Every fall, small employers get a reminder about a "Medicare Part D notice" and wonder whether it applies to them. If your health plan includes prescription drug coverage and anyone on it is eligible for Medicare, it does.
A Medicare Part D creditable coverage notice is a yearly letter telling Medicare-eligible plan members whether your plan's drug coverage is at least as good as Medicare's standard Part D benefit. It's due before October 15 each year, when Medicare open enrollment starts. The notice protects your employees: it tells them whether they can skip Part D without paying a penalty later.
This guide explains what "creditable" means, who gets the notice and when, why the rules tighten for 2027, who makes the call on your plan, and what to do if you missed the deadline. It's general information, not legal advice.
Creditable coverage is prescription drug coverage that is expected to pay, on average, at least as much as Medicare's standard Part D plan. Coverage that falls short is non-creditable.
The distinction matters because of Medicare's late enrollment penalty. People who go 63 or more days in a row without creditable drug coverage after becoming eligible for Part D pay a penalty when they finally enroll. That penalty is added to their Part D premium for as long as they have Part D.
So picture a 67-year-old employee who keeps working and stays on your plan instead of enrolling in Part D. If your drug coverage is creditable, that choice is safe. If it's not, and nobody told them, they could pay for that gap for the rest of their life.
You're not required to offer creditable coverage. You are required to tell people which kind you offer.
The notice goes to every Medicare-eligible person on your drug coverage. That includes employees, spouses and dependents, and people who qualify for Medicare through disability, not just those 65 and older. Because many employers can't easily tell who's Medicare-eligible, a common approach is to send it to everyone on the plan, often in the open enrollment packet.
The notice must be in writing, and CMS publishes model notices in English and Spanish. If you offer more than one plan, check each one: a low-deductible plan can be creditable while a high-deductible plan isn't.
The bar for "creditable" went up because Medicare's own drug benefit got richer. The Inflation Reduction Act redesigned Part D starting in 2025, including a cap on out-of-pocket drug costs. When the standard Medicare benefit pays more, employer plans have to pay more to match it.
For years, most employers used CMS's "simplified determination" method, a design-based safe harbor. Under the 2009 version, a plan generally qualified if it was designed to pay at least 60% of members' drug costs. Here's how that has changed, based on CMS's April 2026 final rule as summarized below:
CMS projects the threshold will keep rising, reaching 75% by 2030.
The practical result: a plan that was creditable for 2026 under the old method may not be for 2027. High-deductible plans, where members pay full price for drugs until the deductible is met, are the most likely to fall short. If your plan's status changes, the notice your employees receive this year should say so.
One change makes life easier. Starting in 2027, account-based plans, including HRAs, ICHRAs, FSAs and HSAs, no longer have to send creditable coverage notices, because they don't provide drug coverage themselves.
The employer is responsible for the notice, but you usually don't have to run the numbers yourself.
Fully insured plans. The insurance carrier typically makes the creditable determination for each plan it offers and often supplies a ready-made notice. Your job is to make sure the notice reaches the right people on time.
Level-funded and self-funded plans. The determination usually comes from the plan's third-party administrator (TPA), its pharmacy benefit manager (PBM) or an actuary. Ask for it in writing for each plan option, and ask specifically whether it was tested under the revised 2027 method.
If a plan fails the simplified test and you don't get an actuarial determination, you can treat it as non-creditable and send that notice. That's safer than guessing creditable and being wrong.
Not sure what your carrier or TPA has on file for your plan? A Bespoke team member can help you.
Send the notice now. There's no specific federal penalty on employers for a late Part D notice, but the risk to your employees is real, and the fix is simple.
A late notice that gives people time to act is far better than none. An employee who learns in December that their coverage isn't creditable can still choose a Part D plan for January.
The employee notice isn't the only Part D requirement. Employers also have to report their plan's creditable status to CMS each year, generally within 60 days after the plan year starts. For a January 1 plan year, that's around March 1.
The disclosure is filed online through CMS's creditable coverage portal and takes a few minutes once you know your status. A new disclosure is also due if your drug coverage ends or its creditable status changes. Put it on your compliance calendar next to the October notice.
Do small employers have to send a Medicare Part D notice?
Yes, if your group health plan includes prescription drug coverage and anyone on it is Medicare-eligible. There's no size exemption. Most employers satisfy the requirement by including the notice in open enrollment materials sent to everyone, which avoids having to identify exactly who is Medicare-eligible.
When is the Medicare Part D creditable coverage notice due?
The annual notice is due before October 15, the start of Medicare's open enrollment. It's also due before a person's initial Part D enrollment period, before a Medicare-eligible person's coverage starts, within 30 days of a change in creditable status, and whenever someone asks for it.
What happens if an employer doesn't send the notice?
There's no specific federal penalty on the employer. The risk falls on employees: someone who skips Part D believing their coverage was creditable can face a lifelong late enrollment penalty. If you missed the deadline, send the notice as soon as possible so people can still act during open enrollment.
Who should receive the Part D notice?
Every Medicare-eligible person covered by your drug plan should receive it, including employees, spouses, dependents and people eligible through disability. Because tracking eligibility is hard, many employers send the notice to all plan participants. CMS provides model notices in English and Spanish.
Do HRAs, ICHRAs and HSAs need a Part D notice?
Not starting in 2027. CMS's April 2026 final rule removed account-based plans, including HRAs, ICHRAs, FSAs and HSAs, from the notice requirement because they don't provide drug coverage themselves. Any group health plan that does include drug coverage still needs a notice.
How do I know if my plan is creditable for 2027?
Ask your carrier, TPA or PBM for a written determination for each plan option. For 2027, a plan generally qualifies under CMS's simplified method if it's designed to pay at least 73% of members' drug costs. Plans that don't meet that test need an actuarial determination or a non-creditable notice.
We'll confirm whether each of your plans is creditable under the new rules and make sure the right notices go out every year, on time.
Reach out and let Bespoke Benefits guide you through the requirements for this year, and prepare for what's to come in 2027.
Talk to an advisor.
