What Is Medical ER on Your Paystub? Employer Health Cost Explained
Medical ER is what your employer pays toward your health coverage. Why it appears on your stub without reducing your pay, and where the annual figure shows up on your W-2.
Medical ER is one of those lines that makes a pay stub look alarming until you understand it. A large figure appears beside your health insurance, yet your deposit is unaffected. ER means employer, and the amount is what your employer paid, not what you did.
EE and ER Side by Side
Most stubs that show an employer contribution also show the employee one. Medical EE is your share, deducted from your wages and usually taken pre-tax under a Section 125 plan, which reduces your taxable wages. Medical ER is your employer's share, paid on top of your salary.
Seeing both together is useful, because it shows the real cost of the benefit. An employee contributing $120 a pay period against an employer contribution of $500 is receiving considerably more compensation than the salary figure alone suggests.
Is It Taxable?
Employer contributions to health coverage are generally not taxable income to the employee. That is what makes employer-sponsored insurance tax-efficient compared with buying the same policy from post-tax income. The ER line therefore does not appear in your taxable wages and does not increase your tax.
Where the Annual Figure Appears
The total cost of employer-sponsored health coverage, combining both shares, is reported in Box 12 of your W-2 with code DD. It is informational only. It is not income, it is not a deduction, and you do nothing with it on your return. It exists so employees can see what their coverage costs in full.
I explain the employer and employee split and how Section 125 treatment affects taxable wages in my explainer on Medical ER for Online Paystub.
Worth Reading at Open Enrolment
When you compare plan options, look at the combined EE and ER figures rather than your contribution alone. A plan with a lower employee cost may carry a lower employer contribution too, and the difference usually shows up somewhere else, in the deductible or the network.