The New Hampshire Legislature has enacted three new laws in 2007 requiring New Hampshire employers to extend health insurance coverage to additional classes of individuals. Previously, typical coverage was extended to an employee's same-sex spouse, a "qualifying child" (as defined in the Internal Revenue Code Section 152), and/or a "qualifying relative" (as defined in the Internal Revenue Code Section 152). The new laws passed in 2007 have added the three categories of individuals eligible for health insurance coverage:

• HB 790 signed on July 17, 2007 expanded the definition of "dependent" for NH insurance purposes to include a child who is less than 26 years of age, a resident of New Hampshire (or alternatively, enrolled as a student at an institution of higher education), unmarried, and not provided coverage under any other health plan or Medicaid. – Effective September 15, 2007
• HB 437 signed on May 31, 2007 extended coverage to same-sex spouses resulting from Civil Unions. – Effective January 1, 2008
• SB 197 signed on July 18, 2007 requires the continuation of coverage for three years to an ex-spouse in the event of divorce or legal separation. – Effective July 18, 2007

Under Internal Revenue Code Section 106(a), an employee's taxable wages do not include employer provided coverage under a health plan that compensates the employee for injury or sickness of the employee, the employee's spouse, or dependents. Therefore, NH employers providing coverage for any additional individuals due to the new law changes, must include the incremental costs of coverage in the employee's wages as a taxable fringe benefit for federal tax purposes. Additionally, the employee-funded portion of the premium associated with the additional coverage may constitute a "post-tax" deduction.

Many health insurance providers and payroll service providers are still digesting what this will mean for their clients and what changes they will need to make to accommodate these new provisions. In the meantime, please contact BNN with any questions you may have on how this will affect your payroll administration and annual tax filings.

The information above is intended to provide information only and should not be construed as tax, legal or financial advice. For more information, please contact a Baker Newman Noyes tax professional at 800-244-7444.