands in direct tension with federal agency guidance issued less than two months ago. On August 26, the Departments of Labor, Health and Human Services, and Treasury jointly issued FAQ Part 74, clarifying that plans are not required to retroactively reimburse surcharges when a participant completes a reasonable alternative standard mid-year. Judge Bough went the other way. The agencies issued enforcement guidance, while Judge Bough issued a binding ruling on the merits.
Individual plaintiffs retain the right to sue regardless of what the agencies say, and FAQ Part 74 operates under enforcement discretion rather than a revised regulation, meaning the underlying statutory question remains open until an appellate court settles it.
Employer groups including the ERISA Industry Committee had backed Compass Group’s bid for Eighth Circuit review of the April class certification, warning that broad class rulings create settlement pressure even where employer defenses are strong. The Eighth Circuit denied that petition on June 30, without explanation, leaving the class intact going into the summary judgment ruling. Until a circuit court resolves the retroactive reimbursement question, employers running tobacco surcharge programs are operating in a jurisdiction-by-jurisdiction landscape where the legal answer depends on which court is hearing the case.
The Compass Group ruling is most useful as a compliance checklist in reverse. Under ERISA’s wellness program rules, a compliant tobacco surcharge program must offer a reasonable alternative standard and disclose that alternative in all required plan materials, including enrollment guides and summary plan descriptions. It must also provide the full reward to any employee who completes the cessation program, including retroactive reimbursement of surcharges already paid that plan year.
The third requirement is the one Judge Bough held Compass Group failed. It is also the one most commonly missing from existing program designs, because many employers structured their cessation programs to remove the surcharge prospectively only, a design that the majority of district courts had been willing to accept until now.
The most common vulnerability in these cases has not been the existence of the surcharge itself but the plan documentation around it. Cases have proceeded where enrollment guides and summary plan description materials failed to describe the tobacco surcharge, explain the reasonable alternative standard, or confirm that a physician’s recommendation would be accommodated. Those are correctable documentation failures, and a document audit before the next open enrollment is now a more pressing conversation given the ruling.
The Compass Group decision does not make prospective-only program designs automatically unlawful. Other district courts have upheld them, and no circuit court has yet ruled on the retroactive reimbursement question. What it does give plaintiffs is a ruling on the merits to cite, and that changes the risk calculus for plan sponsors who have not audited their wellness program documentation since the litigation wave began.
