As employers prepare for 2027 open enrollment, several compliance developments warrant close attention, including changes to Medicare Part D creditable coverage rules, Affordable Care Act (ACA) affordability thresholds and annual enrollment communications. Early planning can help avoid compliance missteps and employee confusion during the busy enrollment season.
Annual notices
There are several health and welfare plan notices to distribute to employees.
Summary of annual employee benefit notice requirements
| Notice | Annual Distribution Required? | Key Timing |
|---|---|---|
| Medicare Part D Creditable Coverage | Yes | Before October 15 |
| CHIP Notice | Yes | Annually |
| WHCRA Notice | Yes | Annually and upon enrollment |
| HIPAA Special Enrollment | No | Upon eligibility |
| ACA Marketplace Notice | No | Within 14 days of hire |
| HIPAA Privacy Notice of Availability | Every three years | Ongoing |
Medicare Part D notice of creditable coverage
Key 2027 change: The Medicare Part D simplified determination standard increases from 60% to 73%. Employers relying on the simplified method should validate whether each medical plan option continues to qualify as creditable coverage before the October 15 notice deadline.
This notice is due annually before October 15 to inform employees whether the group health plan’s prescription drug coverage is expected to pay on average at least as much as Part D coverage. Employers can engage with an actuary to determine the plan’s creditable status through an actuarial equivalence determination. Alternatively, many plans use the simplified determination. New for 2027 is the simplified determination requirement that the plan be designed to pay on average at least 73% (up from 60% in previous years) of participants’ prescription drug benefits. If a plan option loses creditable status in 2027 under this higher 73% standard, Part D-eligible employees can avoid potential late enrollment penalties by electing a different creditable plan option or enrolling in Part D.
Children’s Health Insurance Program (CHIP) notice
This notice must be provided annually to inform employees that they may be eligible for premium assistance through CHIP or Medicaid state programs. It is normally updated semi-annually each January and July. The most recent update was July 31, 2026.
Women’s Health and Cancer Rights Act (WHCRA) notice
This notice must be provided upon enrollment and annually to inform employees of the availability of coverage under the health plan for reconstructive surgery and other related items and procedures following a mastectomy.
HIPAA special enrollment notice
Employers are required to provide this notice at or before the time an employee is initially offered the opportunity to enroll in the health plan. Although annual distribution isn't required, employers commonly include the notice with other annually required materials.
Primary care provider patient protection notice
Employers sponsoring a health plan with options that require designation of a primary care provider (e.g., HMOs) must provide this notice to plan participants whenever an SPD or other similar description of benefits is provided. Although annual distribution isn't required, many employers elect to include the notice in annual enrollment materials.
Americans with disabilities act wellness program notice
Employers sponsoring a wellness program that includes medical examinations (e.g., biometric screenings) or disability-related inquiries (e.g., medical questionnaires) must provide this notice addressing how the employer protects and uses related information. Although annual distribution isn't required, many employers elect to include the notice in annual enrollment materials.
ACA exchange notice
The ACA requires employers subject to the Fair Labor Standards Act (FLSA) to provide this notice (also referred to as the Marketplace Notice) to new hires within 14 days of the employee’s start date to inform them how to access individual health coverage through the exchange. Although annual distribution isn't required, many employers elect to include the notice in annual enrollment materials.
HIPAA notice of privacy practices
Employers with a self-insured health plan must provide this notice describing the plan’s use and disclosure of PHI upon enrollment and within 60 days of a material change to the notice. HIPAA requires providing a notice of the availability of the notice of privacy practices at least once every three years, which employers commonly include in annual enrollment materials.
Active or passive open enrollment
Passive enrollment can reduce administrative burden, but employers should ensure enrollment communications clearly explain which elections will automatically roll forward and which require employee action.
In an active open enrollment, employees generally must make affirmative elections for the next plan year. Under a passive approach, designated existing elections (including health and welfare plan benefits and the associated Section 125 cafeteria pre-tax contributions) automatically roll forward unless the employee makes a change.
In a passive open enrollment, employers should clearly communicate:
- A general description of the rolling election process
- The employee-share of the premium for each plan option
- The procedures for declining coverage
- The open enrollment deadline to make an alternative election
- A statement that the election is irrevocable for the plan year unless the employee experiences a permitted election change event
- The employee’s existing elections
ACA affordability
Applicable large employers (ALEs) subject to the ACA employer mandate should consider contribution strategies at open enrollment that avoid IRC Section 4980H(b) liability by meeting the ACA affordability standards. The applicable employee contribution percentage increases to 10.22% for plan years beginning in 2027, up from 9.96% in 2026. The potential penalty for an unaffordable offer increases to $5,670 per year ($472.50 per month) in 2027.
The IRS provides three safe harbors for ALEs to decide whether the offer of coverage at open enrollment is affordable for purposes of avoiding ACA penalties in 2027.
ACA affordability safe harbors for 2027 open enrollment
| Safe harbor | 2027 threshold | How it's calculated | Key consideration |
|---|---|---|---|
| Federal poverty line (FPL) | $135.93/month – flat, regardless of wages | 10.22% of the 2026 FPL for a single individual (48 states/D.C.), ÷ 12 | Simplest and most predictable; enables streamlined Qualifying Offer Method reporting (Code 1A) |
| Rate of pay | Varies by wage tier; based on hourly rate or monthly salary | Hourly: rate × 130 hours × 10.22%. Salaried: monthly salary × 10.22% | Decided prospectively; useful when the FPL threshold isn't met |
| Form W-2 | Varies by employee; not final until year-end | 10.22% × employee’s actual Box 1 W-2 wages | Can't be conclusively tested until after year-end; employee deferrals reduce Box 1 wages |
Employers increasing employee contributions to address rising healthcare costs should reassess affordability calculations for 2027, particularly for lower-paid employee populations where affordability challenges are most likely to arise.
Planning for delayed IRS annual limit announcements
Some annual limit amounts are available well in advance of each year, such as the 2027 HSA limits released in May. Other important limits, such as health flexible spending accounts (FSAs), commuter benefits, adoption assistance and qualified educational assistance, are often not released until well into the fall. This timing can create challenges for employers conducting open enrollment (or finalizing systems) before the IRS announces final limits.
Strategies to consider at open enrollment when the health FSA limit hasn't been released:
- Map to the maximum
Employees electing the current maximum are automatically adjusted to the new IRS limit once announced - Use projected limit
Allow elections up to a projected 2027 limit, with appropriate disclosures if the final IRS amount differs - Reopen elections for the health FSA
Conduct a health FSA election window after the IRS releases final limits, provided all changes are completed before the start of the plan year
Key takeaways for 2027 open enrollment
When preparing for 2027 open enrollment, be sure to prioritize five key compliance considerations:
- Confirming Medicare Part D creditable coverage status under the new 73% standard
- Distributing required participant notices
- Validating ACA affordability
- Clearly communicating active versus passive enrollment processes
- Establishing a plan for IRS limits that may not be released before enrollment begins
Addressing these issues early can help reduce compliance risk and create a smoother enrollment experience for employees.
Author
