Every employer that offers prescription drug coverage to Medicare-eligible employees, spouses, or dependents has an October 15 deadline coming up: sending a Notice of Creditable Coverage. That requirement itself isn’t new. What’s new is that the underlying rules for determining whether your plan even qualifies as creditable have changed for 2026, part of the broader redesign of Medicare Part D under the Inflation Reduction Act, the most significant transformation of the program since it was created in 2003. Employers who assume this year’s notice can simply repeat last year’s determination are taking on more risk than they realize.
Key takeaways
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Employers must send a Notice of Creditable Coverage to every Medicare-eligible individual enrolled in their group health plan, including spouses and dependents, before October 15 each year, ahead of the Medicare Annual Election Period, also known as the Annual Enrollment Period (AEP) that runs October 15 through December 7.
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For 2026, the Centers for Medicare & Medicaid Services (CMS) introduced a revised simplified method for determining whether a plan’s drug coverage is creditable, raising the actuarial value threshold from 60% to 72% of participants’ prescription drug expenses.
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2026 is a one-year transition period in which employers may use either the old 60% threshold or the new 72% threshold. Starting in 2027, only the 72% method will be available.
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A plan that comfortably cleared the old 60% threshold isn’t automatically creditable under the new 72% standard, which means employers can’t assume this year’s determination will match last year’s.
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The IRA’s redesign of the Part D benefit itself continues to phase in: the annual out-of-pocket cap rose from $2,000 in 2025 to $2,100 in 2026, the coverage gap (“donut hole”) has been eliminated, and a new Medicare Prescription Payment Plan lets enrollees spread out-of-pocket drug costs across the plan year instead of paying them upfront.
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Separate from the employee-facing notice, employers must also disclose their plan’s creditable coverage status directly to CMS online, generally within 60 days after the start of the plan year, a requirement that’s easy to overlook if you’re only tracking the October 15 deadline.
Helpful CMS Resources
For employers and plan sponsors completing Medicare Part D creditable coverage requirements, CMS provides the following resources:
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File the Disclosure to CMS Form: Complete the online disclosure form
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Review CMS Instructions and Guidance: View disclosure guidance and filing instructions
CMS requires entities that provide prescription drug coverage to Medicare Part D-eligible individuals to disclose whether that coverage is creditable. The online disclosure to CMS generally must be completed annually within 60 days of the beginning of the plan year, as well as after certain plan terminations or changes in creditable coverage status.
What the October 15 Notice of Creditable Coverage Actually Requires
Employers that sponsor a group health plan with prescription drug coverage must notify every Medicare-eligible participant, not just employees who are Medicare-eligible, but also Medicare-eligible spouses and dependents covered under the plan, whether that coverage is creditable or non-creditable before Medicare Part D standards. The notice has to go out before October 15 of each year. That timing isn’t arbitrary: it lines up with the start of the Medicare Annual Election Period, which runs October 15 through December 7, so Medicare-eligible individuals have the information they need before deciding whether to enroll in a standalone Part D plan or stick with their employer coverage.
Individuals who go without creditable coverage for 63 or more consecutive days after their Part D initial enrollment period ends can face a permanent late enrollment penalty added to their Part D premium, which is exactly why an accurate, timely notice matters to the people receiving it, not just to your compliance file.
Why This Year’s Creditable Coverage Determination Isn’t a Rubber Stamp
Here’s the change most employers haven’t caught up to yet. Since the start of the Part D program, CMS has allowed employers that aren’t applying for the retiree drug subsidy to determine creditable coverage status either through a full actuarial equivalence test or through a simplified determination method. Under the simplified method, a plan has historically qualified as creditable if it was designed to pay at least 60% of participants’ prescription drug expenses. The IRA’s redesign made the standard Part D benefit itself substantially richer, which means the old 60% threshold no longer reflects true actuarial equivalence with what Part D now offers.
In response, CMS finalized a revised simplified determination methodology for 2026 that raises the bar to 72%. For 2026 only, employers may use either the existing 60% method or the new 72% method. Beginning in 2027, the 60% method goes away entirely and only the 72% standard will be available. In practical terms, that means a group plan design that has been reliably creditable for years could fail the new standard, and the only way to know is to run the determination again for 2026 rather than carrying forward last year’s answer.
The Part D Benefit Keeps Changing Underneath the Notice Requirement
The creditable coverage threshold isn’t the only moving piece. The IRA restructured the entire Part D benefit starting in 2024 and 2025, and CMS’s Final CY 2026 Part D Redesign Program Instructions confirm the next round of changes took effect January 1, 2026. The annual out-of-pocket threshold, the point at which a Medicare enrollee’s cost-sharing stops, rose from the original $2,000 cap in 2025 to $2,100 in 2026, adjusted based on the annual increase in average Part D drug expenditures.
