SQL Server Enforce Password Policy
The password policy applies to restrictions around Windows password policy, including things like:


An uppercase character (A-Z). 
A lowercase character (a-z).
A digit(0-9).  
One of the non-alphanumeric characters, such as a    space, _, @,
*, ^, %, !, $, #, or &amp;.


It does not handle expiration checks, you need to have the check expiration set for that to happen.

Reference MSDN Create Login