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:

  • child,
  • stepchild,
  • 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.

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