This article has been updated for the 2022 & 2023 tax years. Want to know what your employer is paying for your health insurance and find out if they (and consequently you) are paying too much? Just check out your W2, box 12, code DD. I’ll show you what to do with it in a bit…
If you have signed up for your employer’s sponsored health insurance plan, you will see a dollar amount listed next to the “DD” code. The DD code reporting is a requirement of the Affordable Care Act and first started being reported in 2012. Note that this code is for reporting purposes only. It is not a taxable income amount.
What is Included in the W2 DD code total?
The DD code is not only what your employer payed for your health insurance plan, but it includes your share (your premium payments) as well, as the IRS points out.
The total listed could also include the required reporting of applicable:
- Health FSA values for the plan year in excess of employee’s cafeteria plan salary reductions for all qualified benefits
- hospital indemnity paid through pre-tax deduction
- Domestic partner coverage included in gross income
The following are required if your employer charges a COBRA premium and optional if they do not charge a COBRA premium:
- Employee Assistance Plan (EAP) providing applicable employer-sponsored healthcare coverage
- On-site medical clinics providing applicable employer-sponsored healthcare coverage
- Wellness programs providing applicable employer-sponsored healthcare coverage
The following are optional to be reported:
- Dental or vision plan not integrated into another medical or health plan
- Dental or vision plan which gives the choice of declining or electing and paying an additional premium
- Health Reimbursement Arrangement (HRA) contributions
- Self-funded plans not subject to Federal COBRA
Items that are not reported include:
- Health Savings Arrangement (HSA) contributions (employer or employee) – those can be found in Box 12, Code W
- Archer Medical Savings Account (Archer MSA) contributions (employer or employee)
- Health Flexible Spending Arrangement (FSA) funded solely by salary-reduction amounts
On to the important stuff – what does this $ amount mean?
Are you & your Employer Paying Too Much for Health Insurance?
I was very surprised to find that the total listed for box 12, code DD on my W2 was $11,880.17!
Now, this is for a high deductible health plan (HDHP), where my cut is only $936 in annual premiums. There were no FSA contributions or hospital indemnity deductions. I can’t say for sure whether my dental and vision plans were included, but if so, I would expect that to be a minor addition.
So really, what’s left is just under $900 per month or $11,000 annually, for my wife and I for combined premiums.
Why do I find this so shocking?
It’s an HDHP, or high deductible health plan! It’s supposed to be a cheaper health insurance option because of the high deductible. What makes this more surprising is that I work for a very large (meaning big pool of employees) and well-run corporation. One would think negotiated rates would actually be lower than what could be found through the public insurance exchanges.
What’s concerning about this is that if my employer ever decided that it needed to start shifting more premium expenses to employees because the cost was too high, it’s more cost out of my pocket. That and… shoot, if they were paying less on health care, maybe they could pay more in income. They are clearly paying too much for health insurance, and as a result, I am too.
If my well run employer is having this issue, I am willing to bet many of yours are too – which means higher premiums and less pay for you.
The major benefit of employer sponsored health insurance plans (outside of the premium sharing) was that they did not discriminate for pre-existing conditions. But now with the ACA, no insurance plans can.
I’m really curious to see what price differences everyone else is seeing between what your employer is paying for health insurance and what you could buy on your own through the exchanges. Is your employer paying too much for your health insurance?
My employer only reports HSA account contributions on my W2 in box 12 with code W. There is nothing listed in 12 with the code DD.
I think they are required to report DD if they sponsor your health insurance, per the IRS. Check out your W2 again. If you have more than 4 box 12 entries, there might be a second report with additional entries.
I believe the IRS doesn’t require “small employers” to provide this info on section DD yet. (small employers being those issuing less than 250 W-2s in the past year):
See the bottom of this chart: http://www.irs.gov/uac/Form-W-2-Reporting-of-Employer-Sponsored-Health-Coverage
Yep, that is correct.
My employer reported $8,600 on my W2 and I have a good plan with a $450 individual deductible (900 family) and a $1600 max out of pocket ($3200 family). So, almost 12,000 seems extremely high for a high deductible health plan.
It is nice to be able to see the total cost of insurance to know what is being paid, but the next question is what can you really do about it? If it is just information to let you know your employer (and you) are paying too much for your insurance, then that really doesn’t do any good. If you can use that information to help your employer get lower costs and therefore maybe help yourself get more pay, then it seems useful.
I think there’s a few benefits that can be gained from the reporting:
1. you can compare what your employer is paying vs what you are paying to know if you are getting a good deal on your particular policy (and if your employer offers multiple policies, potentially switch).
2. transparency could lead to employer’s and insurers addressing high cost plans, especially when public costs are so easily available now.
