What Is a Medical Memo on a Paycheck?

A paycheck is a detailed record of wages, taxes, and various deductions. It often includes notes or codes, called memos, which explain specific withholdings or benefits. Among these, entries related to health are common. Understanding what these “medical memos” represent on your pay stub is essential for managing personal finances. This article clarifies these common notations.

Understanding Medical Paycheck Memos

Medical memos on a pay stub represent contributions or deductions related to health and wellness benefits. The most common entry is for health insurance premiums, which is the portion an employee pays for health, dental, or vision coverage. This amount is subtracted from gross pay to cover the employee’s share of the benefit cost.

Flexible Spending Accounts (FSAs) are another frequent medical memo. These accounts allow employees to set aside pre-tax money for qualified healthcare or dependent care expenses. Similarly, Health Savings Accounts (HSAs) appear as memos, representing pre-tax contributions to a personal savings account specifically for medical expenses, often paired with high-deductible health plans.

Sometimes, a medical memo might indicate an employer’s contribution to health benefits or an HSA. These entries, often labeled “ER” for “Employer Responsible,” are informational and do not reduce an employee’s pay, but highlight the value of the employer-provided benefit. Less common medical-related deductions could include premiums for supplemental life insurance linked to health benefits or fees for wellness programs.

How Medical Memos Affect Your Pay

Medical memos impact your take-home pay, primarily through pre-tax deductions. When health insurance premiums, FSA contributions, and HSA contributions are designated as pre-tax, they are deducted from your gross income before taxes are calculated. This reduces your taxable income, which in turn lowers the amount of federal income tax, state income tax (where applicable), and Federal Insurance Contributions Act (FICA) taxes withheld from your paycheck.

For example, if an employee earns $1,000 and has a $50 pre-tax HSA deduction, their taxable income becomes $950, meaning they pay taxes on a smaller amount. This mechanism provides a tax advantage, potentially saving employees a notable percentage, sometimes up to 40% on income and payroll taxes for those specific amounts. These deductions also generally reduce the employer’s FICA tax liability.

While most medical deductions are pre-tax, some voluntary medical-related benefits may be post-tax. Post-tax deductions are taken from your pay after all applicable taxes have been withheld. These deductions do not reduce your taxable income, meaning you do not receive an immediate tax benefit, though they might offer other financial advantages. Employer contributions to health plans do not impact an employee’s gross or net pay.

Deciphering Your Pay Stub

Locating and understanding medical memo information on your pay stub involves navigating specific sections. Most pay stubs organize information into categories such as “Earnings,” “Taxes,” and “Deductions.” Medical deductions are typically found under sections labeled “Deductions,” “Pre-Tax Deductions,” or “Employee Benefits.” Employer contributions might appear under a separate section like “Employer Paid Benefits” or “Employer Contributions.”

Memos may be listed with full descriptions, such as “Health Ins Prem,” or as abbreviations like “HDP” for health plan deductions, “FSA” for Flexible Spending Account, or “HSA” for Health Savings Account. Many pay stubs include a key or legend, often on the back or within an online portal, that explains these codes and acronyms. Pay stubs also display “Year-to-Date” (YTD) figures, providing a running total of contributions or deductions from the start of the calendar year, which is helpful for tracking annual limits and overall financial planning. Many employers provide online access to pay stubs, which often feature more detailed breakdowns and explanations than printed versions.

Addressing Discrepancies

Regularly reviewing your pay stub is a proactive step to ensure accuracy in all deductions, including medical memos. If you identify an unfamiliar entry, an incorrect amount, or a missing deduction, promptly addressing it is important. Gather specific details about the discrepancy, noting the exact memo, the amount in question, and the pay period it affects.

The primary points of contact for payroll-related inquiries are typically your employer’s Human Resources (HR) department or Payroll department. Initiate contact through the appropriate channel, whether it is an internal ticketing system, email, or phone call, as specified by your company policy. Be prepared to provide the gathered information and any supporting documents, such as benefit enrollment forms or previous pay stubs. Correcting errors early can prevent repeated issues and ensure your pay reflects your elected benefits and applicable tax withholdings accurately.