Navigating Medicare Part D: 2026 Creditable Coverage Changes & Disclosure Essentials for Employers 

Summary 

As we look forward to 2026, employer-sponsored health plans face new considerations for Medicare Part D creditable coverage testing and coverage obligations. The landscape of prescription drug benefits is evolving due to the Inflation Reduction Act of 2022 (“IRA”), directly impacting how employers assess their plans and fulfill their disclosure obligations.  

Medicare Part D creditable coverage refers to prescription drug coverage that is actuarially equivalent to, or more valuable than, the standard Medicare Part D benefit. For employers, determining this status and communicating it to Medicare-eligible individuals (including active employees, retirees, COBRA participants, and their dependents) is a critical compliance requirement. 

The IRA has significantly redesigned the Medicare Part D benefit, particularly for considering the 2025 and 2026 reporting years. These enhancements, particularly the lowering of the annual out-of-pocket (“OOP”) thresholds for beneficiaries, mean that employer plans may need to adjust benefits to continue satisfying the creditable coverage standards. 

For 2026, the Centers for Medicare & Medicaid Services (“CMS”) has introduced a revised simplified determination methodology for assessing creditable coverage. This new methodology requires a higher average payment of prescription drug expenses by the plan, reflecting the enhanced Part D benefits. For calendar year 2026 only, non-retiree drug subsidy (“RDS”) group health plans will have the option to use either the existing (60% payment) or the new (72% payment) simplified determination methodology. This temporary flexibility provides employers with an essential and necessary transition period. 

In addition, employers must continue to fulfill their annual disclosure obligations by ensuring Medicare-eligible individuals make informed decisions about their prescription drug coverage. The annual disclosure obligations for plan sponsors include submitting plan information directly to CMS, via the CMS-sponsored public website submission portal and providing a required disclosure notice to participants. 

Employer Action Items 

• Re-evaluate creditable coverage status for the 2026 plan year: 
  • Determine creditable coverage status using one of two available and approved methodologies:  
    • Simplified determination methodology: In 2026, non-RDS group health plans can use a new simplified determination methodology, or they may elect to use the existing methodology. The new methodology requires the plan to pay, on average, at least 72% of participants’ prescription drug expenses versus the existing methodology that is at least 60% of expenses. This is a one-time transition allowance for the 2026 plan year. 
    • Actuarial equivalence methodology: If the plan does not meet the simplified methodology criteria, or if the plan applies for the RDS, the plan must perform an actuarial equivalence test to confirm creditable status. 
  • Note that the Baldwin Group does not perform Medicare Part D Creditable Coverage assessments for employer clients; however, we recommend consulting directly with the vendor (health insurance carrier, third-party administrator, pharmacy benefit manager) or an actuary. They possess specialized expertise required to evaluate a plan’s creditable coverage status for plan year 2026, considering both the existing and revised simplified methodology frameworks. 

• Prepare annual disclosures:  
  • Participant notices (due annually by October 15): Notices must be provided annually before October 15th (or within the prior 12 months), prior to initial enrollment, and if creditable status changes, to all Medicare-eligible individuals covered under the plan (active employees, retirees, COBRA participants, and covered spouses and dependents). Best practice: Provide the notice to all employees and COBRA participants.  
    • Although this timing requirement suggests employers may need to provide Part D notices on an individualized basis or to coincide with the Medicare annual enrollment window, that is not the case. CMS guidance provides that employers are deemed to be compliant if they provide these notices with their plan’s open enrollment (generally in the 12 months preceding the Medicare open enrollment window), to new hires/special enrollees, anytime the creditable status of the coverage changes mid-plan year, and upon request. Note: The Medicare Part D notice is part of the Employee Benefit Notice Guide packet provided by The Baldwin Group.  
  • CMS disclosure (due annually within 60 days of plan year start): Employers must annually disclose their plan’s creditable coverage status directly to CMS via an online disclosure form. This disclosure is due within 60 days of the start of the plan year, within 30 days of any change in creditable coverage status, or upon termination of the prescription drug plan. 
    • For calendar year plans, this deadline is typically March 1. 

Additional Information and Resources 

• Inflation Reduction Act of 2022 (IRA) 

• CMS Draft/Final CY 2026 Part D Redesign Program Instructions 

• CMS – Creditable Coverage 

• CMS Model Notices 

• Disclosure to CMS Guidance and Instructions 

• Creditable Coverage Disclosure to CMS Instructions & Screen Shots 
• Disclosure to CMS Form