When Does a Dependent Child Turn 26 for the Purposes of Coverage Termination?
Question: Our company sponsors a group health plan that offers coverage to eligible employees and dependent children. We understand that we must make coverage available until a child is age 26. At what point during the month of the child’s 26th birthday is it permissible for our plan to terminate coverage for the child?
Answer: Group health plans that offer dependent coverage are required to continue covering an employee’s child until the child’s 26th birthday — regardless of the child’s residency, financial dependence, student status, employment or other factors. Your plan will satisfy the dependent coverage requirement if coverage is provided until a child attains 26 years of age. As an example, assume an employee’s child’s birthday is July 17. The plan need only offer coverage for the child through the day before his or her 26th birthday: July 16.
Keep in mind that, if your company is an applicable large employer (ALE) under the Affordable Care Act, you could face potential employer shared-responsibility penalties under Internal Revenue Code (IRC) Section 4980H if you don’t offer coverage through the last day of the month containing the 26th birthday of an employee’s child.
An ALE is generally defined as an employer that employed an average of 50 or more full-time employees (or equivalents) in the preceding year. ALEs may be subject to penalties if they fail to offer adequate health insurance to full-time employees and their dependents.
For this purpose, “dependents” means an employee’s children, as defined in IRC Section 152(f)(1), who are under 26 years of age. (This doesn’t include stepchildren or foster children.) Thus, for purposes of Sec. 4980H, a child is a dependent for the entire month during which he or she attains age 26. Therefore, in the example above, an ALE must offer coverage through July 31 to avoid potential penalties.