By: HUB’s EB Compliance Team

Every year, employers with group health plans must send various notices to their employees. One such notice is the Medicare Part D Creditable (or Non-Creditable) Coverage Notice.

What is the purpose of the notice? It lets employees know whether the employer’s plan has prescription drug coverage that is at least as good (that is “Creditable”) or is not as good (that is “Non-Creditable”) as the prescription drug coverage under a Medicare Part D plan. The purpose is to give an employee who is eligible to enroll in Medicare Part D the ability to make an informed decision about whether to enroll in Part D or stay on the employer’s plan.

As noted here, there are significant changes coming to Medicare Part D in 2025 that will make it more difficult for group health plans to be considered Creditable. Fortunately, for 2025, the simplified method for determining creditability is still available. However, the Centers for Medicare and Medicaid Services (“CMS”) has indicated that it will revise the simplified method in future years. As a result, employers will need to keep a close eye on this determination and make any necessary adjustments to their notices in future years.

Who should receive the notice? Only individuals eligible for Medicare Part D are required to receive the notice. However, most employers send the notice to all participants since they may not always know if someone is eligible for Part D (for example, a dependent who may be eligible because of disability).

When does the notice have to be provided? There are potentially four situations where the notice must be provided:

  • First, it must be provided annually prior to the Part D annual enrollment period beginning October 15th. The notice is only required to be provided once in every 12-month period ending on October 14. If an employer provides it earlier in the year (for example, because they have a renewal date early in the year), they would not need to provide the same notice again later that year.
  • Second, it must also be provided prior to an individual’s enrollment in the employer’s plan. Therefore, it should also be sent to new hires.
  • Third, if the employer’s prescription drug benefit ever changes from “Creditable” to “Non-Creditable” (or the other way around), an updated notice must be provided as soon as possible, but no later than 30 days from the change.
  • Finally, it also must be provided on request.

Can it be sent electronically? Yes, if the employer meets the ERISA rules for electronic delivery. Generally, employees who need work-related computer access as part of their regular job responsibilities can receive notices electronically. Other employees must consent to electronic delivery. The Department of Labor has specific rules about electronic delivery, which HUB can provide information on, if requested.

Does the notice have to be in a separate document? No, but if it is included with other documents, it should be printed in a 14-point font and be the first document in the stack, which is somewhat unique. That may argue for it being in a separate document. (Employers can also satisfy this with a box on the first page that contains a 14-point statement about Medicare prescription drug coverage and a reference to the page where the notice starts.)

Does the notice have to be mailed/provided separately? No. The Notice may be provided with other plan information materials (such as enrollment materials). It does not need to be sent as a separate mailing.

Do we need to send a separate copy to spouses and dependents? Generally, no, but if the employer knows that the spouse or dependent lives at a different address from the participant, then a separate notice to the spouse or dependent is required. Additionally, a separate notice is required for any former spouse or dependent who has elected COBRA.

Are model notices available? Yes. The most recent versions of the model notices were developed in April 2011. English and Spanish versions of the model notices are available here. Because the employer coverage is either Creditable (i.e., at least as good as Medicare Part D) or not, there is both a “Creditable” notice and a “Non-Creditable” notice. Employers generally should provide either the Notice of Creditable Coverage or the Notice of Non-Creditable Coverage, but usually not both (although occasionally one coverage option is creditable while another is not, in which case, a separate notice may be required for each coverage option). HUB includes these model notices in its model notice kit. Employers should consult their carrier or TPA to determine if their coverage is creditable. Some carriers offer self-service determinations on their websites.

Is this the same as the annual reporting requirement? No. In addition to providing this notice to employees, employers/plan sponsors must notify CMS of their prescription drug plan's status. Specifically, on an annual basis, each employer/plan sponsor must disclose to CMS whether its group health plan is providing creditable prescription drug coverage or not (this is commonly referred to as the “online filing” or “disclosure to CMS” requirement for Medicare Part D). Information about electronic notification to the government (disclosure to CMS) can be found here.

If you have any questions, please contact your HUB Advisor. View more compliance articles in our Compliance Directory.

NOTICE OF DISCLAIMER

Neither Hub International Limited nor any of its affiliated companies is a law or accounting firm, and therefore they cannot provide legal or tax advice. The information herein is provided for general information only, and is not intended to constitute legal or tax advice as to an organization’s or individual's specific circumstances. It is based on Hub International's understanding of the law as it exists on the date of this publication. Subsequent developments may result in this information becoming outdated or incorrect and Hub International does not have an obligation to update this information. You should consult an attorney, accountant, or other legal or tax professional regarding the application of the general information provided here to your organization’s specific situation in light of your or your organization’s particular needs.