The old coverage gap, long known as the donut hole, has been eliminated under the new benefit structure. And CMS also launched the Medicare Prescription Payment Plan, which lets eligible enrollees elect to spread their out-of-pocket prescription costs in monthly installments across the plan year rather than paying larger amounts at the pharmacy counter. None of these changes directly alter an employer’s notice obligation, but they do mean the “standard Part D coverage” that your plan is being measured against keeps getting richer year over year, which is the underlying reason the creditable coverage bar keeps rising too.
The CMS Online Disclosure Is a Separate Deadline You Can’t Skip
The October 15 notice to plan participants is only half of the compliance picture. Employers are also required to report their group plan‘s creditable coverage status directly to CMS through its online disclosure form, generally within 60 days after the start of each plan year. This is a distinct filing from the participant notice, with its own timing tied to your plan year rather than the calendar year, and it’s a requirement that’s easy to lose track of if your compliance calendar only flags the more visible October 15 deadline.
What Employers Should Do Before October 15
Start with the determination itself: confirm with your group plan administrator, actuary, or advisor which creditable coverage method your plan will use for 2026, and don’t assume last year’s 60%-based determination still holds under the new 72% standard. From there, send the Notice of Creditable Coverage to every Medicare-eligible participant and dependent before October 15, using CMS’s model notice language as your starting point.
Separately, confirm whether your CMS online disclosure was filed within 60 days of your plan year start or is scheduled to be filed on time. Finally, keep documentation of both the determination method used and proof the notice was distributed, since that record is exactly what an auditor or the Department of Labor will ask for if your plan’s compliance is ever reviewed.
Frequently Asked Questions
What is a Medicare Part D Notice of Creditable Coverage?
It’s a required annual notice employers with group health plans that offer prescription drug coverage must send to every Medicare-eligible participant and dependent, telling them whether the plan’s drug coverage is at least as good as standard Medicare Part D coverage (creditable) or not (non-creditable). It must be distributed before October 15 each year, ahead of the Medicare Annual Election Period.
Why did the creditable coverage determination change for 2026?
The Inflation Reduction Act made the standard Part D benefit significantly richer starting in 2024 and 2025, which meant the old simplified determination threshold of 60% no longer reflected true actuarial equivalence with Part D coverage. CMS introduced a revised simplified method for 2026 that raises the threshold to 72%. Employers may use either method in 2026, but only the 72% method will be available starting in 2027.
Does my plan automatically stay creditable if it was creditable last year?
Not necessarily. A plan that met the old 60% threshold isn’t automatically creditable under the new 72% standard. Employers should confirm which method their plan is being measured against for 2026 rather than assuming last year’s determination still applies.
Who has to receive the Notice of Creditable Coverage?
Every Medicare-eligible individual covered under your group health plan, which includes not just Medicare-eligible employees but also Medicare-eligible spouses and dependents enrolled in the plan.
What happens if an employee goes without creditable coverage?
An individual who goes 63 or more consecutive days without creditable prescription drug coverage after their Medicare Part D initial enrollment period ends can face a permanent late enrollment penalty added to their Part D premium for as long as they’re enrolled in Part D.
Is the CMS online disclosure the same as the October 15 employee notice?
No. The October 15 notice goes to plan participants and dependents. Separately, employers must also disclose their plan’s creditable coverage status directly to CMS online, generally within 60 days after the start of the plan year. These are two distinct requirements with different deadlines.
Why Partner With SandStone
Medicare Part D’s rules haven’t stopped changing since the Inflation Reduction Act redesign began, and a compliance calendar built for last year’s requirements can leave gaps in this year’s. SandStone Insurance Partners helps employers navigate ACA, ERISA, and other group benefits compliance requirements with a structured annual review process, so deadlines like the October 15 creditable coverage notice don’t catch your business off guard. Contact your SandStone advisor today to confirm your plan’s 2026 creditable coverage status before the deadline.
Disclaimer: This blog is provided for general informational purposes only and does not constitute legal, tax, or benefits compliance advice. Requirements for Medicare Part D creditable coverage notices and disclosures can vary based on your plan’s specific design, funding structure, and plan year, and CMS guidance is subject to change. Employers should consult with qualified legal counsel, a tax advisor, or their benefits administrator to confirm how these requirements apply to their organization.
