Every fall, tucked in with open enrollment materials, a short notice goes out to employees that most people skim right past. It’s the Medicare Part D creditable coverage notice, and for years it has been one of the more routine pieces of the benefits calendar. For plan years beginning in 2027, the way plans are tested behind that notice has changed. At the same time, the IRS has released new limits for HSAs, high-deductible health plans, and several other pre-tax accounts. None of this is cause for alarm, but it is a good season to slow down, confirm what your plans actually say, and make sure employees understand what those numbers mean for them.
This article breaks both topics down in plain English: what the creditable coverage notice is, how the test works, why some plans may land differently this year, and the pre-tax limits employers and employees should plan around for 2027.
What the Creditable Coverage Notice Actually Says
The notice answers one simple question for anyone on your plan who is eligible for Medicare: Is your prescription drug coverage at least as good as Medicare’s standard drug plan?
If the answer is yes, the coverage is “creditable.” If the answer is no, it is “non-creditable.” Employers are required to tell Medicare-eligible participants which one applies before October 15 each year, and to report the same information to CMS through a short online disclosure within 60 days of the start of each plan year. Those requirements apply whether a plan is fully insured, self-funded, or level-funded, and whether the employer is a private company, a public entity, or a tribal government.
The notice itself hasn’t changed. CMS still offers the same two model notices, one for creditable coverage and one for non-creditable coverage. What has changed is how a plan earns its label.
How the Test Works, in Plain English
At its core, the test compares your plan to Medicare. On average, does your plan pay for prescriptions at least as generously as standard Medicare Part D would? There are two ways to answer that question:
1. The Simplified Method: This is essentially a quick math check. The plan must cover both brand and generic drugs, offer reasonable pharmacy access, and be designed to pay a minimum share of a typical member’s total drug costs. For 2027 plan years, that share is about 73%. If the plan pays at least that much, with the member paying the rest, it passes.
2. The Actuarial Method: An actuary models what the plan would pay for a typical Medicare-age person and compares that to what standard Part D would pay for the same person. If the plan pays as much or more, it passes.
For most fully insured employers, the carrier runs the test and reports the result. For self-funded and level-funded plans, the determination typically comes from the PBM, the TPA, or a consulting actuary. Either way, the employer remains responsible for sending the notice and completing the CMS disclosure.
What Changed for 2027
For many years, most plans relied on an older version of the simplified method. It was a checklist built around a far less generous Medicare drug benefit than exists today. Since then, Medicare’s drug coverage has improved significantly, including a cap on what enrollees pay out of pocket for prescriptions each year. As Medicare got better, the bar for “at least as good as Medicare” rose with it.
CMS has now retired the older checklist. Plans with plan years beginning in 2026 can still use either the old or the revised method. Plans with plan years beginning in 2027 must use the revised simplified method or a full actuarial determination. Timing matters here. A calendar-year plan’s notice going out this fall should already reflect its 2027 plan design and the new test. A plan that renews mid-year will apply the new standard at its first renewal in 2027.
Why High-Deductible Plans Are Most Likely to Land Differently
Traditional copay plans, the kind with a set dollar amount for generics and brand-name drugs from day one, generally pass the test comfortably. High-deductible health plans are a different story.
On an HDHP, members typically pay the full cost of prescriptions until they meet the deductible, which can run several thousand dollars. Medicare now caps a person’s annual out-of-pocket drug costs at a little over $2,000. When an HDHP could leave someone paying more for prescriptions than they would under Medicare, the plan looks less generous on paper, even if it is a strong, well-designed plan for most of the workforce. That doesn’t make the HDHP a bad plan. It simply means its drug coverage may not measure up to Medicare’s specific standard.
What “Pass” or “Fail” Really Means
This is the part most often misunderstood, so it’s worth being clear:
Creditable (pass): A Medicare-eligible employee or family member can stay on the employer plan, delay enrolling in Medicare Part D, and sign up later without penalty.
Non-creditable (fail): Nothing is wrong with the plan, and it’s not a compliance violation. The employer simply has to disclose the status accurately. The risk falls on the individual. If a Medicare-eligible person goes without creditable drug coverage and delays Part D enrollment, they may face a late-enrollment penalty added to their Part D premium once they do enroll. That penalty generally lasts for as long as they have Part D coverage.
That’s why the notice matters. It’s not paperwork for its own sake. It’s a heads-up to employees working past 65, and to spouses or dependents already on Medicare, that helps them avoid a costly and permanent mistake.
