If your group health plan includes prescription drug coverage, you have two Medicare Part D obligations every year. You have to tell your Medicare-eligible plan members whether their drug coverage is creditable, and you have to tell the Centers for Medicare & Medicaid Services (CMS) the same thing. One narrow exception applies to the second obligation: if you are approved for the Retiree Drug Subsidy, you do not file the CMS disclosure for the individuals and benefit options you are claiming the subsidy on. The participant notice still applies.

Most employers treat this as a routine October task. For plan years beginning in 2027, the process changes. CMS is retiring the legacy simplified determination method, the revised method will require plans to pay an average of at least 73% of participants’ prescription drug expenses, and account-based medical plans will no longer be subject to these disclosure rules. Some plans that pass today may not pass under the revised method, and a notice is only as reliable as the determination behind it. 

Here’s what changed, which deadlines apply, and what to review with your carrier, administrator, or benefits advisor before the next notice goes out. 

In this guide

• Annual participant and CMS disclosure deadlines
• The 2027 determination and account-based plan changes
• How to determine whether coverage is creditable
• Who must receive a notice and when
• What the notice must include and how to deliver it
• How to file the CMS disclosure
• How to document coverage for employees
• Consequences of missed disclosures 
• The annual compliance calendar

The two deadlines at a glance

Two additional CMS deadlines apply outside the annual cycle: within 30 days after your prescription drug coverage terminates, and within 30 days after any change in its creditable coverage status.

What changes for 2027

In its CY 2027 final rule, published in the Federal Register on April 6, 2026, CMS made two changes employers need to plan for. 

The legacy simplified determination method is being retired

Employers that do not claim the Retiree Drug Subsidy have long had two ways to determine creditable status: a simplified determination method that works as a design-based safe harbor, and a full actuarial determination.

The Inflation Reduction Act raised the actuarial value of the Part D benefit, capping annual out-of-pocket costs at $2,000 in 2025 and $2,100 in 2026. That made the old safe harbor too easy to clear. CMS revised the simplified method for 2026 and allowed employers to use either the legacy or revised method during the transition year. Starting in 2027, only the revised method is available.

The practical consequence is that the threshold moves from paying an average of 60% of participants’ drug expenses under the legacy method to 73% for 2027, and the dollar-based alternatives that provided a second route to creditable status are gone. A plan that cleared the legacy test comfortably may not clear the revised one. CMS is expected to publish the applicable percentage for future years through annual guidance. 

If your plan’s drug coverage falls short of the revised simplified method, it can still be creditable. You just have to demonstrate it through an actuarial determination rather than rely on the safe harbor.

Account-based medical plans no longer have to disclose

For coverage beginning Jan. 1, 2027, sponsors of account-based medical plans no longer need to determine or disclose creditable coverage status. That covers:

• Health reimbursement arrangements (HRAs), including individual coverage HRAs (ICHRAs)
• Health flexible spending accounts (FSAs)
• Health savings accounts (HSAs)
• Archer Medical Savings Accounts (MSAs)

CMS explained that these arrangements reimburse medical expenses rather than directly provide prescription drug coverage. Requiring a separate determination could create conflicting messages when, for example, an HRA reported non-creditable coverage while the underlying individual policy reported creditable coverage.

The relief is narrower than it may sound. If you sponsor a group health plan that provides prescription drug coverage, whether fully insured, self-funded, or level-funded, nothing about your obligation changes. And if you offer both a traditional group health plan and an ICHRA, the group health plan still has to be tested and disclosed.

Determining whether your coverage is creditable

Creditable coverage means your plan’s prescription drug coverage is expected to pay, on average, at least as much as standard Medicare Part D coverage.

Two points employers often miss:

• The test applies separately to each benefit option. If you offer a PPO, an HMO, and a high-deductible plan, each option must be evaluated on its own and may produce a different determination. 
• Being a high-deductible health plan does not automatically make coverage non-creditable. An HDHP’s drug coverage is tested like any other option. The HSA paired with it is a separate account-based arrangement, and that account is what becomes exempt from disclosure in 2027, not the health plan.

