Medicare Part D Creditable Coverage: FSA, HRA and ICHRA Disclosures & 2027 Simplified Determination Method

On April 6, 2026, the Centers for Medicare & Medicaid Services (CMS) released final rules regarding Medicare Part D creditable coverage disclosures and determinations. Specifically, CMS eliminated the requirement for account-based plans, including Individual Coverage Health Reimbursement Arrangements (ICHRAs), to provide creditable coverage disclosures and finalized changes to the simplified method for determining a plan’s creditable coverage status.

As a reminder, CMS requires employers, as group health plan sponsors, to notify individuals eligible for Medicare Part D whether the employer’s prescription drug coverage is creditable. CMS defines “creditable coverage” as coverage which at minimum has the equivalent actuarial value of Medicare Part D coverage (“Part D”).

The notice is to assist Part D eligible individuals in making an informed decision about initial enrollment in Part D. More information on the creditable coverage disclosure requirement is available here.

Part D Disclosure Not Required for Account-Based Plans

Sponsors of account‑based plans¹ have struggled with creditable coverage disclosures given these plans reimburse medical expenses rather than directly provide coverage for prescription drugs. This made it difficult to determine a plan’s creditable coverage status. This was particularly difficult for sponsors of ICHRAs because the underlying individual coverage being reimbursed likely provided prescription drug coverage.

To address these concerns, starting with disclosures for the 2027 plan year, sponsors of account-based plans are not required to make Part D creditable coverage disclosures. CMS believes this will avoid participant confusion and ease administrative burden on plan sponsors.

These updates do not change the obligation of an employer to provide creditable coverage disclosures if they sponsor a non-account-based group health plan.

Revised Simplified Determination Methodology for 2027

CMS also finalized changes to the simplified determination method for creditable coverage. As mentioned in the article linked above, CMS made modifications to the simplified determination method in 2026 but allowed both the old and revised simplified method to be used in 2026 as a transition period.

For 2027 plan year disclosures, only the revised simplified determination method can be used. A plan provides creditable coverage under the revised simplified determination method if it:

• Provides reasonable coverage for brand name and generic prescription drugs and biological products;
• Provides reasonable access to retail pharmacies; and
• Pays 73%² of a participant’s prescription drug expenses on average.

As a reminder, a plan that does not meet the requirements of the simplified method can still be creditable if it provides coverage that equals or exceeds the actuarial value of the standard prescription drug coverage under Part D.

The information provided is a summary of laws and regulations relating to employee benefit plan compliance. This information should not be construed as legal advice. In all cases, employers should consult with their own legal counsel.