Golden Handcuffs policy?

My client has a golden handcuffs policy for a select few of his employees. It consists of 3 life insurance policies (indexed, I believe). The old accountant has listed the cash value of the policies on the balance sheet as of the year ended 3/31/08 and did not make an adjustment for 3/31/09. There was an increase in the cash value. I obviously need to make an adjustment, but before I do I would like to know if anyone else has dealt with this type of benefit before and if so, what is the correct way to handle it.

Am I correct to assume that the amount that is paid each month by the employer is included in the employees wages?
Would it be deferred income to the employee?
Is it pre-tax?
Am I missing some pertinent information?

Thank you in advance,
Brenda E