More on Adult Child Premiums! Great News!

By Ric Joyner, MBA, CEBS, GBA, CFCI

Folks I got a question from a benefits attorney (also an agent) today asking me my thoughts on Adult Child Premiums and when the pre-tax premiums start under the new regulations. The questions are:

1. *Does the pre-tax premiums start after the 6 months waiting period in the bill or right away when the law was signed March 30th? The answer from Harry Beker today is that it is on the day the bill was signed. This means that people can have pre-tax adult child premiums starting the next day. (Note I was previously saying that it was after the 6 months wait which is in the bill). So this is good info for our own employees and HR should let them know. In keeping with the new policy on emails I will let HR decide whether our employees should have this information.

2. *Note the law reads that it does not matter the dependent status for pre-tax. The employee who adds the child can get the premium reduction tax free starting 3-31 whereas prior to the bill signing, the employees had to pay taxes on the premiums. This is great news and a side benefit of ObamaCare.

3. Even though some states enacted mandated adult child premiums on January 1 ’10, the tax benefit (after-tax to pre-tax) does not RETRO back to January 1.

4. Question from Broker/Attorney—Does the State of WI recognize section 105 for  adult child premiums? The answer is yes because it recognizes 105. Changing 105, gave the “cover” to allow states to recognize adult child premiums. Without changing 105 employees would have been forced to pay taxes on the premiums.

Sources: *Harry Beker 4-15-10 at 4.35 pm EST. Todd Martin, JD Reinhart Law, 3.32 pm EST.


From: Beker Harry [mailto:Harry.Beker@XXXXXX.TREAS.XXX]
Sent: Thursday, April 15, 2010 4:35 PM
To: Ric Joyner
Subject: RE: Federal Age 26 and Taxability

Under the new law, adult child coverage is tax free.  Dependency status is immaterial.

From: Ric Joyner []
Sent: Thursday, April 15, 2010 4:39 PM
To: Beker Harry
Subject: RE: Federal Age 26 and Taxability

And the tax free status starts the day of the bill signing?

From: Beker Harry [mailto:Harry.Beker@XXXXX.TREAS.XXX]
Sent: Thursday, April 15, 2010 5:31 PM
To: Ric Joyner
Subject: RE: Federal Age 26 and Taxability

yes, unless the IRS announces otherwise.


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