Medicare Part D Creditable Coverage Notice: Employer Guide

Every employer that offers a group health plan with prescription drug coverage to a Medicare-eligible employee, retiree, COBRA participant, or dependent has two separate Medicare Part D disclosure obligations each year, not one. The first goes to the people on the plan. The second goes to the federal government. Missing either one does not carry a direct fine, but it can strip a retiree drug program of its subsidy and leave plan members facing a permanent premium penalty they will blame on the employer. This guide covers both deadlines, the CMS rule change taking effect for 2026, and how the determination interacts with the rest of your benefits package.

If you have not reviewed your broader October compliance calendar yet, our employer's guide to open enrollment covers the surrounding deadlines this notice usually gets bundled with.

What Is a Medicare Part D Creditable Coverage Notice?

A Medicare Part D creditable coverage notice is a written statement telling a Medicare-eligible plan member whether the employer's prescription drug coverage is expected to pay, on average, at least as much as the standard Medicare Part D benefit. Coverage that meets this bar is "creditable." Coverage that falls short is "non-creditable." The notice itself does not change anyone's coverage. It only tells a Medicare-eligible person what they need to know before deciding whether to enroll in a separate Part D plan during their own enrollment window.

This requirement comes from the Medicare Modernization Act of 2003 and applies to every employer plan sponsor offering drug coverage, regardless of company size, funding type, or whether the plan is grandfathered under the Affordable Care Act. A five-employee business with a fully insured plan and a Fortune 500 self-funded employer follow the identical notice requirement.

When Is the Member Notice Due?

The notice to Medicare-eligible plan members is due before October 15 each year, timed to arrive before the Medicare Annual Election Period opens on October 15 and runs through December 7. A Medicare-eligible person needs this information before that window opens so they can decide whether to enroll in a Part D plan or stay on the employer's coverage without penalty.

The notice also has to go out at several other points during the year: when a new Medicare-eligible employee joins the plan, before the effective date of any coverage change that affects creditable status, upon a beneficiary's request, and if the plan's prescription drug coverage terminates for that individual. Most employers handle the recurring obligation by folding the October notice into open enrollment materials, then handling the other trigger events as they come up.

When Is the CMS Disclosure Due, and Is It the Same Thing?

The CMS disclosure is a separate filing, due within 60 days after the start of each plan year, and it is not satisfied by sending the member notice. For a calendar-year plan starting January 1, the CMS disclosure deadline falls at the beginning of March. The filing is completed online through the CMS creditable coverage disclosure form and confirms whether the plan's drug coverage is creditable or non-creditable for that plan year, using the same determination method behind the member notice.

There is no direct financial penalty from CMS for missing the disclosure filing itself. The real cost shows up elsewhere: an employer plan that receives the Retiree Drug Subsidy cannot claim that subsidy for a plan year without a timely, accurate CMS disclosure on file, and Medicare-eligible members who never got a compliant notice have a real basis to blame the employer when they get hit with a late-enrollment premium penalty they could have avoided.

What Changed for 2026 Creditable Coverage Determinations?

CMS raised the bar for the simplified determination method most small and mid-size employers use, replacing the 60% average-cost-coverage threshold with a 72% threshold, tied to how much richer the standard Medicare Part D benefit became under the Inflation Reduction Act's redesign. A plan's prescription drug coverage now has to pay, on average, at least 72% of participants' expected drug costs to qualify as creditable under the simplified method, compared to 60% before.

For 2026 only, CMS lets non-subsidy employer plans choose either the old 60% method or the new 72% method when making the determination. Starting with plan years beginning in 2027, the 60% method goes away entirely, and CMS has already confirmed the 2027 threshold rises again, to 73%. A plan design that comfortably cleared 60% in past years is not automatically safe at 72%, and an employer that has not rerun the calculation since the benefit redesign should not assume last year's creditable determination still holds.

A plan that does not meet either simplified threshold can still be found creditable through a full actuarial equivalence test, but that requires an outside actuary and is a meaningfully bigger lift than the simplified calculation most small employers rely on.

Does This Notice Apply to Every Type of Health Plan?

The notice requirement applies to fully insured plans, self-funded plans, HRAs and ICHRAs that provide prescription drug coverage, and grandfathered plans alike. It does not turn on plan size, funding structure, or ACA status the way some other notices do. If the plan includes any prescription drug benefit and covers even one Medicare-eligible individual, whether an active employee past 65, a retiree, a COBRA participant, or a covered spouse or dependent, the notice obligation applies. If you are still deciding between a group plan and an ICHRA-based approach, our ICHRA guide covers how that decision affects your Medicare-eligible workforce.

Whether a plan's premiums run through a pre-tax Section 125 cafeteria plan has no bearing on this determination. The creditable coverage test looks at the drug benefit design itself, not how employees pay for their share of the premium.

An employer plan with zero Medicare-eligible participants in a given year technically has no one to send the individual notice to, but the CMS online disclosure is still generally expected annually for any plan sponsor offering prescription drug coverage. Most employers file it as a matter of course rather than trying to confirm zero Medicare-eligible enrollment every year.

How Does This Interact with COBRA and Retiree Coverage?

A Medicare-eligible COBRA participant or retiree on employer-sponsored drug coverage needs the same creditable coverage notice as an active employee, and the stakes are often higher because these are exactly the populations most likely to be weighing a Part D enrollment decision in real time. For background on how COBRA continuation coverage and Medicare eligibility interact more broadly, see our COBRA guide. Small employers weighing whether a traditional group plan is still the right fit can also compare options in our small business health insurance alternatives guide.

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Frequently Asked Questions

Ready to confirm your plan's 2026 creditable status before the October notice deadline? Summit Health Benefits checks your plan design against the new CMS threshold and handles both the member notice and the CMS filing.

Sources: Centers for Medicare and Medicaid Services (CMS); Medicare Modernization Act of 2003; Internal Revenue Service.