What type of coverage is indicated by the BOX 12 code DD?

The correct choice is the cost of employer-sponsored health coverage, indicated by the BOX 12 code DD on Form W-2. This code specifically shows the total cost of employer-sponsored health insurance coverage for the employee and their family. Including this information is essential because it helps employees understand the value of their health benefits and assists the IRS in determining compliance with the Affordable Care Act mandates regarding health coverage.

This code reflects not only the employee's contributions but also the employer’s contributions towards the health insurance premiums. Reporting this information supports transparency and aids in health care tax compliance, which is important for both employees and the tax system.

The other options refer to different aspects of taxation and employee benefits but do not relate to the specific use of BOX 12 code DD. Understanding the purpose of this code is crucial for accurate payroll reporting and compliance.