Question: Can a child’s tax-dependent, employment, marital, student, or any other status other than age affect medical plan eligibility?

Compliance Team Response:

The ACA has made any status of that type irrelevant for purposes of a child’s eligibility for the employer’s medical plan.

ACA Age 26 Mandate: General Rule

The ACA requires that a health plan offering dependent coverage for children make that coverage available until the child reaches at least age 26.

ACA Age 26 Mandate: Who is a “Child”?

These ACA requirements apply to any child who is eligible for the plan and qualifies as the employee’s “child” as defined by Internal Revenue Code §152(f)(1).

This includes the employee’s:

• Biological child

• Stepchild

• Adopted child (including legally placed for adoption)

• Foster child

(Note that the ACA employer mandate requires only that the employer offer coverage to full-time employees and their biological and adopted children to avoid potential pay or play penalties.  In other words, the ACA employer mandate definition of “child” does not match the IRC §152(f)(1) definition because it excludes the requirement to offer coverage to stepchildren and foster children.)

ACA Age 26 Mandate: Prohibited Restrictions

The ACA prohibits the plan from imposing any eligibility limitation for such children who are under age 26.

This means that the plan cannot condition eligibility on any factor other than the relationship between the child and the employee (i.e., other than whether the child is a “child” under the terms of the plan).

For example, the plan cannot condition child eligibility on:

• Financial dependency

• Residency

• Employment

• Marital status

• Student status

• Eligibility for other coverage

• Tax-dependent status

The only relevant attribute for an eligible child is the child’s age.  In other words, an employee’s eligible biological child, stepchild, adopted child, or foster child will remain eligible for the medical plan to age 26 regardless of any other status.

ACA Age 26 Mandate: Does Not Apply to Most Dental/Vision Plans

The ACA Age 26 Mandate does not apply to “excepted benefits,” which includes virtually all dental and vision plans.

Therefore, employers generally may include plan eligibility limitations for dependent child eligibility prior to age 26 for dental or vision coverage.  This includes the option to define a child’s dental/vision plan eligibility based on tax-dependent status (i.e., under age 19, or under age 24 as a full-time student), which was common for all health plans prior to the ACA.

Regulations

29 CFR §2590.715-2714

(a) In general.

(1)   A group health plan, or a health insurance issuer offering group health insurance coverage, that makes available dependent coverage of children must make such coverage available for children until attainment of 26 years of age.

…

(b) Restrictions on plan definition of dependent.

(1)  In general.

With respect to a child who has not attained age 26, a plan or issuer may not define dependent for purposes of eligibility for dependent coverage of children other than in terms of a relationship between a child and the participant. Thus, for example, a plan or issuer may not deny or restrict dependent coverage for a child who has not attained age 26 based on the presence or absence of the child’s financial dependency (upon the participant or any other person); residency with the participant or with any other person; whether the child lives, works, or resides in an HMO’s service area or other network service area; marital status; student status; employment; eligibility for other coverage; or any combination of those factors. (Other requirements of Federal or State law, including section 609 of ERISA or section 1908 of the Social Security Act, may require coverage of certain children.)

(2)  Construction.

A plan or issuer will not fail to satisfy the requirements of this section if the plan or issuer limits dependent child coverage to children under age 26 who are described in section 152(f)(1) of the Code. For an individual not described in Code section 152(f)(1), such as a grandchild or niece, a plan may impose additional conditions on eligibility for dependent child health coverage, such as a condition that the individual be a dependent for income tax purposes.

IRC §152(f)(1):

(1) Child defined.

(A)  In general. The term “child” means an individual who is—

(i)  a son, daughter, stepson, or stepdaughter of the taxpayer, or

(ii)  an eligible foster child of the taxpayer.

(B)  Adopted child. In determining whether any of the relationships specified in subparagraph (A)(i) or paragraph (4) exists, a legally adopted individual of the taxpayer, or an individual who is lawfully placed with the taxpayer for legal adoption by the taxpayer, shall be treated as a child of such individual by blood.

(C)  Eligible foster child. For purposes of subparagraph (A)(ii), the term “eligible foster child” means an individual who is placed with the taxpayer by an authorized placement agency or by judgment, decree, or other order of any court of competent jurisdiction.