Dependent Age HCSA vs Health/Dental Plan

[Guest Vickie]

My question surrounds the eligibility definition of a Dependent FullTime Student. If a Health and Dental Plan

allow the definition to be age 19 unless FT student under AGE 26, but HCSA follows IRS dependent definition of FT student thru Age 23, then HCSA claims filed for expenses on FT dep child covered under health plan that is 25 years old would HCSA reimbursement really be allowed based on IRS definition of dependent?

Vickie

[Guest nherkowitz]

This is a problem that many benefit plans seem to have ignored. When the law changed late in 2004, many plans had their coverage set and already enrolled their participants for 2005. Most plans still kept the eligibility for their medical plans under the old dependent rules in 2005 and some have not changed them for 2006.

If the individual is not a legal dependent under the Internal Revenue Code, then the employee is not eligible to receive the benefit on a tax free basis. If the 25 year old is not a dependent, than the cost of the benefit for the 25 year old is a taxable benefit to the employee.

There are two rules for dependency. The first test, that includes the under age 24 rules, is the qualifying child test. The student may still be considered a dependent under the code if he/she meets the qualifying relative test. This test is spelled out in IRS Publication 501.

You also need to look at the definition under the cafeteria plan. If it states the old rules, it needs to be amended. If the plan has a definition of dependent that just refers to section 152, then the code changes automatically apply to the plan.