Dependent Eligibility: Non-ERISA

State & Municipal Government Plans

A group health plan will have established criteria for determining whether or not the dependent of a participant is eligible to participate in the health plan.

There are also requirements for notifying the employer, COBRA administrator or insurer when a dependent terminates and for determining possible tax implications for certain dependents.

Common Requirements

Please note: All plans may have their own dependent eligibility requirements.  You should review your plan description for definitions of dependents and age limitations.

Dependents of an employee eligible for medical coverage commonly include:

New Dependents

To receive immediate coverage, the employer or the employee must notify the insurance company or plan administrator within a specified time (see your plan description) after the date the dependent is born, adopted, or placed.

National Medical Child Support Orders

A National Medical Support Notice (NMSN) is a standardized medical child support order that is used by state child support enforcement agencies. NMSNs must be issued in a standard format and includes instructions for the employer to follow.

The NMSN consists of two parts:

Part A: “Notice to Withhold for Health Care Coverage” includes instructions to the employer and an employer response form

Part B: “Medical Support Notice to Plan Administrator” directs the Plan Administrator to enroll the child in the plans specified by the NMSN

When an employer receives an NMSN, it must:

If the NMSN is appropriately completed, the Plan Administrator must treat it as a QMCSO.

Sample NMSN Forms can be obtained from the links below:


Status Changes

Applicable Laws

When a dependent’s status changes, certain laws may impact the dependent’s rights or eligibility for benefits under a group health plan.

Applicable laws include:


COBRA regulations provide that if a dependent loses coverage under the employer’s plan due to the COBRA qualifying events of employment termination/reduction in hours, death of the employee, or the employer’s bankruptcy, the employer has 30 days to notify the Plan Administrator of the qualifying event, and the Plan Administrator then has 14 days to send out the COBRA election notice.  Since the employer may be the Plan Administrator, as a practical matter this becomes a 44 day timeframe to send out a COBRA election notice after these qualifying events.

If the COBRA qualifying event is divorce or a child losing eligibility (situations that the employer may not be aware of), the employee or qualified beneficiary must be allowed a minimum of 60 days to notify the Plan Administrator (a/k/a employer) of the qualifying event.

In cases where the employer is the Plan Administrator, once notice from the employee or qualified beneficiary is received, the Plan Administrator (a/k/a employer) has 14 days to send out a COBRA election notice.

These timeframes do not change in circumstances where the employer and/or Plan Administrator has delegated the task of issuing the COBRA notice to a third-party COBRA administrator.

See the COBRA Provisions compliance activity for more information about COBRA timeframes and the role of the employer.

HIPAA Special Enrollment Rules

If a dependent loses coverage from another health plan, or the employee gains a dependent through marriage, birth or adoption, the employee must be allowed a minimum of 30 days to enroll in the employer’s health plan and must be treated as an individual who enrolls when first eligible in terms of benefits, premiums and application of any pre-existing conditions exclusion.

If an employee or dependent experiences a special enrollment event governed by CHIPRA (a gain or loss of eligibility for premium assistance under a state Medicaid or Children’s Health Insurance Program) a minimum of 60 days is required for enrollment/disenrollment in the employer’s health plan.

Under IRS guidance effective Sept. 16, 2013, the marriage of a same-sex couple (in a state that recognizes same sex marriage would be considered a status change permitting a mid-year election change.  The guidance does not address whether the change in the legal environment is itself a status change for a previously married same-sex couple.  It does not fall within the scope of the existing status change rules.

Section 125 Election Change Related to Dependent Eligibility

There are no specific timeframes in the Treasury regulations that specify when a Section 125 (“cafeteria”) plan must require an election change request to be submitted if the Section 125 plan allows pre-tax benefit elections to be changed upon occurrence of a qualifying change in status or the occurrence of a HIPAA Special Enrollment event.  However, the regulations state that there must be consistency between the change in status or special enrollment event and the requested election change.

For that reason, most employers adopt a 30 day timeframe for submitting election change requests to ensure that the election change request is consistent with the change in status or HIPAA special enrollment.

A minimum 60 day timeframe for election changes must be allowed for HIPAA special enrollment events governed by CHIPRA.

