Q: It seems like plans and insurers can terminate dependent coverage after a child turns 26, but employers are allowed to exclude from the employee’s income the value of any employer-provided health coverage through the end of the calendar year in which the child turns age 26. This is confusing.
A. Under the law, the requirement to make adult coverage available applies only until the date that the child turns
However, if coverage extends beyond the 26th birthday, the value of the coverage can continue to be excluded from the employee’s income for the full tax year (generally the calendar year) in which the child had turned 26. For example, if a child turns 26 in March but is covered under the employer plan of his parent through December 31st (the end of most people’s taxable year), the value of the health care coverage through December 31st is excluded from the employee’s income for tax purposes. If the child stops coverage before December 31st, then the premiums paid by the employee up to the time the plan was stopped will be excluded from the employee’s income.