Per Books Online under the section headed Password Policy

Policy Enforcement

The enforcement of password policy can be configured separately for each SQL Server login. Use ALTER LOGIN (Transact-SQL) to configure the password policy options of a SQL Server login. The following rules apply to the configuration of password policy enforcement:

When CHECK_POLICY is changed to ON, the following behaviors occur:

CHECK_EXPIRATION is also set to ON unless it is explicitly set to OFF.

The password history is initialized with the value of the current password hash.

What it doesn't mention is whether complexity is also checked, but I have the suspicion that may be default behaviour.

-d