The ER health cost that’s listed on a pay stub doesn’t refer to money for a trip to the emergency room. This abbreviation means “employer responsible” and shows the contributions employers make on their employees’ behalf toward health insurance. This is different from the taxes taken out for Medicare.
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Key takeaways about ER on pay stubs
- ER health cost on a pay stub stands for “employer responsible” health contributions
- It represents the amount employers pay towards employee health insurance
- Understanding ER health notation helps employees understand their total compensation package
Accurately documenting contributions on your employee’s pay stub makes sure both you and your employee have the same source of information should either party have questions about contributions. Here’s more important info about what to include on the pay stub and how to remain compliant.
Components of a pay stub
What are pay stubs? Originally, this term referred to the slips of paper a physical paycheck may tear from. Nowadays, when employees receive direct deposit, they should also get a digital pay stub.
Most workers just check the payment amount on their pay stub or direct deposit to make sure their earnings and hours are correct and don’t look much further. However, pay stubs include other valuable information for both employees and employers to be familiar with.
Payroll deductions recorded on a pay stub include:
- Employer responsible contributions to health costs
- Employee contributions and tax withholdings for Social Security and Medicare, federal income tax, and any state and local taxes
- Employer tax withholdings on behalf of the employee for Social Security and Medicare
- Unemployment insurance contributions
- Health savings account contributions (as applicable)
- Retirement contributions to accounts like 401 (k), 403 (b), Roth IRA, etc. (as applicable)
These deductions are often listed per pay period and sometimes also year-to-date. This can help employees understand how much they have already contributed that year and if they are close to exceeding annual limits on things such as health savings accounts or retirement accounts. Documenting ER health costs in this overall compensation summary is an important part of making sure you show you have paid enough on behalf of your employees to support Medicare, Social Security, and unemployment insurance.
How to read and interpret ER health notation
So what is the ER health cost on the pay stub that you see? It’s the amount the employer has paid toward health costs. This cost is part of employee benefits, like disability insurance and matched retirement contributions.
The Fed MED/ER category on a paycheck stub refers to the employer’s contribution to Medicare on behalf of the employee. It is calculated as 1.45% of an employee’s wages and goes directly to Medicare, the federal health insurance program that provides benefits for hospital, medical, and surgical care.
These health contributions may be just one of several notations broken down on a check stub that explains which tax contribution goes where. Some of the others include:
- Fed MED/EE: The amount an employee contributes to Medicare.
- Fed OASDI/EE: The amount an employee contributes to Social Security.
- Fed OASDI/ER: The amount an employer contributes to Social Security on an employee’s behalf.
- Fed withholding: The amount withheld from an employee’s paycheck for federal income tax.
- State withholding: The amount withheld from an employee’s paycheck for state income tax (where applicable).
Legal requirements for reporting ER health costs
Managing payroll isn’t just about tracking different deductions, figuring out how to calculate payroll taxes, and documenting ER health costs. It’s also about remaining compliant with legal reporting requirements. When it comes to reporting ER health costs, it typically includes submitting documentation to governing bodies to show the employer has made contributions in line with legal requirements. These are broken down into federal and state-specific regulations.
Federal regulations
The federal regulations for reporting ER health costs include reporting the cost of health care coverage on Form W-2.
State-specific laws
Some states have mandates that require reporting of employer-responsible health costs. Failure to comply may result in fines. States that require reporting include:
- Massachusetts
- California
- New Jersey
- Rhode Island
- Vermont
- Washington, D.C.
Impact of ER health costs on employee compensation
ER health costs are part of an employee’s compensation, like benefits such as a dental plan. While an ER contribution is not a dollar amount that goes into an employee’s pocket today, it provides peace of mind because it’s available if the need for medical care arises. The cost for you as an employer to compensate full-time employees includes the taxes you pay on their behalf, benefits, and wages. This total compensation is documented in the different notations on the check stub and most online payroll providers make sure this information gets recorded right out of the box.
Best of luck growing your business and staying informed about the different employer responsibilities. If you need assistance, our team is here to help!
Please note all material in this article is for educational purposes only and does not constitute tax or legal advice. You should always contact a qualified tax, legal or financial professional, in your area for comprehensive tax or legal advice or if you’re unsure of your obligations.
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Jon Davis is the Sr. Content Marketing Manager at OnPay. He has over 15 years of experience writing for small and growing businesses. Jon lives and works in Atlanta.