IRS Says Employer-provided Accident and Health Coverage Tax-free for Dependent Children up to Age 27, Effective immediately



COBRA Model Notices: Updated General Notice




Cowan Completes 8th Annual Client Survey

IRS Says Employer-provided Accident and Health Coverage Tax-free for Dependent Children up to Age 27, Effective Immediately

On April 27, 2010, the IRS released IRS Notice 2010-38 which explains that employers can, effective March 30, 2010, provide tax-free accident and health coverage to dependent children under 27 years old. (Separately, the health care reform legislation mandates that any group health plan that offers dependent children coverage continue to offer such coverage until the dependent child turns 26.)  Amounts paid or reimbursed under an employer-provided accident or health plan for medical care expenses of a dependent under age 27 will also be excluded from the employee's gross income.  This applies to dependent children who are not age 27 or older at any time during the employee's taxable year (which employers may assume to be the calendar year).  

This dependent child age limit will also apply to qualified benefits under Section 125 cafeteria plans, including health FSAs.  Employers may permit employees to immediately make pre-tax salary reduction contributions for accident or health benefits under a cafeteria plan (including a health FSA) for children under age 27, even if the cafeteria plan has not yet been amended to cover these individuals.  While cafeteria plan amendments generally may be effective only prospectively, in this instance a retroactive amendment to cover children under age 27 may be made no later than December 31, 2010, and must be effective retroactively to the first date in 2010 when employees are permitted to make such reductions (but in no event before March 30, 2010).

COBRA Model Notices: Updated General Notice

The DOL has updated the COBRA model General Notice to reflect the May 31, 2010 premium reduction eligibility extension.  Plans subject to COBRA provisions must provide the updated general notice to all qualified beneficiaries (not just covered employees) who experienced a qualifying event at any time from September 1, 2008 through May 31, 2010, regardless of the type of qualifying event, and who have not yet been provided an election notice.

The model Notice of New Election Period and Supplemental Information Notice have also been updated for plans subject to continuation coverage provisions.

http://www.dol.gov/ebsa/COBRAmodelnotice.html

Cowan Completes 8th Annual Client Survey