Does Employer-Paid Health Insurance Go on a W-2?
Understand the purpose of the health insurance cost shown on your W-2. This value represents the total plan cost and is for informational purposes only.
Employees reviewing their annual Form W-2 often have questions about the various figures and codes. A common inquiry is the value reported for health insurance, as the cost of employer-sponsored health coverage is reported on the W-2. This is done for informational purposes, giving employees a better understanding of the value of their benefits package.
Locating the Reported Cost on Form W-2
To find the cost of your health coverage, look at Box 12 of your Form W-2. This box reports several types of compensation and benefits, each identified by a specific code. For employer-sponsored health insurance, the code is “DD,” and the amount next to it represents the total cost of your health plan for the year.
The use of codes allows this data to be reported without creating confusion with taxable income. This reporting requirement applies to employers who file 250 or more W-2s for the preceding calendar year; smaller employers are exempt.
What the Reported Value Represents
The figure in Box 12 with Code DD is the total cost of your health insurance plan. This amount includes both the share paid by your employer and the portion you paid through pre-tax payroll deductions. The value also includes the cost for any other individuals, like a spouse or dependents, covered under the plan.
Certain health-related expenses are excluded from this reported amount. Contributions made to a Health Savings Account (HSA) are not part of the Code DD value, nor are the costs for stand-alone dental or vision plans.
Taxability of Employer-Paid Health Insurance
The amount reported under Code DD is not taxable income. Its presence on your W-2 does not increase your total taxable wages reported in Box 1, and you will not pay federal income or payroll taxes on this amount. The value is disclosed for informational purposes only, a rule that originated with the Affordable Care Act (ACA) to provide consumers with comparable information on healthcare costs.
The employer’s contribution to your health coverage is an excludable benefit, meaning it does not count toward your gross income. Therefore, the figure in Box 12 with Code DD should not be added to the wages reported in Box 1, Box 3, or Box 5. It serves purely as a point of information about the full cost of your health plan.