Michelle’s Law

Please Note:  State and municipal government employers who sponsor self-insured health plans may elect to be exempt from Michelle’s law.  Please see the section entitled “State and Municipal Government Plans – PHSA Exemption” for more information, or visit

Impact of ACA on Michelle’s Law Requirements
Because Michelle’s law provides extended eligibility to a seriously ill dependent child only when the child’s eligibility is otherwise conditioned on full-time student status, the ACA’s elimination of full-time student status as a condition of eligibility for an employee’s child limits Michelle’s Law impact on most group health plans. This is because under the ACA, plans are required to extend eligibility to adult children until the child’s 26th birthday without regard to full-time student status. For plan years beginning on or after September 23, 2010, the impact of Michelle’s Law, as well as its notice and disclosure requirements, is limited to plans allowing an adult child to participate after attaining age 26, if eligibility is conditioned on maintaining full-time student status.

Michelle’s law is named for a seriously ill college student who was forced to stay in college as a full-time student to maintain her status as a dependent on her parent’s health insurance.

The new legislation requires health plans to provide the same benefits as if the child continued to be a full-time student in the case of college students who take a medical leave of absence of up to one year for a serious injury or illness.  Coverage under these circumstances must continue until:

Plans Covered
The law applies to both fully-insured state and municipal government plans.  Please see the note above regarding its application to self-insured plans. It does not apply to plans that only offer excepted benefits.

Written Certification
The requirements of Michelle’s Law do not apply unless the plan receives a written certification by a treating physician of the dependent child, which states that the child is suffering from a serious illness or injury and the leave of absence is medically necessary.

Plan Notice Requirement
The health plan must include with any notice of any requirement for certification of student status a description of the terms relative to continued coverage during medically necessary leaves of absence.  The description should be written in language that is understandable to the typical plan participant.

Information about the right to this extended coverage should also be included in the plan summary and enrollment materials.

Possible Tax Implications

Section 105(b) of the Internal Revenue Code generally excludes from an employee’s gross income employer-provided reimbursements made directly or indirectly to the employee for the medical care of the employee, employee’s spouse or employee’s dependents (as defined in § 152).

Prior to the ACA, medical coverage provided to the dependents of an employee was nontaxable only if the dependent was a “qualifying child” or “qualifying relative” – and therefore a “tax dependent” under Code Section 152, as modified by Code Section 105(b). Coverage provided for children who were not tax dependents resulted in imputed taxable income to the employee purchasing the coverage.

Under § 152(f)(1), a child is an individual who is the son, daughter, stepson, or stepdaughter of the employee, and a child includes both a legally adopted individual of the employee and an individual who is lawfully placed with the employee for legal adoption by the employee. Under § 152(f)(1), a child also includes an “eligible foster child”, defined as an individual who is placed with the employee by an authorized placement agency or by judgment, decree, or other order of any court of competent jurisdiction.

As amended by the ACA, the exclusion from gross income under § 105(b) has been modified to expand the availability of nontaxable health coverage to an employee’s adult children. Effective March 30, 2010, the Section 105(b) exclusion is available with respect to coverage provided to an employee’s child who has not attained age 27 as of the end of the taxable year, including a child of the employee who is not the employee’s dependent within the meaning of the § 152(a). Thus, the age limit, residency, support, and other tests described in § 152(c) do not apply with respect to such a child for purposes of § 105(b).The exclusion applies only for reimbursements for medical care of individuals who are not age 27 or older at any time during the taxable year. For purposes of §§ 105(b) and 106, the taxable year is the employee’s taxable year; employers may assume that an employee’s taxable year is the calendar year; a child attains age 27 on the 27th anniversary of the date the child was born (for example, a child born on April 10, 1983 attained age 27 on April 10, 2010). Employers may rely on the employee’s representation as to the child’s date of birth.

IRS guidance effective Sept. 16, 2013 does not require employee welfare benefit plans to provide health benefits to same-sex spouses.  However, to the extent that an employer does so, the employer may treat the cost of coverage provided to the spouse as tax deductible.  In addition, a health FSA may provide benefits to a same-sex spouse.  See our Blog post for information on what same sex spouses are eligible for this tax deduction and whether the employer or employee is eligible for a tax refund if taxes were withheld from benefits provided to same sex spouse prior to Sept. 16, 2013.

Additional Resources

Click Here to review the Working Families Tax Relief Act.