Something is not right.  The health insurance premium paid for, on behalf of, or reimbursed to the 2% shareholder must be included in Box 1 as taxable wages although it should be excluded from FICA/FUTA wages.

On that basis, the premium should be reported in Box 14 rather than Box 12 with Code DD.

If it's done right, the premium is deductible above the line for 2% shareholder-employees.

To qualify for this tax treatment, your client cannot simply take a distribution and pay for the premium.