The U.S. Department of Labor has answered a seemingly simple question that vexed many Washington insiders for months: Under the new health care reform law, what is the age limit for employees’ adult children to be eligible for coverage under a parent’s group health plan?
The Patient Protection and Affordable Care Act stated that adult children could be covered “up to age 26.” But did that mean until they turned 26, or that they were covered during the entire year they were 26?
The answer: Up until their 26th birthdays.
IRS clarifies age for tax-free coverage
Much of the age confusion about insurance for employees’ adult children stems from another part of the health care reform law that made such coverage a tax-free benefit.
Now the IRS has clarified that health coverage provided for an employee's children under age 27 is tax-free to the employee.
That means employers with cafeteria plans may permit employees to immediately make pre-tax salary-reduction contributions to provide coverage for children under age 27. Employers have until the end of 2010 to amend plan language to incorporate the change.
See IRS Notice 2010-38 (www.irs.gov/pub/irs-drop/n-10-38.pdf) for details.