Upcoming Medicare Part D Creditable Coverage Notice Deadline

Creditable Coverage

Prescription drug coverage is considered “creditable” when its actuarial value equals or exceeds the actuarial value of standard Medicare Part D prescription drug coverage. Generally, this actuarial determination measures whether the expected amount of paid claims under the group health plan’s prescription drug coverage is at least as much as the expected amount of paid claims under the Medicare Part D prescription drug benefit. It is considered “non-creditable” when it does not provide, on average, as much coverage as Medicare's standard Part D plan.

Employers are not required to offer prescription drug coverage to their employees. However, they are required to notify Medicare Part D-eligible plan participants of their prescription drug plans’ creditable coverage status. Employers offering multiple plan options (for example, a PPO, an HDHP, and/or an HMO) must determine the creditable coverage status separately for each plan option.

Note that due to several changes to Medicare Part D plans that began in 2025, some employer-sponsored prescription drug plans might find it challenging to meet creditable coverage requirements and could be considered “non-creditable” in 2026. Click here for a Risk Strategies article for more information.

Determination of Creditable Coverage for 2026

As we previously reported here, there are three approved methods from the Centers for Medicare and Medicaid Services (CMS), the federal agency governing Medicare, to determine whether coverage is creditable for Medicare Part D purposes for the 2026 calendar year:

1. The current simplified determination method,
2. The revised simplified determination method, and
3. The actuarial determination method.

For the 2026 calendar year, employer plan sponsors can generally use one of the two available “safe harbor” simplified determination methods (detailed below). These two “safe harbor” methods provide creditable coverage simply as a result of the way they are designed.

Current Simplified Determination Method:

The elements under the current simplified determination method to deem a prescription drug coverage benefit creditable are outlined below:

1. The plan provides coverage for brand and generic prescriptions;
2. The plan provides reasonable access to retail providers;
3. The plan is designed to pay on average at least 60% of participants’ prescription drug expenses; and
4. The plan satisfies at least one of the following^[1]:
   • The coverage has no annual benefit maximum or maximum annual benefit payable by the plan of at least $25,000;
   • The coverage has an actuarial expectation that the amount payable by the plan will be at least $2,000 annually per Medicare-eligible individual; or
   • For employers that have integrated prescription drug and health coverage, the integrated plan has no more than a $250 deductible per year, has no annual benefit maximum or a maximum annual benefit of at least $25,000, and has no less than a $1,000,000 lifetime combined benefit maximum.

Revised Simplified Determination Method:

The elements under the revised simplified determination method to deem a prescription drug coverage benefit creditable, in accordance with the Final CY 2026 Part D Redesign Program Instructions (Final Instructions), are outlined below:

• The plan provides reasonable coverage for brand name and generic prescription drugs and biological products;
• The plan provides reasonable access to retail pharmacies; and
• The plan is designed to pay, on average, at least 72% of participants’ prescription drug expenses.

Notably, the Final Instructions clarify that for calendar year 2026 only, employer plan sponsors will be provided the choice to use either the current simplified determination method or the revised simplified determination method to determine whether their prescription drug coverage is creditable.

Click here for additional insight into the revised simplified determination method.

Actuarial Determination Method:

If a plan’s prescription drug coverage does not satisfy the requirements for being considered creditable under either of the design-based “safe harbor” simplified determination methods detailed above, an actuarial determination will need to be made. Prescription drug coverage is considered to be creditable under this determination method if the actuarial value of that coverage equals or exceeds the actuarial value of “defined standard prescription drug coverage” using generally accepted actuarial principles in accordance with CMS actuarial guidelines. Generally, actuarial equivalence refers to a determination that, in the aggregate, the dollar value of drug coverage for a set of beneficiaries under one plan can be shown to be equal to the dollar value for those same beneficiaries under another plan.^[2]

Risk Strategies’ team of qualified actuaries can support employer plan sponsors with the actuarial determination method to determine creditable coverage status.

Calendar Year 2027

For the 2027 calendar year, the Final Instructions note that CMS intends to no longer permit the use of the current simplified determination method. If finalized by CMS, this would result in non-RDS group health plans having to use either the revised simplified determination method or the actuarial determination method for the 2027 calendar year.

Notice of Creditable Coverage Requirements

Notice Timing: In addition to the October 15 distribution deadline prior to Medicare Part D annual enrollment, the notice is also required to be provided at other times, including:

• Prior to an individual’s initial enrollment period for Part D,
• Prior to the effective date of coverage for any Medicare-eligible individual who joins the plan;
• When prescription drug coverage terminates or changes creditable/non-creditable status; and
• Upon request.

Employer plan sponsors are also advised to consider including the notice in plan enrollment materials for new hires.

