The IRS Memo Everyone Cites—But Few Have Actually Read
If you've researched wellness program tax treatment, you've encountered CCA 202323006. But most commentary misses a critical sentence buried in the analysis—one that explains exactly how after-tax premium funding changes everything.
This site provides the complete text, detailed analysis, and answers to the questions CFOs and tax advisors actually ask.
The memo analyzes a specific fact pattern: a wellness program where employees pay premiums entirely through pre-tax salary reduction under a Section 125 cafeteria plan. The IRS concluded that in this specific structure, wellness benefits are includible in income and wages.
Buried in the legal analysis is an acknowledgment that changes the entire calculus: the IRS explicitly states that if premiums are paid with after-tax dollars, the analysis would be different. This sentence is the key to understanding compliant program structures.
CCA 202323006 does not address—and cannot be used to challenge—programs that use a dual-premium structure with separate after-tax wellness premium funding. The memo's conclusions are explicitly limited to before-tax only arrangements.
Under IRC §6110(k)(3), Chief Counsel Advice memoranda "may not be used or cited as precedent." CCA 202323006 represents the IRS position in one specific case—it does not establish binding rules for all wellness programs.
"The exclusion from gross income under section 104(a)(3) applies to amounts received through accident or health insurance, or through an arrangement having the effect of accident or health insurance, for personal injuries or sickness. The exclusion under section 104(a)(3), however, does not apply to the extent that amounts paid are attributable to contributions by the employer which were not includable in the gross income of the employee, or paid by the employer."
— CCA 202323006, Law and Analysis Section
The inverse is equally clear: when premiums ARE paid with after-tax dollars (includable in gross income), Section 104(a)(3) DOES apply, and benefits ARE excludable. This is the foundation of compliant dual-premium structures.
The PTE Gold Book provides the definitive guide to understanding CCA 202323006 and structuring compliant Section 125 payroll tax reduction programs.
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