Frequently Asked Questions

In IRS guidance, "double dip" refers to a structure where an employer claims tax advantages on both ends of the same transaction:

• Premiums are paid through pre-tax salary reduction (saving FICA on those dollars)
• Benefits from the same policy are claimed as tax-free to the employee

The IRS objects because you can't get tax advantages on both the premium payment AND the benefit payment from a single policy funded entirely with pre-tax dollars.

Ask these questions:

• How is the wellness/fixed indemnity premium funded?
• Is there a separate after-tax employee contribution for the wellness policy?
• Are there two distinct insurance policies or just one?
• Does the wellness benefit come from the same policy that receives pre-tax premiums?

If wellness premiums are 100% pre-tax with no after-tax component, and benefits come from that same single policy, it may be a "double dip" structure.

If there's genuine after-tax funding for a separate wellness policy, with clear documentation of the premium separation, it's likely a dual-premium structure—not a "double dip."

Double Dip:

• ONE policy
• 100% pre-tax funding
• Claims benefits are also tax-free
• Trying to use both §105/§106 AND §104(a)(3)

Dual Premium:

• TWO separate policies
• Pre-tax funding for Policy 1 (qualified benefits under §105/§106)
• After-tax funding for Policy 2 (wellness benefits under §104(a)(3))
• Each policy operates under its own legal framework

The key distinction is that dual-premium maintains clear separation—the wellness benefits come from a policy funded with after-tax employee dollars.

As of January 2026, there are no publicly reported:

• IRS enforcement actions against dual-premium wellness structures
• Tax Court cases addressing these programs
• Published rulings or regulations codifying the CCA positions

The CCAs represent IRS analysis of specific fact patterns but are explicitly non-precedential under IRC §6110(k)(3). The IRS has not moved to formalize these positions through rulemaking or enforcement.

Professional skepticism is appropriate and healthy. Most CPA concerns stem from conflating dual-premium structures with the single-premium arrangements described in the CCAs.

Provide your CPA with:

• Documentation showing the dual-premium structure with separate pre-tax and after-tax funding
• The program's legal opinion from qualified ERISA/tax counsel
• References to IRC §104(a)(3), Treasury Regulation §1.104-1(d), and Revenue Ruling 69-154
• A copy of The PTE Gold Book for comprehensive analysis

Once advisors understand the premium separation, most concerns resolve. If the wellness benefits genuinely come from an after-tax funded policy, §104(a)(3) applies as written.

Key questions to evaluate any wellness program:

• Premium structure: Is there a separate after-tax premium for the wellness policy? How much?
• Policy separation: Are there two distinct insurance policies from licensed carriers?
• Documentation: Can you provide documentation showing the pre-tax and after-tax premium separation?
• Legal opinion: Do you have a legal opinion from qualified tax counsel addressing §104(a)(3) treatment?
• Insurance carriers: Who are the carriers? Are they rated by AM Best or Demotech?
• Compliance protection: What insurance do you offer for defense costs and potential back taxes?

Possibly. If you rejected a program based on "double dip" concerns without examining whether it was actually a dual-premium structure, it may be worth re-evaluating.

The key question is: Where do the wellness benefits come from—a pre-tax funded policy or an after-tax funded policy?

If the wellness benefits come from a separate policy funded with after-tax employee dollars, the "double dip" label doesn't apply. The program may be fully compliant under §104(a)(3).

Ask the vendor for documentation of the dual-premium structure and have your tax advisor review with the correct framework in mind.