California updates information on adult child health care premiums 2011/03/30 at 5:08 am
CCHreg; PAYROLL 03/15/11
California updates information on adult child health care premiums
Californias Employment Development Department has provided clarifying information on tax related matters as a result of the federal Patient Protection and Affordable Care Act and the Health Care Education and Reconciliation Act (see related story in the CCH Payroll Management Guide Report Letter Issue No. 2184 dated February 3, 2011). Both of these federal provisions were enacted in March 2010. The new federal law requires group health care plans and health insurance issuers to extend health care coverage to adult children (who are not married) until the child turns 26 years of age.
Furthermore, federal provisions enacted under these legislative measures allow for medical expenses to be excluded or deducted from a parents federal personal income tax liability if the child has not attained the age of 27 by the end of the tax year.
The extended coverage to adult children under the federal legislation referenced above is not considered wages that are subject to Unemployment Insurance (UI), Employment Training Tax (ETT), or State Disability Insurance (SDI), taxes. Existing State law, Section 931 of the California Unemployment Insurance Code (CUIC) excludes payments for employer-provided coverage under accident or health plans to a dependent from being
Section 931 of the CUIC does not apply to California Personal Income Tax (PIT) provisions. The fair market value for health care coverage to an adult child under the new federal provision is considered reportable income for California PIT purposes and subject to California PIT withholding. The fair market value of the health care coverage is set at the discretion of the employer.
Assembly Bill (AB) 36, currently in the legislative process, will bring California into conformity with the Federal Health Care Acts. If AB 36 is signed into law, State law will contain conforming provisions that will no longer consider health care payments for adult children as income for California PIT purposes and therefore not subject to California PIT withholding. Taxpayers can visit the EDD website at www.edd.ca.gov for status updates regarding this legislation. (EDD Tax Branch News #126, March 8, 2011.)
For more information on this and other topics, consult the Visit our News Library.
Visit our News Library to read more news stories.