Today, the IRS announced that as a result of the Affordable Care Act, health care coverage for an employee’s child under 27 years of age is now generally tax-free to the employee, effective March 30, 2010. The changes allow employers with cafeteria plans (“plans that allow employees to choose from a menu of tax-free benefit options and cash or taxable benefits”) to permit employees begin making pre-tax contributions to pay for this expanded benefit. A child under the new changes includes “a son, daughter, stepchild, adopted child, or eligible foster child.”
In addition, to changing the rules regarding cafeteria plans, the Act also requires plans that provide dependent coverage of children to continue to make the coverage available for an until child until the child turns age 26.
Notice 2010-28 explains the changes in more detail as well as provides examples for determining whether a child qualifies or not.