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Every fall, employers that offer prescription drug coverage have an important Medicare Part D responsibility. They must tell Medicare-eligible employees and dependents whether their current employer-sponsored drug coverage is “creditable” or “non-creditable.”

The annual notice must be provided before October 15, when Medicare’s Annual Enrollment Period begins. For 2026, that means employers should distribute their notices no later than Wednesday, October 14, 2026.

This year, however, there is another Medicare Part D issue getting attention. The rules for determining whether employer coverage is creditable are changing for plan years beginning in 2027.

That has created some understandable confusion. Medicare beneficiaries will be selecting 2027 Medicare coverage during this fall’s Annual Enrollment Period beginning October 15, 2026. Does that mean employers should already be using the new 2027 testing rules for notices they are distributing now?

For most employers, the answer is no.

The annual notice should reflect the prescription drug coverage applicable to the Medicare-eligible individual at the time the notice is provided. For fully insured plans quoted through Word & Brown, we maintain published references identifying all non-creditable plans for 2026 plan-year effective dates: California Plans | Nevada Plans. Employers and brokers can use those resources to confirm the status of the plan currently in place.
The key is to match the notice to the coverage the individual actually has – or is about to enroll in – rather than assuming every October notice automatically relates to the next calendar year.

First, What Is “Creditable Coverage?”

Prescription drug coverage is considered “creditable” when it is expected to pay, on average, at least as much as Medicare’s standard Part D prescription drug coverage.
Employers are not required to offer creditable prescription drug coverage. But they are required to determine whether the coverage they offer is creditable or non-creditable and disclose that information to Medicare-eligible individuals covered by the plan.

Why It Matters

A Medicare-eligible individual who goes 63 continuous days or longer without Medicare Part D or other creditable prescription drug coverage may become subject to a Medicare Part D late enrollment penalty. In most cases, that penalty continues for as long as the individual has Medicare prescription drug coverage.

That makes an accurate creditable coverage notice much more than another annual disclosure. It gives Medicare-eligible individuals important information they may need when deciding whether to maintain employer coverage or enroll in Medicare Part D.

The Medicare Part D Benefit Got Better – So Testing Is Changing

The Inflation Reduction Act of 2022 significantly redesigned Medicare Part D and increased the value of the standard Medicare prescription drug benefit.

That created a problem with the longstanding simplified method employer plans have used to determine whether their prescription drug coverage is creditable.

Under the previous simplified methodology, qualifying employer plans could generally satisfy the test if the coverage was designed to pay at least 60% of participants’ prescription drug expenses, along with several other requirements.

The Centers for Medicare & Medicaid Services (CMS) concluded that this methodology no longer appropriately reflected the value of the redesigned Medicare Part D benefit. For 2026, CMS introduced a revised simplified method requiring the plan to pay at least 72% of participants’ prescription drug expenses. However, CMS gave most group health plans a one-year transition period. For plan years beginning in 2026, they could use either the existing simplified method or the revised method.

That transition ends with 2026.

Beginning with plan years starting in 2027, the old, simplified methodology is retired. Plans using the revised simplified method must be designed to pay, on average, at least 73% of participants’ prescription drug expenses. Plans may alternatively establish creditable status through actuarial equivalence testing.

This means a plan that has historically been considered creditable should not automatically be assumed to remain creditable upon renewal in 2027.

Some plans may continue to pass the revised standard. Others – particularly certain higher-deductible plan designs – may not.

So, What Should Employers Do Before October 15, 2026?

This is where the timing becomes important.

The annual Medicare Part D disclosure requirement applies to the prescription drug coverage the Medicare-eligible individual has. CMS separately requires another disclosure before a Medicare-eligible individual joins the plan and whenever a change affects whether that coverage is creditable or non-creditable.

For example, an employer with a plan year running July 1, 2026, through June 30, 2027, should use the creditable status applicable to that existing plan. The employer does not need to determine the status of a future July 2027 renewal before distributing its annual notice this October.

