Under the ACA’s Employer Shared Responsibility provisions (“employer mandate”), Applicable Large Employers (ALEs) must offer coverage not only to their full-time employees, but also to those employees’ dependents (dependent children).
Non-ALEs are not subject to the employer mandate, but if they offer dependent coverage, it must meet the ACA’s standards – including extending coverage to dependent children up to age 26.
Definition of Dependent
- For ACA purposes, a dependent means the employee’s biological child, adopted child, or stepchild who is under age 26.
- Dependents do not include:
- Spouses
- Foster children
- Other relatives (siblings, grandchildren, etc.)
Employer Mandate Requirement for ALEs
- ALEs must make an offer of coverage to 95%+ of their full-time employees and their dependents (to avoid 4980H(a) “no coverage” penalties).
- The coverage must meet Minimum Essential Coverage (MEC) standards.
- There is no affordability or minimum value requirement for dependent coverage – only for coverage offered to eligible full-time employees themselves. However, in practice, nearly all employers offer the same MEC/Minimum Value plan to both employees and their dependents (and also to spouses).
- The ACA’s employer mandate does not require offers of coverage to spouses. In practice, however, most employers extend coverage to employees, their spouses, and their dependents.
Special Note on Dependent Rules (ALEs vs. Non-ALEs)
- These dependent coverage rules apply broadly to all group health plans – not just those of ALEs.
- ALEs: Must offer dependent coverage to full-time employees’ children to avoid penalties.
- Non-ALEs: Not subject to the employer mandate, but if they choose to offer dependent child coverage, it must extend to children up to age 26 (the ACA’s universal dependent age rule).
Compliance Tip
When verifying ACA compliance, confirm that eligibility policies and plan documents clearly define dependents consistent with ACA rules. Employers that mistakenly exclude stepchildren or adult dependent children to age 26 may inadvertently expose themselves to penalty risk.