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Dependent Coverage Up to Age 26 and What it Means

December 17, 2018

The Affordable Care Act (ACA) requires group health plans and health insurance issuers offering group or individual coverage that provide dependent coverage to children on their parents’ plans must make coverage available until the adult child reaches age 26.  The question heard most often is “At what point in the month of their 26th birthday is it permissible to terminate coverage for that child?”.  Since it depends on the number of full-time employees an organization has in a preceding year, there are two answers to the question.

Under 50 Employees  For this size organization that offers group health plans to dependents, they are required to continue making coverage available for an employee’s child until that child’s 26th birthday.  For example, if an employee’s child’s birthday is September 13th, the plan need only offer coverage for the child through the day before his or her 26th birthday, i.e. September 12th. 

50 or More Full-time Employees   If your organization employs an average of 50 or more full-time employees (and equivalents) in the preceding calendar year, you are an applicable large employer (ALE) and subject to the employer shared responsibility penalties under IRS Code section 4980H.  According to IRS Code 4980H, a dependent child must be covered for the entire month during which he or she turns 26 or the organization risks incurring penalties.  As in the above example, the employee’s child’s birthday is September 13th, therefore the plan’s coverage for that child must be offered through September 30th to avoid penalties. 

Defining Dependent Coverage 

Dependent coverage is coverage of any individual under the terms of a group health plan, group or individual health insurance coverage, because of the relationship to a plan participant.  The term “child” is not defined in the ACA, however, guidance points to the meaning as an individual who is a son, daughter, stepson, stepdaughter or adopted child of the participant.  Keep in mind – there is no clarification if foster children are included. 

It is important to note that parents can make the decision whether or not to add an adult child(ren) to their plan.  When the ACA extended coverage to age 26, it did not create independent enrollment rights for these dependents.  Furthermore, there is no requirement to cover the child of a dependent child (grandchild), or the spouse of a dependent child. 

Eligibility Restrictions 

Age and the relationship between the child and the plan participant are the only terms that restrict eligibility. The following terms cannot be used to restrict eligibility: 

  • Financial dependency on the plan participant 
  • Residency with the plan participant 
  • Student status 
  • Marital status 
  • Employment status 
  • Eligibility for other coverage

For more information regarding Employee Benefits for your organization, or to speak with one of our advisors, email Billy MacNair, Senior Vice President at Brown & Brown Benefit Advisors at bmacnair@advisorsbb.com.  

“This content is strictly informational and should not be used as specific advice on insurance products, legal, accounting and/or tax related matters. Insureds should always contact the appropriate licensed professional for their insurance, legal, accounting or tax needs.” 


Brown & Brown Benefit Advisors