IRS Notice 2010-38 expanded the health care tax exclusion for children through the end of the calendar year in which a child turns age 26 ("Adult Child") as added by the Patient Protection and Affordable Care Act (PPACA) and the Health Care and Education Reconciliation Act (Act) which was effective March 30, 2010. This change has an immediate impact on plans that define eligibility based on reference to the definition of a health care dependent found in Section 105(b) of the Code including many FSA and HRA accounts.

 

The health insurance coverage mandate under the Act requires "group health plans" to provide coverage of children to age 26 effective for plan years beginning on or after September 23, 2010.  For FSA and HRA plans the provision can be effective March 30, 2010.

 

FSA and HRAs may reimburse participants for the medical care of Adult Children through the end of the calendar year in which the Adult Child turns age 26. 

 

An Adult Child includes a son/daughter, step son/daughter, adopted child or eligible foster child without regard to whether the child is a tax dependent. Dependents of Adult Children are not covered by the tax exclusion and therefore are not eligible.

 

Taxpayers may rely on the Notice until such time as regulations are amended.

 

This will directly affect your Plan and will require an Amendment of your Model Plan Document.  The Act allows you to retroactively modify your plan to March 30, 2010 if the amendment is signed by December 31, 2010.  If your plan is administered by BenefitHelp Solutions, please submit your plan amendment changes by completing the Adult Children - Plan Amendment Request Form and faxing or emailing it to our office as soon as possible.