Download Dependent Coverage

 Legislative Update:
Dependent Age Limit Increases to Age 26
for Health Coverage
December 2010
As a reimbursement account participant, we would like to inform you of a provision within the Affordable Care
Act which extends health coverage for an “adult” child. If adopted by your employer, your dependent child(ren)
could continue to be covered under your medical plan up to age 26 and medical expenses would be eligible for
reimbursement under a healthcare flexible spending account (HCFSA). The following frequently asked
questions will help you better understand how this change may impact health plan coverage and tax treatment
for your dependents.
Frequently Asked Questions (FAQs)
Who is eligible?
Your natural child, stepchild, foster child, adopted child, or children placed with you for adoption are eligible.
Often referred to as an “adult” child, the child may be married, does not have to be living with you and does not
have to be a tax dependent.
Please note: IRS Publication 502 on the participant portal may not be updated by the IRS until 2011 to reflect
this change.
What are the new age requirements?
1. Coverage for group medical plans that offer dependent coverage generally must continue to provide
coverage for an employee’s child until age 26. This means the last day of coverage for your child
would be the day before the child’s 26th birthday.
2. Taxation for this extended coverage will be tax-free until December 31 of the year in which the adult
child turned 26. This means, if adopted by your employer, medical expenses for adult children may
also be reimbursed through a HCFSA until the last day of the calendar year in which the child turns 26.
Which health plans are impacted by this change?
The law generally affects group medical plans including healthcare Flexible Spending Accounts (FSAs) and
Health Reimbursement Arrangements (HRAs). However, employers are not required to increase the age limit
for most FSAs, dental and vision plans. Therefore, you should check with your employer on whether your
employer has elected to also increase the age limit to age 26 for your plan.
Please note: Health Savings Accounts (HSA) are not affected by the increased age limit.
Are plans required to extend coverage?
Group medical plans (commonly health insurance) and HRAs, which currently cover dependents, are required
to extend coverage to age 26. Generally, healthcare FSAs, dental and vision plans are not required to extend
coverage. Please check with your employer on whether your plan has been amended to include this change.
Legislative Update:
Dependent Age Limit Increases to Age 26
for Health Coverage
December 2010
Reimbursement Account FAQs
How do I find out if my plan has been amended for my healthcare FSA?
Ask your employer if your healthcare FSA plan has been amended to allow adult children to age 26 to utilize
your FSA funds. In addition, you should ask when the amendment will go into effect.
How long are my adult child’s medical expenses eligible for reimbursement under my
healthcare FSA?
If your employer has amended your FSA plan, expenses incurred until December 31 of the year in which your
child reaches age 26 will be eligible for reimbursement.
For example: Let’s say your child is turning 26 on May 15, 2011. Eligible medical expenses incurred through
December 31, 2011 are eligible to be reimbursed with your healthcare FSA. Any expenses incurred in 2012 or
later cannot be reimbursed.
If my employer allows the extended coverage for my adult child, what expenses are eligible for
reimbursement under a healthcare FSA?
If your employer has amended your FSA plan, all IRS Section 213(d) medical expenses would be eligible for
reimbursement. Access the participant portal to view a listing of eligible medical, dental, prescription, vision
and/or hearing expenses.
Are the reimbursements I receive included in my taxable income?
If your employer amended the plan, the contributions and reimbursements are tax-free for expenses incurred
after the effective date of the amendment and before December 31 of the year in which your child reaches age
26.
Does this change to the dependent age affect my HSA?
No. The HSA dependent age coverage stays the same. However, your “adult” child may be eligible to be
covered under your High Deductible Health Plan (HDHP) but ineligible to receive tax-free reimbursements from
your HSA.
©PayFlex Systems USA, Inc. 12/10
PF-023