Under Medicare Part D Regulations, employers who sponsor health plans must: (1) determine whether the plan’s prescription drug coverage is equivalent to Medicare Part D (“Creditable”); (2) send notice of the status at least to Medicare-eligible participants and dependents’ and; (3) must report the status to CMS. These reporting requirements help Medicare-eligible individuals decide whether to enroll in or to delay enrollment in Medicare Part D.

Employer health plans that are not applying for the Medicare Part D subsidy can use a simplified test to determine whether coverage is equivalent to Part D. The first notice was required to be distributed to participants prior to November 15, 2005 (the start of the initial Medicare Part D enrollment period); and the first report to CMS was due March 31, 2006. There are ongoing reporting obligations.

Although there are currently no penalties imposed by HHS for failure to comply with these obligations, there is pressure to institute penalties. Further, we understand that the DOL considers the obligations under the Medicare Part D regulations duties of a fiduciary under ERISA and has flagged the notices and reporting as an audit item. A CMS representative has reported that it is OK to do the reporting to CMS and participants now even though the initial deadline has passed.

Posted by Joni L. Landy, Tucker Arensberg Employee Benefits Practice