2011-2 - Adult Dependents: California Issues New Guidance


A few days ago, the California Franchise Tax Board (FTB) and the California Employment Development Department (EDD) published guidance regarding California's nonconformity to the provisions in the Patient Protection and Affordable Care Act (PPACA) that remove the imputed income tax requirements on over-aged dependents up to age 27.

The California legislature has also introduced AB 36 for the purpose conforming with the non-taxability provisions in PPACA for coverage provided to adult dependents through age 26. The California Unemployment Insurance Code Section 931 also will treat the cost of coverage as wages for income for unemployment tax purposes. AB 36, if passed and signed by Governor Brown, would be retroactive to March 30, 2010 but effectively applying on the first day of the first Plan Year in which the adult dependent coverage became available (on or after September 23, 2010).

The purpose of this Memorandum is to provide you with notice of these significant developments. Once we know more about the progress of AB 36, we will prepare a recommended action plan.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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