3. you can see and compare what your employer (and you) are paying vs. what is available on the private market – which is great information to have for a number of reasons (COBRA considerations, self-employment considerations, etc.).
4. It allows you to see the value of your benefits, which is useful when trying to decide between you or a spouses employer plan.
Does this amount represent the cost of COBRA if you were to leave your company ?
It appears that the two premiums mentioned in the post are not apples to apples for several reasons.
For example, I suspect that the pricing of insurance premiums for your employer is based on the demographics and claims history of all employees in your specific company. Most likely the premiums are blended for all ages (not split into age bands).
It appears to me that the premiums on the healthcare.gov website are split into age bands with younger individuals paying a lot less that older individuals.
Basing premiums on age banding helps younger employees to save money today while basing premiums and blending costs for employees of all ages helps older employees pay lower premiums.
There may be some truth to this, but I am fairly certain the average age of employees at my company is right around my age, if not younger.
And yes, older age will result in a higher premium, but it’s probably not as significant as you were expecting. For example, a 55 year old male (much higher than the ave. employee age) would be at $414/mo. through the better exchange plan.
I have 12a and 12b, totaling a bit over $11,000.
D = 6375
DD = 4845
Company size is around 200. We got whacked last renewal because the insurance company actually lost money on the last term.
OK, so I work for a local gov’t w/ 11,000+ employees. I also have the HDHP w/ HSA that I contribute the max to. Here’s my numbers:
12a DD = $14424.96
12b G = $1340.00
12c W = $6314.94
So what can I learn from this?
Your employer is paying a hell of a lot for an HDHP, for starters.
Company size in US is about 200k. Block DD is $13,317. Monthly premium for family coverage is about $130 with $2500 deductible. I haven’t had to check Healthcare.gov …. yet.
HDHP for two in their early 30s, 2.5k deductible, 8.5k out of pocket max.
I was shocked too and looked for a comparable in my state. I wasn’t able to find one with a 2.5k deductible, everything was higher than that.
As a minister for our denominational leadership, they reduce our salary and use that money to provide us insurance that we select. Is that amount what is supposed to be reported on the W2, box 12, code DD?
Great Article. Thanks for the info. Does anyone know where I can find a blank “form W-2” to fill out?
This is very common for small and large employers. There is something that can be done about it and that is for employers to realize many times not having that traditional old employer plan is actually better for employees and the employer. We show employers all the time what the cost difference would be using these individual plans (you just have to follow some simple IRS rules).
On my W-2 my employer pays my full health coverage. In box 12a it is listed as DD and the amount, which I understand is not suppose to be tax deductible. Then on my W-2 in Box 14 it shows the same amount as Fringe and then this amount is added to my wages. Now I am paying taxes on this amount. Is this correct. Is it suppose to be in both boxes?
My husband works for a company that employees over 270,000 employees in 21 countries! From my husband’s wages each week, about $61.23 is deducted for medical, dental and vision premiums for our family of 4, which totals approximately $3184.00 per year. In box 12a on his W-2 with the code DD, is the whopping amount of $17,108.00! That means his company is paying a difference of $13,214.00 per year or $254.12 per week for the remainder of our health insurance premiums. That is insane! That is about $1426.00 per month for medical, dental and vision for a family of 4. That is highway robbery. Simply ridiculous!
Does having the DD box mean I can claim healthcare coverage and not pay penalty even though I do not have medical coverage only vision?
Great article. I retired Jan 1, 2017 and enrolled in company sponsored program costing $800 per month. W2 box 12a code dd amounts to $1000 per month. If $1,000 includes my contribution, where did the other $200 come from?
Mine was over $14,000!
so do we deduct the dd amount in box 12 from gross wages since it isn’t taxable?
Are my parents or relatives also eligible to get a cover under an employer-sponsored health insurance plan?
The company I work for did it for,me on the w-2. Only way I noticed is that co workers looked at previous checkstubs to see that total wages for,the year was missing in the final months compared to the w-2. Example if the wage was 15000 in November and on the w2 is showed wages as 147000. Didn’t make sense. But box 12a DD was 3000 and wasn’t taxable explained by corporate to me.. So technically we are paying out of pocket for all medical coverage offered by the employer plus our premiums out of our wages for the year
Our family of 3 has in excess of &25,000 on Line 12dd with my wife paying $430 per month and her local govt employer contributing another $1,600+ per month. I have tried to get the Dem candidates to focus on this giant insurance rip-off. A Forbes Mag article found that for every dollar your employer pays in health ins premium, that one less dollar in take home pay. In the 2007 Healthy Americans Act, a bipartisan group of Senators proposed requiring employers to give employees pay raises equal to 12dd within two years and allow employees to negotiate their own coverage. Many could choose a public option at a fraction of the employer premium.