Written by Marc R Barnes EA
June 23, 2010
Expanded coverage for older children now available.

In today’s economy, many parents have adult children who still rely on them for some financial support. As a result of the recently passed landmark health legislation that overhauls the current health care system, many adult children may now be able to rely on their parents for assistance with health care coverage as well.

The Affordable Care Act requires group health plans and health insurance issuers who provide dependent coverage of children to continue to make such coverage available for an adult child through age 26. If your business has a group health plan that covers your employees’ children, the health plan must now cover children until they turn age 27. Until this change was made, many health plans applied lower age limits and also required that the child qualify as a dependent of the parent for tax purposes. Under the new Act, a child is any son, daughter, stepchild, adopted child, or eligible foster child.

This expanded benefit also applies to retiree health plans and to self-employed business owners who take the self-employed health insurance deduction on their tax return. Unlike some of the health care measures that don’t take effect right away, this provision is effective beginning March 30, 2010.

The IRS recently stated that employers with cafeteria plans may permit employees to immediately make pre-tax contributions to provide coverage for children under age 27, even if the cafeteria plan has not yet been amended to cover these individuals. So if your business has a cafeteria plan, this option is available right away. Keep in mind that the IRS also stated that businesses have until the end of 2010 to amend their cafeteria plan language to incorporate this change.