Health coverage provided for an employee’s children under 27 years of age is generally tax-free to the employee.
Child – Broad Definition for this Purpose
Other than age, the “child” definition has no other restriction. Thus, there are no income or marital restrictions. For this purpose, a child includes a son, daughter, stepchild, adopted child or eligible foster child.
This provision allows 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 to make pre-tax contributions to pay for this expanded benefit.
The definition of “child” for this purpose includes the individual’s:
- legally-adopted individual,
- an individual lawfully placed with the employee for legal adoption, and
- an eligible foster child.
No other requirements apply so long as the individual meets the definition of a child and has not reached age 27 by the last day of the year. Even a married child is included by this definition! (But the married child’s spouse and/or children are not covered.) A child attains age 27 on the 27th anniversary of the date the child was born (for example, a child born on April 10, 1989 attained age 27 on April 10, 2016).
Contact your employer for further information regarding the employer’s plan related to this very beneficial provision.