Cannon v. Comcast Tests Whether Tobacco Surcharge Is ERISA-Compliant Wellness Program
Plan Documents Omitted Required Disclosures, Plaintiff Says
James Cannon Jr., a participant in Comcast Corporation’s self-funded ERISA health plan, alleges the company imposed a $25-per-paycheck tobacco surcharge—amounting to roughly $650 annually for Plaintiff and $50 per month as stated in the Summary Plan Description (SPD)—without providing a compliant wellness program, violating federal anti-discrimination and fiduciary duty rules.
“Comcast’s Plan fails to clearly establish a reasonable alternative standard,” the complaint alleges, “and fails to provide those individuals with retroactive reimbursement.” (Compl. ¶3). “Every individual participating in the program should be able to receive the full amount of any reward or incentive,” the complaint quotes the regulations as requiring. (Compl. ¶32). Instead, Cannon alleges, Comcast’s alternative standards—such as the ComPsych program or a primary-care-physician-based program—provided only prospective relief, not retroactive refunds for surcharges already assessed. (Compl. ¶39).
Complaint Alleges Noncompliant Wellness Program
The complaint further alleges that Comcast’s wellness program was noncompliant due to the absence of required disclosures in participant notices. The Plan did not include a physician-accommodation statement in its notices, as required by federal rules. “Defendants distributed participant-facing materials without the required disclosures,” the complaint states, “including the physician-accommodation statement.” (Compl. ¶84). “The full reward under the outcome-based wellness program must be available to all similarly situated individuals,” the complaint quotes the regulations as mandating. (Compl. ¶29(d)). Cannon alleges that Comcast’s failure to provide compliant notices and alternative standards rendered the surcharge discriminatory under federal anti-discrimination provisions. The complaint asserts that Comcast’s conduct transforms the surcharge into a “subterfuge for discrimination.” (Compl. ¶49).
The complaint brings a cause of action under ERISA’s anti-discrimination provisions: Count I: Violation of ERISA § 702 (29 U.S.C. § 1182) and implementing regulations (42 U.S.C. § 300gg-4(j); 29 C.F.R. § 2590.702(f))—unlawful imposition of tobacco surcharge without compliant wellness program, against all Defendants. (Compl. ¶¶35-49).
“Comcast’s Plan is not a ‘program[] of health promotion or disease prevention’ as required by ERISA but instead an impermissible cost-shifting scheme,” the complaint alleges. (Compl. ¶11). The complaint further asserts that the Plan’s materials, including the SPD and annual benefits guide, did not disclose that completion of a cessation program during the Plan year would entitle participants to relief from the surcharge for the entire year or a refund of surcharges already withheld. (Compl. ¶38).
Surcharge Treated as Plan Funding Stream, Reducing Comcast’s Contributions
The complaint alleges that Comcast treated the tobacco surcharge as part of the Plan’s funding stream, using the proceeds to offset its own contribution obligations. The Summary Plan Description states that the surcharge is added to the “regular required plan contribution,” and Comcast withheld the surcharge from paychecks alongside other premium contributions. (Compl. ¶50). “Every dollar of surcharge collected reduced the company’s contribution dollar-for-dollar,” the complaint alleges. (Compl. ¶53). The surcharge amounts were Plan assets, the complaint contends, and Defendants’ use of the funds to reduce Comcast’s contributions constituted self-dealing and a breach of fiduciary duties. “Defendants used the funds to save money for the company,” the complaint alleges. (Compl. ¶56).
The complaint further alleges that the surcharge shifted costs from Comcast to participants without increasing Plan resources, violating ERISA’s duty of loyalty. The Plan’s funding structure tied participant contributions to Plan assets, reserves, and expected benefit obligations, exposing participants to higher costs and the risk of future benefit reductions. (Compl. ¶105). “Comcast obtained wrongful profits by offsetting its contribution obligations with Plan assets, violating ERISA § 409(a),” the complaint states. (Compl. ¶101).
Fiduciary Breach and Prohibited Transactions Alleged
The complaint brings claims for breach of fiduciary duty, alleging that Comcast and the Benefits Fiduciary Committee failed to administer the Plan solely in the interest of participants. The Committee, which has discretionary authority over Plan management, allegedly omitted material information from participant-facing materials and failed to conduct prudent reviews of the wellness program’s compliance with federal law. The complaint includes Count III: Breach of Fiduciary Duty and Prohibited Transactions (Plan-Level Relief) – Violation of ERISA §§ 404, 406, and 409 (29 U.S.C. §§ 1104, 1106, 1109), against Defendants (brought under ERISA § 502(a)(2), 29 U.S.C. § 1132(a)(2)). (Compl. ¶90-101).
“Defendants are fiduciaries with discretionary authority and control over the management and administration of the Plan,” the complaint states. (Compl. ¶90). The complaint alleges that Comcast breached its duty to monitor the Committee’s administration of the Plan. (Compl. ¶97). The complaint also alleges that Defendants engaged in prohibited transactions by transferring Plan assets for Comcast’s benefit. “The Plan suffered harm due to Defendants’ use of surcharge proceeds to reduce Comcast’s contribution obligations,” the complaint alleges. (Compl. ¶100).
Relief Sought Includes Restitution and Disgorgement
Cannon seeks class certification and equitable relief under 29 U.S.C. § 1132(a)(2) and (a)(3). The complaint requests restitution of unlawfully collected surcharge amounts, disgorgement of profits from violations, an accounting of all prior surcharge payments, and a surcharge against Defendants for amounts owed to participants.
“Equitable restitution of unlawfully collected surcharge amounts traceable through Defendants’ handling and commingling of Plan funds” is among the forms of relief requested. (Compl. ¶106). The complaint also seeks recovery of unlawfully charged fees and fiduciary breach under 29 U.S.C. § 1109. (Compl. ¶80).
The allegations are unproven, and no defendant has yet responded to the complaint.
The allegations described here are taken from the filing and remain unproven; no responsive pleading is reflected in the source document.
David Brunk is a civil litigation attorney. He can be reached at david@newmanbrunk.com.
From the Complaint Public Court Record
1 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF PENNSYLVANIA JAMES CANNON JR., on behalf of himself and all others similarly situated, Plaintiff, v. COMCAST CORPORATION; THE COMCAST CORPORATION BENEFITS FIDUCIARY COMMITTEE; and JOHN DOES 1–20, Defendants. Civil Action No.: CLASS ACTION COMPLAINT Plaintiff, James Cannon Jr. (“Plaintiff”), individually and on behalf of the Class defined below of similarly situated persons, alleges the following against Comcast Corporation (“Comcast”), the Comcast Corporation Benefits Fiduciary Committee (the “Committee”), and the individual members of the Committee during the relevant time period (collectively, the “Defendants”), 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 Comcast to impose discriminatory and punitive health insurance surcharges on employees who use tobacco products without making available a reasonable alternative standard to avoid those surcharges. This lawsuit challenges Defendants’ unlawful practice of charging a tobacco surcharge under the Comcast Comprehensive Health and Welfare Benefit Plan (the “Plan”) in a manner that violates the Employee Retirement
2 Income Security Act of 1974 (“ERISA”) and the implementing regulations. ERISA permits health- contingent wellness programs that promote health if, and only if, such programs strictly comply with the criteria governing these programs, including: (i) making available a meaningful and accessible reasonable alternative standard to any individual being charged extra based on a health factor; (ii) clearly disclosing the availability of that alternative standard, the means to access it, and the right to a physician-directed alternative in “all plan materials” describ
Questions about this topic: david@newmanbrunk.com