The Medicare Modernization Act requires all employers to provide written notice to Medicare eligible individuals regarding whether their prescription drug coverage is creditable or non-creditable. The prescription drug coverage is “creditable” if it is expected to pay, on average, as much as the standard Medicare prescription drug coverage (Medicare Part D); otherwise, it is “non-creditable.”  This allows individuals to make an informed decision about whether to remain on an employer plan or enroll in Medicare Part D.

Eligible individuals include those entitled to Medicare Part A or enrolled in Medicare Part B and it could be an active employee, disabled employee, COBRA beneficiary, retiree, or a covered spouse or dependent.  Since employers may not be aware of whether a current employee has any dependents that are Medicare eligible, it is a best practice for employers to provide the notice to all employees.


Timing Requirement:

It is recommended that employers distribute the notice to new hires and to all employees at least annually before October 15th.  In addition, employers should provide the notice when prescription drug coverage ends, when creditable coverage status changes, or upon request.


How to Disclose the Notice:

By Mail:
Delivery of the notice can be made on a stand-alone basis or combined with other documents; however, if combined, the notice must be prominent and conspicuous in at least 14-point font and placed in a separate box. First class mail is preferable and you should document when the notice is mailed, where it is mailed, and to whom it is mailed.

Electronic Delivery:
The notice may be provided electronically, though only to plan participants who have access to your electronic information system on a daily basis as part of their work duties. For employees who do not have regular access to electronic media, you should provide the notice in paper format or you should receive a signed authorization from those employees consenting to electronic distribution. Employers should always be sure to follow the DOL’s electronic disclosure rules. A single notice can be e-mailed to the employee and their dependents unless an employer is aware that the spouse or dependent is Medicare Part D eligible and that they reside at a different address, in which case an employer should send out another disclosure to the dependent.


Action Item:

Employers should ensure that their Medicare Part D Creditable or Non-Creditable Disclosure Notice has been distributed to all employees prior to October 15.


Sequoia Clients Only:

Be on the lookout for an email enclosing the requisite Medicare Part D Notice between now and October 1st.  The email will enclose instructions on what to do.


More Information:

CMS Website

Electronic Disclosure Rules


The information and materials on this blog are provided for informational purposes only and are not intended to constitute legal or tax advice. Information provided in this blog may not reflect the most current legal developments and may vary by jurisdiction. The content on this blog is for general informational purposes only and does not apply to any particular facts or circumstances. The use of this blog does not in any way establish an attorney-client relationship, nor should any such relationship be implied, and the contents do not constitute legal or tax advice. If you require legal or tax advice, please consult with a licensed attorney or tax professional in your jurisdiction. The contributing authors expressly disclaim all liability to any persons or entities with respect to any action or inaction based on the contents of this blog.

Joanna Castillo– Joanna is the Client Compliance Manager for Sequoia, where she works with our clients to optimize and streamline benefits compliance. In her free time, Joanna enjoys live music, college football, travel, and walking her dog in Golden Gate Park.