What are the legal considerations involved with adoption benefits?

Employers adding or modifying adoption benefit programs should be aware of certain legal considerations, including requirements under group health rules as well as ERISA, COBRA, and the Family and Medical Leave Act.

Group health plan rules. Adoption raises issues under the health care portability rules under HIPAA [see ¶42,410 ]. Beginning on October 1, 2001, the Child Support Performance and Incentive Act of 1998 affects the rules governing adoptions under qualified medical child support orders [see ¶42,070 ].

ERISA. Reimbursement for legal expenses related to adoption may cause the plan to be classified as an ERISA welfare benefit plan that is subject to certain reporting and disclosure requirements, such as providing summary plan descriptions and reporting plan information to the government.

COBRA. The definition of a qualified beneficiary under COBRA includes a child born to or placed for adoption with the covered employee on or after the date of a qualifying event. COBRA participants are also be allowed to change their coverage status upon the adoption of a child.

Being placed for adoption or placement for adoption occurs when a covered employee assumes and retains a legal obligation for total or partial support of a child in anticipation of the child's adoption. A child who is immediately adopted by a covered employee without a preceding placement for adoption is considered to be placed for adoption on the date of the adoption.

FMLA. Under the Family and Medical Leave Act, eligible employees of covered employers are entitled to take unpaid, job-protected leave for the adoption of a child and for care of that adopted child during the first year [see In what situations is FMLA leave available? at ¶45,420 ].

Tax benefits. For tax years beginning in 2009, the maximum amount that can be excluded from an employee's gross income for amounts paid or expenses incurred by an employer for qualified adoption expenses under an adoption assistance program is $12,150. The tax benefit begins to phase out for taxpayers with modified adjusted gross incomes in excess of $182,180 and is completely phased out at $222,180.