Dependent coverage extended

Dependent coverage extended

Health plans must offer coverage to dependents on their parents’ plan(s) until the young adult turns 26. Coverage must offer the same benefits as for other dependents and can’t cost any more.

Dependent defined
Eligible dependents:

  • Must be a dependent of the employee (son, daughter, stepson, or stepdaughter, legally adopted or eligible foster child*). Don’t have to be living with a parent
  • Don’t have to be living with a parent
  • Don’t have to be a dependent on their parents’ tax return
  • Don’t have to be full-time students
  • May be married (but plan doesn’t have to cover the dependent’s spouse or children)

Effective
This applies to all health plans, including grandfathered plans. Grandfathered plans are not required to cover a dependent child if the dependent child is eligible for coverage under the dependent child’s own employer health plan until Jan. 1, 2014. Beginning in 2014, dependent children must be offered coverage whether or not they’re eligible for coverage under their employer’s plan.

Important notice about HSAs and dependents under age 26
While the Affordable Care Act allows parents to add their dependent children (up to age 26) to their health plans, the IRS has not changed its definition of a dependent for health savings accounts. This means that a person could have their 24-year-old child covered on their HSA-qualified high-deductible health plan, but not be eligible to use their HSA funds to pay for medical bills for that 24-year-old.

The IRS definition of a dependent is used when determining a dependent for HSA purposes. The account holder must be able to “claim” the child/relative as a dependent on their tax return. If the account holder can’t claim the child/relative as a dependent, then they can’t spend HSA dollars on services provided to that child/relative.

Here is a quick reminder of the IRS definition of a dependent:

  • Qualifying child:
    • Daughter, son, stepchild, sibling or stepsibling (or any descendant of these)
    • Has same principal place of abode for more than one-half of taxable year
    • Has not provided over ½ of own support during taxable year
    • AND not yet age 19 (not yet age 24 if student) at the end of the tax year
    • OR permanently and totally disabled
  • Qualifying relative:
    • Bears a relationship: daughter, son, stepchild, sibling or stepsibling (or any descendant of these), father, mother or ancestor, aunt, uncle, in-laws or an individual who has his/her principal place of residence the home of account owner
    • Receives more than half of support from account owner
In NYS the enhanced NYS Age 29 Regulations Update trumps this.