Who makes the determination

Fully insured plans. Your carrier will typically make the determination and provide it to you. Ask for it in writing, and ask early enough that you can send notices before Oct. 15. The plan sponsor should still confirm that each option has been evaluated and that the applicable disclosure requirements are satisfied.

Self-funded and level-funded plans. Your third-party administrator or pharmacy benefit manager may provide the determination. If they do not, a qualified benefits consultant can help apply the revised simplified method. Plans relying on actuarial equivalence should involve an actuary.

Retiree Drug Subsidy participants. If you claim the RDS, you cannot use either simplified method. You must use the actuarial determination method, which requires an attestation from a qualified actuary.

Not sure which of your benefit options clear the revised threshold? Our employee benefits and Medicare team can review your prescription drug coverage against the 2027 standard and help you identify next steps before notices are due.

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Who must receive the notice

The notice goes to Medicare Part D-eligible individuals who are covered by, or who apply for, your plan’s prescription drug coverage. That applies whether your coverage is primary or secondary to Part D. 

An individual is Part D-eligible if they:

• Are entitled to Medicare Part A or enrolled in Medicare Part B, and
• Live in the service area of a Medicare Part D plan or a Medicare Advantage plan that includes prescription drug coverage

In practice, that group is broader than most employers expect. It includes active employees, disabled employees, COBRA participants, and retirees, along with their covered spouses and dependents.

Because you often will not know which plan members are Medicare eligible, most plan sponsors send the notice to all plan participants. It is the simplest way to be confident you have not missed anyone.

When notices are required

Before Oct. 15 is the deadline everyone remembers, but there are five triggers:

1. Before the Part D annual coordinated election period, which runs Oct. 15 through Dec. 7
2. Before an individual’s initial enrollment period for Part D
3. Before the effective date of coverage for any Medicare-eligible individual who joins your plan
4. Whenever your prescription drug coverage ends, or changes so that it becomes creditable or stops being creditable
5. Upon a member’s request

Sending the notice to all plan participants annually before Oct. 15 satisfies the first two. "Before" means the individual received the notice within the preceding 12 months. Adding the notice to your new hire enrollment materials covers the third, and many employers fold it into the open enrollment packet to handle the annual requirement at the same time.

What the notice has to say

CMS publishes model notices in English and Spanish. You are not required to use them, but if you write your own, the content standards still apply.

If your coverage is creditable

• A statement that you have determined the coverage is creditable
• An explanation of what creditable coverage means, namely that the plan is expected to pay, on average, at least as much as standard Medicare Part D coverage
• An explanation of why that matters, including that a break in creditable coverage of 63 continuous days or more before enrolling in Part D can result in higher premiums

If your coverage is non-creditable

• A statement that you have determined the coverage is not creditable
• An explanation that the plan is expected to pay, on average, less than standard Part D coverage
• An explanation that individuals can generally only enroll in Part D between Oct. 15 and Dec. 7
• A clarification that failing to enroll when first eligible may mean higher premiums later

CMS also recommends covering the member’s right to request a notice, the options available once Part D coverage is available, whether the individual keeps existing coverage if they enroll in Part D, whether dropped coverage can be reinstated, and how to get financial assistance with Part D costs through the Social Security Administration.

Delivering the notice

You have flexibility in how you deliver the notice. It does not need its own mailing, and it can travel with open enrollment or renewal materials as long as it is prominent and conspicuous within them.

A single notice generally covers the plan member and all Medicare-eligible dependents at the same address. If you know a Medicare-eligible spouse or dependent lives elsewhere, send that person a separate notice.

Electronic delivery

Electronic delivery is permitted if you follow the Department of Labor’s electronic disclosure standards. For employees who use a computer as part of their regular job duties, that means:

• Using reasonable means to confirm the notice was actually received
• Telling the recipient, at the time you send it, that the document is significant
• Making a paper copy available on request

You also have to tell the participant that they are responsible for passing the notice along to their Medicare-eligible dependents covered by the plan.

