Adult Child Coverage
For plan years beginning on or after September 23, 2010, plans that cover dependents must provide coverage to adult children up to age 26 (regardless of marital status, student status, tax dependent status, residency, or parental support). Coverage does not have to be provided to the adult child's dependents. A grandfathered plan is not required to extend coverage to an adult child who is eligible for other employer-sponsored coverage until the plan year beginning on or after January 1, 2014, at which time the employer must extend coverage to adult children regardless of eligibility for other coverage. Regulations impose notice and special-enrollment rules for adult children.
Note: The adult child coverage mandate only applies to certain types of health plans, such as major medical insurance. It does not apply to HIPAA excepted benefits, such as disability, cancer, hospital indemnity, or accident insurance. Click here for more information about the types of benefits that are exempt from the Health Care Reform plan design mandates.
Adult Children Hot Topics & FAQs
- Under the special enrollment rules, must the plan allow other family members to enroll or only the adult child who had previously aged out of the plan?
Answer: The plan must provide all eligible family members an opportunity to enroll in the plan.
- May a plan impose support, residency, student status, tax dependent status, or other restrictions on children’s eligibility?
Answer: Generally no. “Children” for purposes of this rule includes the employee’s sons, daughters, stepchildren, adopted children (including children placed for adoption), and foster children. Generally the only restriction an employer’s plan may impose on such children’s eligibility prior to turning age 26 is age. However, an employer may impose restrictions on other individuals. For example, the plan could require that an employee’s grandchild or niece must qualify as the employee’s tax dependent in order to be enrolled in the plan.
- Is the plan required to extend coverage to age 26 or to the end of the year in which the child turns age 26?
Answer: To age 26. There are two separate Health Care Reform rules related to adult children: the coverage mandate and the tax change. Under the coverage mandate, a group health plan that covers children must offer coverage to any child up to age 26 for plan years beginning on or after September 23, 2010. In addition, Congress made a corresponding tax change so that employment-based health coverage for such children would be excluded from the employee’s income. That rule allows an employer to extend coverage for the child on a tax-advantaged basis through the end of the calendar year in which the child turns age 26. (For more information about the new tax rule for adult children, click here.)
Putting the two rules together, for plan years beginning on or after September 23, 2010, an employer’s plan must cover adult children to age 26 and may cover children on a tax-free basis through the end of the year in which the child turns age 26. The health plan may provide coverage even longer than age 26 (and may be required to do so under state law), but the value of the coverage would have to be imputed as income to the employee unless the child otherwise qualifies as a tax-dependent (perhaps because the child is disabled). Having said that, the employer may not extend eligibility for health FSA or HRA reimbursements for individuals who are not eligible to receive benefits on a tax-free basis.
Summary of the coverage for adult children notice requirements
Model adult children’s coverage notice
Summary of the special enrollment rules for adult children and their families
Summary of Health Care Reform tax rules for adult children
American Fidelity Assurance Company does not provide tax or legal advice.