1. Presented by: Brenda JM Sabin, CBP Key Concepts, LLC

2.  Definitions of Dependents  Civil Unions and Domestic Partner taxation examples  Recent Law Changes

3.  Section 125 Plan – covers health related plans under Federal law  IRC = Internal Revenue Code  Dependents  Federal  State – different by state

4.  Section 125 plans  Federal Definition of Dependents  Civil Unions  State definition of Dependent  Domestic Partner  Not a Dependent

5.  Section 125 plans – qualified dependents are: Spouse, qualifying child or qualifying relative (federal law)  Qualifying child  Is under age 19, or 24 if a full-time student;  Lives in same home as taxpayer for more than half taxable year;  Has not provided over 50% of his/her own support for the year.  Qualifying Relative  Is not a “qualifying child” as described earlier;  Is a resident of US, Mexico or Canada;  Earns less than current exemption amount ($3,500 for 2008);  Has over 50% his/her support provided by employee/taxpayer.

6.  NH – SB197 – allows ex-spouses (divorced or legally separated) to stay on insurance plan as a dependent for up to 36 months.  NH – HB790 – changes definition of dependent child.  < age 26, and  Unmarried, and  NH resident or enrolled as a student (P/T or F/T) in an institution of higher education, and  Not covered under another health plan or Medicaid.

7.  State recognized dependents not federally recognized  VT/NH – Civil Union partner has same dependent rights as spouse  Under State Laws the section 125 plan is NOT taxable for state income tax if provided for a legal dependent* but it is for federal  The Fair Market Value (FMV) of the insurance itself is taxable to the employee for federal taxes (not state)

8.  Worksheet –  Employee and Civil Union Partner (2 person plan)  Using information on Worksheet – calculate the imputed income that is taxable to the employee and the pre-tax vs post-tax premium deductions.  Excel sheet

9.  What if the Civil Union partner had a dependent child?  Worksheet:  Employee and Civil Union Partner and CU Dependent(Family plan)  Excel sheet

10.  What if the dependent child was the Employees legal dependent?  Worksheet:  Employee and Civil Union Partner and EMPLOYEE Dependent(Family plan)  excel

11.  Same sex or opposite sex  Lets look at the same examples but they are not recognized as dependents by either State or Federal Law.

12.  Pro’s and Con’s  Yearly  Quarterly  Per Paycheck

13.  Requiring proof of civil unions  Do you require proof of marriage?  Requiring proof of dependent children  Do you require that now?  Do you have a Domestic Partner affidavit?  Some insurers require them

14.  Group Term Life –imputed income  Tuition Reimbursement ($5,250)  Qualified Transportation Benefits  $115 per month for mass transit  $220 per month for parking  Company Car and Personal Use  Lease Value method  Cents per mile method  Commuting method  Bonus’  Supplemental Tax Rates  25% Federal  7.2% VT  0% NH

15. Recent IRS Changes Ratesthru 06/3007/01 >> Business (mileage)50.5cents58.5 cents Medical/Moving 19 cents27 cents Charitable 14 cents14 cents

16.  Q & A  Brenda JM Sabin, CBP  Key Concepts, LLC  www.keyconcepts.us  keyconcepts@accessvt.com