2023 San Francisco Health Care Security Ordinance Expenditure Rate Announced

The San Francisco Office of Labor Standards Enforcement (OLSE) recently announced the 2023 expenditure rates to comply with the City’s Health Care Security Ordinance (HCSO):

Depending on the number of hours payable to an employee who is not exempt from the HCSO (covered employee), a large employer subject to the HCSO (covered employer) could be required to spend up to $1,754.40 per quarter ($584.80 per month) on behalf of each covered employee to satisfy the HCSO requirements during 2023.  In general, health care expenditures include employer contributions toward medical, dental and vision coverage. Special rules apply to an employer with a self-funded plan (visit the HCSO website here for more information).

HCSO Overview

The HCSO requires “covered employers” to make quarterly “health care expenditures” on behalf of its “covered employees” based on the number of “hours payable” during that quarter. These terms are briefly described below.

Covered Employers

Employers are covered by the HCSO for any calendar quarter, and thus subject to the Ordinance’s requirements for that quarter if they satisfy all of the following three requirements:

• They employed one or more workers who performed work within the geographic boundaries of the City and County of San Francisco; and
• They are a for-profit business with 20 or more persons performing work, or a non-profit business with 50 or more persons performing work, regardless of location; and
• They are required to obtain a valid San Francisco business registration certificate pursuant to Article 12 of the Business and Tax Regulations Code.

The following employers are not covered by the HCSO:

• A private employer that employs fewer than 20 persons (including those employed outside of San Francisco) and who does not have a contract with the City and County of San Francisco; or
• A non-profit corporation that employs fewer than 50 persons (including those employed outside of the City); or
• Employers that have no covered employees in San Francisco.

Covered Employees

A covered employer is required to make a minimum health care expenditure on or behalf its covered employees, which are those employees:

• Entitled to be paid the minimum wage;
• Employed by his or her employer for at least 90 calendar days;
• Who perform at least 8 hours of work per week within the geographic boundaries of San Francisco; and
• Who are not exempt

In addition, an amendment was passed on June 22, 2021, providing HCSO coverage to employees who are working remotely outside of San Francisco while public health orders recommending employees work remotely remain in effect. However, the City’s public health order on July 11, 2022, removed the recommendation that employers “allow office employees to continue to work remotely as much as possible.” Thus, unless or until new City health order restrictions are issued, employees working remotely outside of San Francisco are not covered by the HCSO employer spending requirements.

The following categories of employees are exempt from the HCSO:

• Employees who voluntarily waive their right to have their employers make health care expenditures for their benefit;
• Employees who qualify as managers, supervisors, or confidential employees AND earn more than the applicable salary exemption amount, which is currently $109,643, or $52.71 per hour. As of January 1, 2023, the new threshold will be $114,141 per year, or $54.88 per hour.
• Employees who are eligible for Medicare or TRICARE (the health care program serving Uniformed Service members, retirees and their families). In order to claim these exemptions, an employer must be able to document employee eligibility;
• Employees who are employed by a non-profit corporation for up to one year as trainees in a bona fide training program consistent with federal law; or
  Employees who receive health care benefits pursuant to the San Francisco Health Care Accountability Ordinance.

Hours Payable

Hours payable includes hours an employee is actually paid wages for work performed in San Francisco, or entitled to be paid (e.g., vacation hours, paid sick time, and PTO).

Health Care Expenditures

A health care expenditure is an amount of money paid by a covered employer to provide a covered employee with access to health care services.  Examples include making payments to enroll a covered employee in a health insurance program sponsored by the employer or making payments on an employee’s behalf to the City Option program (Medical Reimbursement Account or Healthy San Francisco).

ADDITIONAL INFORMATION

Specific information regarding the HCSO, as well as other laws applicable to the City and County of San Francisco, can be found on the OLSE website at www.sfgov.org/olse. Please also contact your Burnham Benefits Consultant or Burnham Benefits at 949‐833‐2983 or inquiries@burnhambenefits.com.

This Legislative Update was prepared by the Baldwin Regulatory Compliance Collaborative (the “BRCC”), a partnership of compliance professionals offering client support and compliance solutions for the benefit of the Baldwin Risk Partners organization, which includes: Jason Sheffield, BRP National Director of Compliance; Richard Asensio, Burnham Benefits Insurance Services; Nicole L. Fender, the Capital Group; Bill Freeman, AHT Insurance; Stephanie Hall, RBA/TBA; Caitlin Hillenbrand, AHT Insurance; Paul Van Brunt, Baldwin Krystyn Sherman Partners (BKS); and Natashia Wright, Insgroup.

Burnham Benefits and the BRCC do not engage in the practice of law and this publication should not be construed as the providing of legal advice or a legal opinion of any kind. The consulting advice we provide is intended solely to assist in assessing its compliance with applicable federal and state law requirements, and is based on our interpretation of federal guidance in effect as of the date of this publication. To the best of our knowledge, the information provided herein, and assumptions relied on, are reasonable and accurate as of the date of this publication. Furthermore, to ensure compliance with IRS Circular 230, any tax advice contained in this publication is not intended to be used, and cannot be used, for purposes of (i) avoiding penalties imposed under the United States Internal Revenue Code or (ii) promoting, marketing or recommending to another person any tax-related matter.