listed on a pay stub doesn’t refer to money for a trip to the emergency room. On a pay stub, ER stands for “employer” and EE stands for “employee,” showing which party is responsible for a given contribution. So ER health costs refer to the amount an employer pays toward an employee’s health insurance premium.
It’s a benefit cost, not a tax, so it’s different from taxes taken out for Medicare. The Fed MED/ER listed on a pay stub also uses the ER label, but refers to the employer’s matching payroll tax contribution.
Key takeaways about ER on pay stubs
- ER health cost stands for “employer” and EE stands for “employee,” showing which party is responsible for a pay stub contribution.
- ER health cost is the amount an employer pays toward an employee’s health insurance premium.
- Understanding these notations helps employees see the full value of their compensation package beyond take-home pay.
Accurately documenting contributions on your employee’s pay stub ensures you and your employee have the same information when payroll questions come up. Here’s what ER health costs include, where it shows up on a pay stub, and what you need to report.
Components of a pay stub
Originally, the term “pay stubs’ referred to the slips of paper attached to a physical paycheck. Nowadays, most employees receive direct deposit, so they receive a digital pay stub.
Most workers just check the payment amount to ensure their earnings and hours are correct and don’t look much further. However, pay stubs include other valuable information for employees and employers.
A pay stub typically shows payroll deductions from employee pay and contributions the employer pays separately, including:
- Employer contributions to health costs
- Employee contributions and tax withholdings for Social Security and Medicare, federal income tax, and any state and local taxes
- Employer-paid matching contributions to Social Security and Medicare
- Unemployment insurance contributions
- Health savings account contributions (as applicable)
- Retirement contributions to accounts like 401(k), 403(b), 457(b), or SIMPLE IRA (as applicable)
Pay stubs often list these amounts per pay period and sometimes also year-to-date. This helps employees see how much they’ve contributed so far and whether they’re approaching annual limits on things like health savings accounts (HSAs) or retirement accounts. Employers document ER health costs as part of this overall compensation summary, but this is a separate reporting requirement from the payroll taxes an employer pays for Medicare, Social Security, and unemployment insurance.
Decoding ER vs. EE
- ER: Stands for “Employer.”
- EE: Stands for “Employee.”
- These codes quickly show which party is responsible for a specific pay stub contribution.
ER Health Costs
- This represents the amount the company pays toward the employee’s health insurance premium.
- It is a benefit cost, not a tax deduction.
ER Payroll Taxes
- Codes like Fed MED/ER refer to payroll taxes, not benefits.
- This specific code highlights the employer’s matching 1.45% Medicare tax paid directly to the government.
W-2 Reporting Rules
- The ACA requires employers to report total healthcare coverage costs on Form W-2, Box 12, using Code DD.
- Businesses that filed fewer than 250 W-2s last year are generally exempt.
ER health costs vs. Fed MED/ER: What’s the difference?
So what is the ER health cost you see on a pay stub? It’s the amount the employer pays toward an employee’s health costs. This cost is part of employee benefits, alongside things like disability insurance and matched retirement contributions.
The Fed MED/ER category on a pay stub is a different category entirely. It’s the employer’s matching contribution to the Medicare tax, calculated as 1.45% of an employee’s wages and paid directly to the federal government.
A pay stub may include several other notations for benefit contributions and tax withholdings.
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).
Fed MED/ER and Fed OASDI/ER are both part of FICA, the Federal Insurance Contributions Act, which funds Medicare and Social Security. Employees and employers each pay a matching share of both taxes, which is why you see an EE version and an ER version of each on a pay stub.
Common ER and EE abbreviations on pay stubs
When you see the code ER on a pay stub, keep in mind it can refer to benefit contributions paid as a part of an employee’s compensation package (ER health costs, ER life, and ER pension) or payroll taxes the company owes to the federal government (Fed MED/ER and Fed OASDI/ER).
Depending on your payroll provider, you might see a few variations of these codes. And some companies add a number, like Med ER1, for example, to indicate a specific plan or tier.
Here is a quick guide to help you decode your pay stub:
| Abbreviation on pay stub | What it stands for | Who pays? | What it means |
| ER Med / Medical ER / ER Health (ER cost of medical) | Employer-paid medical | Employer | The amount the company contributes toward health insurance premiums |
| EE Med / Med EE Pre | Employee-paid medical | Employee | The employee’s share of health insurance premiums, often deducted pre-tax |
| ER life (ER cost of life) | Employer-paid life | Employer | The amount the company pays to provide employee life insurance benefits |
| ER Pension / 403b ER | Employer-paid retirement | Employer | The company’s matched funds or contribution to an employee’s retirement account |
| Fed MED/ER | Federal Medicare employer tax | Employer | The 1.45% Medicare payroll tax paid directly by the employer |
| Fed MED/EE | Federal Medicare employee tax | Employee | The 1.45% Medicare tax deducted from the employee’s gross wages |
| ER Paid LTD | Employer-paid long-term disability | Employer | The amount the company pays to provide long-term disability benefits |
Decoding these pay stub codes is only half the battle. If you’re an employer, it’s just as important to have a solid plan for managing the compliance and reporting tasks that come with offering these benefits.
Legal requirements for reporting ER health costs
Managing payroll isn’t just about tracking deductions, figuring out how to calculate payroll taxes, and documenting medical ER on a pay stub. It’s also about complying with legal reporting requirements at both the federal and state level.
Federal regulations
The Affordable Care Act requires employers to report the cost of health care coverage on Form W-2, Box 12, using Code DD. This reported figure includes both the employer’s and the employee’s share of the premium, not just the ER portion.
Employers who filed fewer than 250 W-2s in the prior calendar year are exempt from this reporting requirement, which covers the majority of small businesses.
State-specific laws
Some states have mandates that require reporting of employer health costs, and noncompliance can lead to fines. Failure to comply may result in fines. States that require reporting include:
- Massachusetts
- California
- New Jersey
- Rhode Island
- Vermont
- Washington, D.C.
Simple and straightforward
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— John Wilson, Creative Catering LLC
Impact of ER health costs on employee compensation
ER health costs are part of an employee’s total compensation, alongside other benefits like a dental plan. While an ER contribution isn’t a dollar amount that lands in an employee’s pocket today, it provides peace of mind, knowing coverage is available if they need medical care.
The full cost of employing someone includes the gross wages you pay, the benefits you provide, and the taxes you owe on their behalf. Payroll providers typically document all of this in the notations on a pay stub, and most online payroll platforms record this information automatically.
Getting comfortable with pay stub lingo like ER health costs makes it easier to explain total compensation to your team and stay ahead of your reporting obligations. If you need help managing payroll and benefits in one place, 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.
