Eligibility for dependent coverage on Group Insurance

I posted on this back on 4/3 but decided to do new posting since I have a better handle and didn't want to confuse worse. (Sorry for length)OK, I have finished doing an analysis of our Group Insurance dependent eligiblity coverage & our 125 eligibility coverage(which are 2 different things but affect each other) and have had some legal advice/interpretation. I am not going to address spouse since they are same under each (and that could be a posting in itself, only dependent children, who must be under 19 or 25 if full time student, and I won't go into Dependent Disabled Child.) Briefly requirements are:
Our Group Insurance Plan covers:
1. Naturally born child and/or legally adopted child; Does not matter where live or who supports or who claims on taxes.
2. Employee has legal guardianship for child must meet all 3: Primarily dependent on employee for support, claims on taxes, and resides with employee.
3. Step child-All 3 must be met: Primarily dependent on employee/legal spouse for support; employee/legal spouse clais on taxes; and permanently resides ewith employee/legal spouse.

Our 125/Cafeteria Wrap Document (which is pretty standard) covers:
1. Naturally born child and/or Adopted child if
a)lives with employee and is correctly claimed by employee as dependent for taxes. or
b) does not live with employee but pays 51% of expenses and/or responsibility transferred to employee by non-employee parent by executing IRS form 8832
c)does not live with employee, does not claim on taxes, but has a Qualified/National Child Support Order (QMCSO)
2. Legal guardian ship is similare to # 1;
3. Step child covered if:
a)lives with the employee/legal spouse and correctly claims on taxes.
b)doesn't live with employee, but correctly claimed by employee/legal spouse (by paying 51% of expenses or responsibility has been transferred to employee/legal spouse from non-employee parent by executing IRS 8332
c)does not live with employee; is not claimed on taxes, Has a QMCSO or National Medical Child support Order requiring coverage to be paid for by the employee/legal spouse (normally addressed to specific company).

Anyway, it is obvious we have folks covered under our group insurance that shouldn't be there and some that can be covered (employee's legal dependents) that should be covered post tax since can't be under 125 plan. I am really worried about all the step kids we have covered. I wondered how many of you ask for documents to make sure the children/step childen are "legally covered" (how deep do you go) and how you keep up with it? How many of you even realize that you have folks covered that you shouldn't? I am sure some of your actual Plan design my be different, but bet your 125 plan is similar if not the same.

This has gotten to be a big mess. I REALLY have some employees who HATE me and think I dreamed all this up!

E Wart


  • 2 Comments sorted by Votes Date Added
  • We don't worry about step children because the form is also a certification by the employee that the child is eligible. (The rules are on the form, outlined in employee meetings, and in all plan documents and SPD's.)

    With others (grandchildren, etc), we look at court documents.

    I don't know why the rules came down this way, but they have been in place for years. I guess there are too many divorce/step-children situations to try to cover. Plus, most employees are trying to get someone else to pay for coverage of the children if it is possible. Grandparents, on the other hand, try to help out. Anyway, it makes sense to me. Our health plan and our FSA plan, however, align much more tightly than yours do. Perhaps it is time to make some changes.

    Good luck!

  • Thanks, we are making changes (that is what triggered this analysis.. I know we need it.) However, in getting into it, the 125/IRS law is so very limiting. I hadn't even seen a Form 8832 before. I even called in our GM who should be using this on his taxes, and he hasn't seen it either. (Apparently if your divorce document allows you to claim them, but you can't "verify you pay 51% or more of taxes, you can't claim unless this form is used.)
    Anyway, I know they recently (about 18 months or so) issued some clarification to the 125 language, but still is very difficult and outdated. (What I have under the 125 plan interpretation is exactly what can be under the 125 plan, but if not covered under the plan document, can't be covered.) I thought divorce or child support documents would serve as the "legal document" to allow employees to claim dependent children, but they aren't!! We live and learn, can't wait until tomorrow.
    E Wart
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