Read Your Plan Summaries Closely
Many carriers indicate a plan’s creditable coverage status directly on their plan summaries, benefit summaries, or annual renewal materials, often as a simple line noting whether the plan is creditable under Medicare Part D. Employers should thoroughly examine these documents for each plan option they offer, every year. A plan that was labeled creditable last year could carry a different designation this year, even if the plan design looks nearly identical.
If a plan summary doesn’t clearly indicate creditable status, request written confirmation from the carrier, PBM, or plan administrator, identified by the exact plan names used in your benefits guide. Keep that confirmation on file. Ideally, have it in hand by late summer so there’s time to prepare notices before the October 15 deadline. If a plan design changes mid-year, check again, because a change in status triggers a new notice.
When Some Plans Pass and Others Don’t
Many employers offer more than one medical plan, and it’s increasingly possible that a traditional PPO will be creditable while an HDHP is not. There are two common ways to handle this:
1. One Combined Notice: A single notice lists each medical plan by name and states whether it is creditable. This is the most common approach, and CMS allows model notices to be adapted this way.
2. Separate Notices by Plan: Each participant receives the notice that matches their plan. This works, but it’s harder to manage, especially when employees switch plans at open enrollment.
A combined notice has a real advantage. It reaches employees before they make their open enrollment choice, so someone approaching 65, or with a spouse on Medicare, can factor drug coverage into their decision at the moment it matters most. Many employers also send the notice to all enrollees rather than trying to identify every Medicare-eligible individual, since spouses and dependents are rarely tracked.
The 2027 Pre-Tax Limits at a Glance
Alongside the creditable coverage change, the IRS has released most of the 2027 limits for tax-advantaged health accounts. Here’s what employers and employees should plan around:
- Health Savings Account (HSA) contributions: $4,500 for self-only coverage and $9,000 for family coverage, up from $4,400 and $8,750. Individuals age 55 and older can contribute an additional $1,000 catch-up.
- HDHP minimum deductible: $1,750 self-only and $3,500 family, up from $1,700 and $3,400. A plan must meet these minimums to remain HSA-qualified.
- HDHP out-of-pocket maximum: $8,700 self-only and $17,400 family, up from $8,500 and $17,000.
- Excepted Benefit HRA: $2,250, up from $2,200.
- Health Flexible Spending Account (FSA): The 2026 limit is $3,400. The 2027 limit has not yet been announced and is typically released later in the fall. For plans that allow carryover, up to $680 of unused 2026 funds can roll into 2027.
- Dependent Care FSA: $7,500 per household ($3,750 if married filing separately). This limit was raised by law beginning in 2026 and is not indexed for inflation, so it stays the same for 2027.
One timing detail is worth noting. HSA contribution limits follow the calendar year, so they change on January 1 for everyone. HDHP deductible and out-of-pocket thresholds, along with FSA and HRA limits, generally follow the plan year. An employer with a mid-year renewal will apply the new plan thresholds at its next renewal, while employees’ HSA limits increase on January 1 regardless.
Where HSAs and Medicare Meet
These two topics come together for one group in particular: employees who are enrolled in an HDHP, contributing to an HSA, and approaching or past age 65.
Once a person enrolls in any part of Medicare, including premium-free Part A, they can no longer contribute to an HSA. They can still use the money already in the account. Enrolling in Social Security benefits at 65 or older automatically triggers Part A enrollment, and that coverage can be backdated up to six months. Employees who keep contributing during that window may end up with excess contributions to correct. Pair that with the possibility that the HDHP is now non-creditable for drug coverage, and working-age Medicare decisions become more complicated than many employees realize.
The takeaway isn’t that HDHPs are the wrong choice for older workers. It’s that these employees deserve clear, personal guidance before they make decisions that are difficult to undo.
How Atria Helps
This is where two of our Four C’s work together: Compliance and Communication. On the compliance side, we request creditable coverage determinations from every carrier and plan administrator as part of each renewal. We confirm results plan by plan, keep the documentation on file, and help prepare accurate notices and CMS disclosures on time. Employers get a finished answer instead of a chore to chase.
On the communication side, we translate what those determinations mean for real people. That means helping employees nearing 65 understand how their plan choice, HSA contributions, and Medicare enrollment fit together, and making sure updated contribution limits are reflected in enrollment materials and payroll before January 1.
Bottom Line
The creditable coverage notice may look the same this year, but the test behind it has changed, and some plans, particularly high-deductible plans, may carry a different label than they have in the past. Employers should review every plan summary for its creditable coverage designation, get written confirmation where it isn’t clear, and communicate the results in a way employees can actually use. Combined with new HSA, HDHP, HRA, and FSA limits for 2027, this fall is the right time to make sure your benefits calendar, your documents, and your people are all on the same page.
This article is for informational purposes only and should not be considered legal or tax advice.
