Changing Definition of Dependent Could Impact Employee Benefit Programs

The Working Families Tax Relief Act of 2004 (“Act”), signed by President Bush on October 4, 2004, changed who is a “dependent” under section 152 and other sections of the Internal Revenue Code (“Code”) in an attempt to unify the definition of dependent for various tax purposes. The changes are effective for tax years beginning after December 31, 2004 generally January 1, 2005. Absent immediate guidance from the IRS, this change could have the unintended consequence of adversely impacting several areas of employee benefits and unsuspecting participants.