COMPTROLLER'S SEAL STATE OF CONNECTICUT 55 ELM STREET
HARTFORD, CONNECTICUT
06106-1775
Telephone: (860) 702-3480
Facsimile:(860) 702-3556
HEALTH CARE COST
CONTAINMENT COMMITTEE
STATE OF CONNECTICUT
OFFICE OF THE STATE COMPTROLLER
HEALTHCARE POLICY & BENEFIT SERVICES DIVISION

DIVISION MEMORANDUM 2012-04
TO THE HEADS OF ALL STATE AGENCIES
May 4, 2012

ATTENTION: Human Resource and Payroll Officers
All Members of State Medical/Dental Plans
SUBJECT: Need to Update Dependent Status Information/
Upcoming Dependent Eligibility Audit

I. Introduction

In order to verify that only eligible individuals are covered under the State of Connecticut medical and dental plan, the Healthcare Policy & Benefit Services Division (HPBSD) of the Office of the State Comptroller (in consultation with the Health Care Cost Containment Committee) is preparing for an audit of all persons enrolled as dependents under the state employee plan as of the new plan year starting July 1, 2012. The audit will take place after that date.

Before the audit commences, it is important that agencies and plan members understand the eligibility rules and to ensure that each person listed as a dependent under the state health plan is properly classified. Toward that end, the bargaining parties to the SEBAC Agreement have issued a clarifying agreement regarding the identification, classification and continued coverage for certain individuals. A copy of the parties' agreement has been posted on this Division's website.

During the period between now and July 1, 2012, members of the health plan, both actives and retirees, should be sure to update the status of certain individuals they have enrolled as their dependents and provide required documentation if those individuals are affected by the changes discussed below.

II. Need for Members to Identify or Reclassify Status of Certain Individuals

Eligible Dependents. Under our medical plans, eligible dependents generally include a member's legally married spouse or civil union partner and children. The definition of a "child" includes a biological child, a stepchild, a foster child, an adopted child, or a child legally placed for adoption under the age of 18.
If a member is only covering his or her own children, as defined above, under the age of 26 for medical and age 19 for dental (any age in the case of a disabled child) and a legally married spouse or civil union partner, there is no need to do anything additional during open enrollment. However, if a member has been providing medical benefit coverage for a spouse from whom they are legally separated, a former spouse or a child (any age) for whom they are (or were) a legal guardian further action will be required on or before July 1, 2012.

A. Individuals Requiring Immediate Status Updates

Members will be required to provide certain information during open enrollment (and no later than July 1, 2012) if they have enrolled any of the following as a "dependent":

1) A spouse from whom the member is legally separated;
2) A former spouse from whom the member is divorced; or
3) Any individual for whom the member is (or was) named as legal guardian.

During open enrollment - and no later than July 1, 2012 - each plan member must provide the correct classification of any individual identified in categories (1) - (3) above who has been enrolled as a "dependent". Despite the issuance of COBRA notices following a change in marital status, some members may have misunderstood their ability to cover a spouse as a dependent under the state plan after a judgment of legal separation. Similarly, some members may have believed that a divorce decree requiring them to continue an ex-spouse's medical coverage permitted them to keep the former spouse on the state plan as a dependent. This memorandum clarifies the rules surrounding continued coverage of a spouse after legal separation or a former spouse after divorce and the member's obligation to provide notice of a marital status change.

The plan allows coverage of a minor child for whom the employee is the legal guardian as a dependent. Typically, legal guardianship ends when the child attains 18 years of age. Questions have arisen about a member's right to continue medical coverage for such individuals after court-ordered guardianship ends. This memorandum explains the conditions for coverage for such individuals between the ages of 18 and 26 and requires all members to disclose the status of children for whom they served as legal guardian.

B. Coverage of a Spouse after Legal Separation

The bargaining parties' recent agreement has clarified the circumstances under which health/dental benefit coverage may be continued for the spouse after a judgment of legal separation. The applicable rules depend upon the date when judgment was entered.

1. Legal Separation Judgments entered prior to July 1, 2012

A member who was granted a legal separation judgment on or before July 1, 2012, will be permitted to continue coverage for a spouse, subject to the following conditions.

