Say the employer pays directly for an employee's individual health care policy. By Rev. Rul. 61-146, that employer direct payment is not included in the employee's compensation (under IRC Section 106(a) and Treas. Reg. Section 1.106-1). That same rule would apply if the health care policy premiums paid directly by the employer for the employee's coverage also included coverage, in the same policy, for the employee's spouse and/or dependents.

However, let's say that the employer not only pays premiums for the employee's individual health care policy, but also pays premiums for an individual policy for the employee's spouse (a separate policy from the one covering the employee). Is the employer-paid premium for the spouse's individual health care policy included or not included in the employee's gross income? (Seems to me it ought to be included.)

Larry,

About 10 years ago, some unofficial IRS comments were made to the effect that a policy neither owned by the employer or employee was not eligible as a section 125 benefit because it was not in the context of the employment relationship.

Like 125, section 106 also depends on the employment relationship. (The difference being one of choice in the matter of something other than the payment of premiums by the employer.) So logically, the notion expressed by in those unofficial IRS comments would seem to extend to the section 106 situation too.

Without 106 (or 125), the payment of health insurance premiums by the employer is taxable income to the employee. So I agree with you that it seems to be includible. However, I know of nothing more declarative or authoritative.