Exactly When May Employers Cut Off Medical Coverage to Adult Dependent Children Who Reach Age 26 Under PPACA?

As of January 1, 2015 (or the first renewal thereafter for plans qualifying for transitional relief), PPACA’s employer mandate rules began imposing penalties on large employers (those with 50 or more full-time and full-time equivalent employees) that do not offer coverage to all full-time employees and their dependent children. For purposes of these rules, a “dependent” is defined as a biological or adopted son or daughter who is under 26 years of age. 

The employer shared responsibility final regulations clarify that a child is a dependent for purposes of the employer shared responsibility penalties for the entire calendar month in which he or she attains age 26. However, the final rules exclude stepchildren and foster children from the definition of dependent.

Hence, large employers that are subject to the employer mandate must offer dependent coverage to children (but not step or foster children) of their full-time employees through the entire month in which the dependent attains age 26 in order to avoid the shared responsibility penalties.  Therefore,

• Small employers are not subject to penalties under PPACA’s adult coverage mandate if they do not offer dependent coverage at all, or terminate dependent coverage on the child’s 26th birthday; but
• Large employers that are subject to the employer mandate are subject to penalties if they do not offer dependent coverage to the children of their full-time employees through the entire month in which the dependent attains age 26.