Even many employers with January 1 renewals may not have finalized their 2027 benefits by October 14.

The practical approach is to disclose the status of the coverage currently in place and then review the creditable status again when the employer moves into its 2027 plan.

For the October 2026 notice cycle, employers should generally use the status applicable to their current plan year.

Check Again at the 2027 Renewal

This is the part employers and brokers should not overlook.

When a group renews into a plan year beginning in 2027, the carrier will have evaluated that plan under the new 2027 standard.

Word & Brown is polling our fully insured carrier partners now to obtain their 2027 creditable and non-creditable plan determinations. As carriers finalize and release their 2027 plans, we will update our resources with those determinations.

At renewal, brokers and employers should check the status of the new 2027 plan rather than assuming its prior status continues.

If the plan remains creditable, the employer can communicate that status accordingly.

If the plan changes from creditable to non-creditable, the employer must notify affected Medicare-eligible individuals of the change. CMS requires disclosure whenever coverage changes in a way that affects its creditable status.

That notice is particularly important because an individual who loses creditable prescription drug coverage may have an opportunity to enroll in Medicare Part D outside of the annual enrollment period.

For the first time in many years, the 2027 plan renewal may produce a different Medicare Part D answer than the employer is accustomed to seeing.

For 2027 especially, and for future renewals, employers should make checking the plan’s creditable or non-creditable drug status part of the renewal process and distribute the applicable notice with Open Enrollment materials.

Who Needs the Notice?

The disclosure requirement applies to Medicare Part D-eligible individuals covered under the employer’s prescription drug plan, including:

• Active employees and their dependents
• COBRA participants and their dependents
• Individuals eligible for Medicare because of disability, ESRD, etc.
• Retirees and their dependents as applicable

Because employers may not always know which employees or dependents are eligible for Medicare, distributing the annual notice broadly to plan participants is often the best practice and safest administrative approach.

CMS provides model Creditable Coverage and Non-Creditable Coverage notices that employers can customize for their plans, including English and Spanish versions.

Don’t Forget the Separate CMS Filing

The participant notice is only one part of the employer’s Medicare Part D disclosure responsibility.

Employers and other entities providing prescription drug coverage generally must also report the plan’s creditable coverage status directly to CMS through its online disclosure form.

The CMS filing is generally required:

• Within 60 days after the beginning of each plan year
• Within 30 days after termination of a prescription drug plan
• Within 30 days after a change in the plan’s creditable coverage status

For example, if an employer renews into a new 2027 plan and its prescription drug coverage changes from creditable to non-creditable, the employer should not only notify affected Medicare-eligible individuals, it must also update CMS regarding the change.

Likewise, if a prescription drug plan is terminated, an additional CMS disclosure may be required.

The CMS filing is separate from the notice provided to employees and dependents.

Takeaways for Health Insurance Brokers

• For notices due before October 15, 2026: Employers should generally use the creditable status applicable to the prescription drug coverage currently in place.
• Do not assume 2027 status will be the same: The longstanding simplified testing method is being retired for plan years beginning in 2027.
• Check again at renewal in 2027: When an employer renews into its 2027 plan, confirm the new plan’s creditable or non-creditable status.
• Watch for status changes and distribute 2027 notices with Open Enrollment: If coverage changes from creditable to non-creditable – or vice versa – affected Medicare-eligible individuals should receive an updated notice.
• Remember the CMS filing: Employers must separately disclose prescription drug coverage status to CMS at the beginning of the plan year and report plan terminations and changes in creditable status within the required timeframes.
• 2027 fully insured plan statuses: Word & Brown is currently working with our carrier partners to collect 2027 creditable coverage determinations. We will publish our 2027 California and Nevada plan resources as those determinations become available.
• Self-funded and level-funded plans: Employers should confirm whether their third-party administrator (TPA), pharmacy benefit manager (PBM), or other plan administrator will provide the determination. If not, the plan may need to apply the revised simplified methodology or obtain an actuarial determination.