2. Legal Separation Judgments entered after July 1, 2012

A member who is granted a legal separation judgment on or after July 1, 2012, will be permitted to cover a spouse, subject to the following:

C. Divorce Decrees requiring Coverage of a Former Spouse

In general, entry of a divorce decree requires that the former spouse be removed as a dependent under the plan within 31 days from the effective date. However, the laws of some states and certain divorce decrees require a member to continue group medical plan coverage for a former spouse. These divorce decrees may have confused some members about their right to keep a former spouse on the state medical/dental plan as a dependent. The bargaining parties have clarified the rules to be applied where a divorce decree requires continued coverage of an ex-spouse.

Note: Where there is no court order or statute requiring continuation of coverage for a former spouse or a member fails to provide timely notice of a marital status change, continuation coverage for the former spouse will be available under COBRA.

1. Members divorced on or before June 30, 2012

Members who were divorced on or before June 30, 2012, and who are required to provide health benefit coverage for an ex-spouse under the laws of their home state or under the terms of a divorce decree will be allowed to continue coverage for a former spouse, subject to the following:

2. Members divorced on or after July 1, 2012

Members who divorce on or after July 1, 2012, and who are required by state law or divorce decree to provide health benefit coverage for an ex-spouse will be allowed to continue coverage for a former spouse under the state plan, provided:

D. Children subject to Legal Guardianship

1. Need to identify all Children Subject to Guardianship.

Under our medical/dental plan, an active or retired state employee who has been named by the court as legal guardian of a minor child is permitted to cover that child as a dependent while the guardianship is in place. Most legal guardian ship ends at age 18. Until recently, the only way to identify such individuals in CORE-CT or on the healthcare application form had been to list that child as either the "son" or the "daughter" of the member, which created confusion. New dependent categories have now been created for these individuals.

CORE-CT now has two different categories to identify an individual as either a "temporary ward" (someone subject to a one-year legal guardianship) or a "ward," which means an individual subject to legal guardianship as a minor child, which ends at age 18 in most states.

A member who has been providing medical benefits to a child for whom he or she is the legal guardian must now identify that child as a ward (or temporary ward) - not as a "son" or "daughter" - and must provide the employing agency or the Retirement Health Unit of HPBSD with a copy of the legal guardianship order. Everyone who is providing coverage for a child who is currently (or was formerly) subject to legal guardianship must update the child's status by submitting a CO-1318 for each individual to the employee's agency (for actives) and to the Retirement Health Unit of HPBSD (for retirees).

2. Tax consequences for Coverage after Guardianship Ends (children between 18 and 26).

If a member has been providing medical plan coverage to an individual after legal guardianship has ended (for example, a grandchild between the ages of 18 and 26) the member must update the child's status by July 1, 2012 by submitting a CO-1318 and by providing further information to be used to determine the tax treatment of benefits provided. There are two possibilities. If the child continues to be the member's dependent for federal income tax purposes, then the benefit should not be taxable to the member. Form CO-1048 QR should be used by the member to document the individual's status as a dependent for tax purposes. While members are permitted to cover a former ward who is not a tax dependent, the fair market value of the benefit will be taxable the plan member. Form CO-1048 NQ should be filled out by the member to designate individuals under the age of 26 who are covered under the plan but do not qualify as a dependent for federal tax purposes.

III. Conclusion

Plan members should take this opportunity to verify that only eligible individuals are enrolled as dependents under the state medical/dental benefit plans. The upcoming dependent eligibility audit will be based on dependent enrollments in effect on or after July 1, 2012.

Employee and retiree plan members who fail to make the required disclosures regarding legal separations or divorces or who are discovered to have maintained enrollment for ineligible individuals may be subject to penalties and/or liability for the value of benefits provided.

Please see the attached forms that will be used to update the status of the dependent types discussed in this memorandum. Agency Payroll and Human Resources personnel with questions should e-mail Margaret.Haering@po.state.ct.us or telephone 860-702-3486.

Very truly yours,

THOMAS C. WOODRUFF, Ph. D.
Director

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