Advisories

New Definition Of “Dependent” Affects Health Plans And Other Benefits Plans

November 2004

The Working Families Tax Relief Act of 2004, signed into law recently by the president, has dramatically changed the definition of "dependent" under Code Section 152. This definition applies for numerous purposes, such as determining personal exemptions, tax credits and head of household filing status. It also impacts the definition of dependent under health benefit plans, dependent care assistance plans, hardship distributions under 401(k) plans, nonqualified deferred compensation plans under new Code Section 409A, etc. The changes take effect January 1, 2005.

This Advisory identifies changes to the law which may have an impact upon health benefit plans and their administration. These changes would likely apply to most or all such plans, although this may not always be the case, depending upon the particular plan documents and administration.