For retirees and anyone without regular workplace computer access, the requirements are heavier. The individual has to consent, and before consenting must be told about their right to a paper copy, how to withdraw consent and update their address, and any hardware or software they will need. Consent has to be submitted electronically along with a valid email address. If you deliver electronically, you also need to post the notice on your website with a link from the homepage.

Filing the disclosure to CMS

The second obligation is reporting your creditable coverage status to CMS. Unlike the participant notice, this is a form submission rather than a mailing.

1. Open the online disclosure form on the CMS creditable coverage site.
2. Report your plan’s creditable or non-creditable status and the number of Part D-eligible individuals expected to be covered.
3. Submit within 60 days after the start of your plan year. For calendar-year plans, that is generally March 1.

The online form is the only accepted method unless a specific exception applies. Because this deadline falls months after the October notice, it is the one employers most often lose track of. Put both dates on the same compliance calendar.

When an employee asks you to prove their coverage

Employees approaching Medicare, or enrolling later than 65, are often asked to document that they have had creditable prescription drug coverage. The request usually arrives as "I need a letter for Social Security" or "Medicare wants proof of my coverage."

The annual notice can often serve as proof. CMS’s model notice also includes an optional personalized section that employers can complete when an individual needs documentation of prior creditable coverage. 

If you are not using the model notice, you can provide a personalized statement of creditable coverage that includes:

• The individual’s first and last name
• Their date of birth or unique member identification number
• Your organization’s name and contact information
• A statement that you determined the plan’s coverage is creditable or non-creditable
• The date ranges of creditable coverage

Two clarifications are worth having ready.

This is not a HIPAA certificate of creditable coverage. Those certificates documented prior coverage for pre-existing condition exclusions, and they have not been required since the Affordable Care Act eliminated those exclusions. If an employee asks for one, what they almost always need is the Part D notice or a personalized statement.

Part D and Part B work differently. Creditable coverage protects against the Part D late enrollment penalty. Part B has its own enrollment rules and its own special enrollment period tied to current employment, and COBRA and retiree coverage are treated differently for Part B than for Part D. That difference catches people off guard. See our guide to age 65 Medicare decisions and employer coverage coordination for how the two interact.

Employees who want help evaluating their own Medicare options can be pointed to our personal Medicare team.

What happens if you do not send the notice

CMS generally cannot impose direct penalties on an employer that fails to provide creditable coverage disclosure notices. That makes the requirement easy to deprioritize, which is a mistake for three reasons.

If you claim the Retiree Drug Subsidy, you will not qualify for the subsidy unless you provide the notices.

ERISA’s fiduciary provisions can create indirect consequences for a plan sponsor that does not meet its disclosure obligations.

The most immediate risk is to employees. Someone who was not told that their drug coverage was non-creditable and therefore did not enroll in Part D when first eligible can face a late-enrollment penalty that generally continues for as long as the individual remains enrolled in Part D. Accurate, timely notices help employees make informed enrollment decisions and avoid an unnecessary long-term cost.

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Your annual Part D compliance calendar

For 2027, add one step: confirm which determination method your carrier or administrator is using, because the method most employers have relied on is no longer available.

Talk with a benefits advisor

The Part D notice itself is straightforward. The determination behind it is where compliance risk is most likely to arise, and the 2027 changes make early review especially important. If you are not certain that every benefit option will still qualify as creditable, resolve the question now rather than waiting until September.

Christensen Group’s employee benefits team helps Minnesota employers work through creditable coverage determinations, notice distribution, and CMS reporting alongside the rest of their benefits strategy. Get in touch and we will take a look at where your plan stands.

Links and resources

• CMS model notice letters for creditable and non-creditable coverage, in English and Spanish
• CMS creditable coverage overview, including guidance and instructions
• CMS online disclosure form
• CY 2027 Medicare Advantage and Part D final rule (Federal Register)
• Christensen Group HR resources

Related reading

• Medicare Part D changes for employer plans in 2026 and 2027
• Age 65 Medicare decisions: Part B enrollment, employer coordination, and key factors to consider

This article is intended for general information and is not exhaustive, nor should any discussion or opinion be construed as legal advice. Readers should contact legal counsel for legal advice specific to their plan.