Change takes effect immediately for adult children under 27
April 27, 2010
Washington, DC— Nevada Senator Harry Reid today announced that health coverage provided for children under age 27 is now generally tax-free to employees as a result of the new health care law, the Patient Protection and Affordable Care Act. The Internal Revenue Service (IRS) released guidelines todayto help employers, employees and health insurers take immediate advantage of this new law. Details of this provision, which will reduce the tax burden on families, individuals, and businesses, are included in IRS Notice 2010-38 and are available at www.irs.gov.
“Expanding parents’ health care plans to allow coverage for their adult children is one of the most important provisions we put into place. I am pleased that the IRS has taken steps to make it easier for employers to offer this benefit immediately,” Reid said. “Nevadans will keep more money in their pockets immediately as a result of this tax-free health care coverage. More families and individuals will get access to affordable care, and businesses will save money that will allow them to grow.”
Prior to passage of the new health reform law, the rules for tax-free employer health care limited coverage for workers’ children to those that had not yet reached age 19, or age 24 if thechild was a full-time student. Additionally, adult children are eligible for coverage even if they do not meet the requirements for being treated as dependent on the parent’s tax return.
In addition to tax-free health coverage for children under 27, the new law will require insurance companies to extend coverage to children who are on their parents’ plan up to age 26. Even though the law doesn’t require such coverage until September 23, 2010, two health insurance companies with a major presence in the Nevada market recently announced they would extend coverage well-before that date. Reid applauded their decision to comply with the law prior to September, calling it “evidence that the reforms we’ve enacted are common sense improvements and the right thing to do.”