Interim final regs address health coverage for adult children up to age 26

The Internal Revenue Service, in conjunction with other agencies charged with providing guidance under the recently enacted health reform legislation, issued interim final regulations (T.D. 9482) May 10 on the provision requiring adult children to be covered under their parents' health plan or policy until they turn 26 years old.

The new rules, which are effective for plan or policy years beginning on or after September 23, 2010, clarify several important issues:

- Coverage will need to be made available to adult children even if they are not currently – or were never previously – covered by the plan or policy, and employees with adult children who did not elect to participate in their employer's plan must be given the opportunity to join the plan along with their adult children.

- The coverage offered to adult children must be the same as that available for other children, and surcharges for adult children that do not apply to other children are not permitted.

- Employers or insurers must notify employees or insured individuals of the opportunity for their adult children to enroll and must give them at least 30 days to enroll, effective no later than the first day of the first plan or policy year beginning on or after September 23, 2010. (In subsequent years, coverage for adult children may be elected as part of normal open enrollment periods.)

- Until 2014, grandfathered plans (generally, those in existence on March 23, 2010) may exclude adult children who are eligible to participate in another employer's group health plan (other than one provided by the other parent's employer). If both of a child's parents' employers offer health plans, then the adult child may choose either plan.

These rules work in tandem with another provision of the health reform legislation that expanded the U.S. federal income and employment tax exclusions for coverage of individuals' adult children through the end of the year in which they turn 26. Guidance on that provision, which took effect on March 30, 2010, was released on April 27 in Notice 2010-38. (For prior coverage, see Tax News & Views, Vol. 11, No. 27, Apr. 30, 2010.)