Notice Recipients: The notice of creditable (or non-creditable) coverage must be distributed to all Medicare-eligible individuals who are covered under an employer’s prescription drug coverage plan. This may include not only active employees and their covered dependents, but also disabled employees, retirees, COBRA participants, and their covered spouses and dependents in each instance.

Since most employer plan sponsors will not generally know whether a covered spouse or dependent is Medicare-eligible, many plan sponsors, as a common practice, send the notice to all active and disabled employees, retirees, and COBRA individuals. Plan sponsors must include clear language in the notice directing the recipient to provide the notice to any Medicare-eligible spouses and dependents covered under the plan. However, a separate notice must be provided if a plan sponsor happens to know that any spouse or dependent participating in the plan who is eligible for Medicare Part D resides at a different address from the employee or retiree.

Notice Distribution: The notice may be mailed out as a separate, stand-alone document or included as part of open enrollment or other benefit-related materials, as long as it is prominent and conspicuous within the other materials. To satisfy the “prominent and conspicuous” requirement, the disclosure notice portion of the document (or a reference to the section in the document being provided to the individual that contains the required statement) must be prominently referenced in at least 14-point font in a separate box, bolded, or offset on the first page. See below for an example of what this “separate box” should look like based on CMS guidance:

Electronic Delivery: The notice can also be sent electronically as long as plan participants have regular work-related computer access in accordance with the Department of Labor rules regarding electronic delivery methods^[3]. Plan sponsors that send the notice electronically must also inform plan participants that they are responsible for providing a copy of the notice to their Medicare-eligible dependents covered under the group health plan.

CMS guidance also clarifies that a plan sponsor may provide the notice electronically to retirees if the individual has indicated to the employer that they have adequate access to electronic information. Before individuals agree to receive their information via electronic means, they must be informed of their right to obtain a paper version, how to withdraw their consent and update address information, and any hardware or software requirements to access and retain the notice.

If an individual consents to an electronic transfer of the notice, a valid e-mail address must be provided to the employer plan sponsor, and the individual’s consent must be submitted electronically. This ensures both the individual’s ability to access the information as well as the system for providing these documents results in actual receipt. In addition to having the notice sent to the individual’s email address, the notice (except for personalized notices) must be posted on the employer plan sponsor’s website, if applicable, with a link on the home page to the Medicare Part D creditable coverage notice.

CMS Model Notice

CMS provides model notices (accessed here), available in both English and Spanish, which employer plan sponsors can leverage to satisfy their notice distribution requirements.

If an employer plan sponsor chooses not to use the CMS model notices, their customized notice must still include certain information, including a disclosure about whether the plan’s coverage is creditable, the meaning of creditable coverage (as defined by CMS guidance), and why creditable coverage is important.

Purpose of the Medicare Part D Notice of Creditable Coverage

There are no specific penalties for an employer plan sponsor who fails to provide the Medicare Part D Notice of Creditable Coverage to employees. However, Medicare Part D eligible individuals who fail to maintain creditable coverage for a period of 63 continuous days or more will face a late enrollment penalty when they eventually enroll in Part D. For this reason, the notice serves an important purpose for these individuals to prove they maintained creditable coverage and avoid late enrollment penalties when they ultimately enroll in Part D.

CMS Medicare Part D Disclosure Reporting

Although the Medicare Part D Notice of Creditable Coverage must be distributed before October 15 each year, employers sponsoring prescription drug coverage must also annually disclose to CMS the plan’s creditable coverage status within 60 days of the start of the plan year. For employers with calendar year plans (January 1 – December 31), the deadline to complete this disclosure to CMS is typically March 1.

Click here for a previous Risk Strategies article with more information on CMS Medicare Part D disclosure reporting requirements.

Next Steps for Employer Plan Sponsors

The first step for employer plan sponsors is to determine whether their prescription drug coverage is creditable or non-creditable.

• Fully-Insured Plans: Employers who sponsor fully-insured group health plans can typically rely on their carriers to determine the creditable coverage status of their prescription drug coverage.
• Self-Funded Plans: For employers with self-funded health plans (including level-funded plans), your Risk Strategies account team can assist with determining the creditable coverage status of your prescription drug coverage if the plan’s third-party administrator or pharmacy benefit manager does not provide the determination.

Once the coverage’s creditable status is determined, employer plan sponsors are advised to prepare and distribute the applicable notice before October 15, 2025. As a reminder, CMS model notices for this purpose can be accessed here.

Contact your Risk Strategies team members for further assistance, or contact us directly here.

[1] The Affordable Care Act prohibits health plans from imposing lifetime and annual limits on the dollar value of essential health benefits.

[2] Preamble to Medicare Part D Regulations (Jan. 28, 2005)

[3] In accordance with DOL Reg. §2520.104b-1(c)(1).