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New regs secure health care coverage for older children

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in Small Business Tax

Thanks to the new health care legislation, you can keep older children on your company health care plan for a longer period of time.

Alert: The IRS has released temporary regulations clarifying the new rules. (TD 8482, 5/10/10) The temporary regs were issued in conjunction with Department of Labor (DOL) regulations. (Labor Reg. Sec. 54.9815-2714T)

The new rules may alleviate your concerns about children who recently graduated college or moved out of the home without adequate coverage of their own. Also, the new regulations clarify that tax-free treatment applies to coverage extended to an adult child, whether or not the child is your dependent (see box below).

Here’s the whole story: Under the Affordable Care Act of 2010, a health insurance plan must continue to offer coverage to a dependent child until he or she reaches age 26 whenever the parent has dependent child coverage. Previously, insurers usually removed children from the rolls at much earlier ages.

‘This new law provision is effective for plan years beginning after Sept. 22, 2010. But, if an insurer implements the new rules earlier, it can avoid gaps in coverage for new college graduates and other young adults and save administrative costs.

Issuers must give parents with adult children who qualify an opportunity to enroll for at least 30 days regardless of whether the plan offers an open enrollment period. This enrollment opportunity and a written notice must be provided no later than the first day of the first plan year beginning after Sept. 22, 2010. The new policy doesn’t otherwise change the enrollment period or start of the plan year.

The new regulations also establish that older children must be offered the same benefits available to similarly situated individuals. The plan can’t charge these individuals any extra.

If extended coverage will be available to your children, the DOL advises you to:

1. Explore your options. Some larger private health insurance companies have volunteered to provide coverage earlier than the implementation deadline. In many cases, this stopgap coverage is already available. Check with your insurer.

2. Target the open enrollment period. If early coverage isn’t an option with your health insurance plan, young adults will qualify for an open enrollment period after Sept. 22. Insurers are required to provide adequate notice for this special open enrollment period.

3. Sign on the dotted line. To obtain the extended coverage, all parents and children have to do is sign up during the enrollment period and pay for this option.

Tip: For more information and the new DOL Fact Sheet visit www.dol.gov/ebsa/newsroom/fsdependentcoverage.html.

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