Is there a penalty if an employer fails to timely file Medicare Part D disclosures to CMS? Are there penalties if the employer fails to provide Medicare Part D disclosures to employees?

Employers must report the creditable status of their prescription drug plan coverage to the Centers for Medicare & Medicaid Services (CMS) within 60 days after the start of the medical plan year (policy year or contract year, regardless of the ERISA plan year).

Plan sponsors must also provide the Notice to Part D Eligible Individuals on the occurrence of five different events:

• On an annual basis prior to October 15 (the first day of the Medicare enrollment period). Thus, the notice must be provided no later than October 14 each year.
• Prior to an individual's initial enrollment period for Part D. For most individuals, the initial enrollment period for Part D is generally concurrent with the initial enrollment period for Part B, which is the seven-month period that begins three months before the month an individual first meets the eligibility for Parts A and B and ends three months after.
• When the individual originally becomes eligible under the group plan. Upon a change in the plan's creditable status, including termination of the prescription drug plan. Timely delivery of the notice allows the individual the opportunity to enroll in Part D if creditable coverage is lost and avoid late enrollment penalties.
• Upon an individual's request.

There are no specific penalties for failing to provide these notices (at least currently), and CMS does not have a process for correcting if a plan fails to provide them. The only specified penalty relates to a retiree plan attempting to receive the retiree drug subsidy. Such a plan would be denied the subsidy if it had not complied with the required Medicare Part D notifications. Note also that plan sponsors have a fiduciary duty under ERISA to comply with all federal laws related to their plans.

However, the real issue here is that Medicare eligible individuals could have delayed enrollment in Part D because they believed their coverage to be creditable based on an incorrect or missing notice. The individual could be penalized when they go to enroll in Medicare. This is because a Medicare eligible individual can only delay Part D (without penalty) if they have creditable coverage. If they have gone without creditable coverage for 63 days or more, they will be limited as to when they can enroll in Part D (annual enrollment starting October 15) and will receive a premium penalty based on the number of months that they did not have creditable coverage.

If an employer failed to provide these disclosures in the past, then they should consider distributing these disclosures as soon as possible and make sure that they are distributed in a timely manner going forward.