November 09, 2016
San Francisco's Office of Labor Standards Enforcement (OLSE) recently released the 2017 contribution rates applicable to the San Francisco Health Care Security Ordinance (HCSO).
In addition, as a reminder, beginning with the 2017 year, in order to comply with the HCSO, health care expenditures made by employers subject to the ordinance (Covered Employers) must all be irrevocable expenditures. This means that the use of revocable expenditures such as stand-alone health reimbursement accounts (HRA) after January 1, 2017 will no longer be permitted. (HRAs are considered revocable health care expenditures because they are designed so that unexpended balances can revert to the employer upon an employee's termination.) Note that In 2016, up to 20 percent of a Covered Employer's health care expenditure made to comply with the HCSO was potentially permitted to be a revocable expenditure.
The HCSO first became effective January 9, 2008, and generally requires Covered Employers to make a minimum health care contribution on behalf of its "Covered Employees."
The HCSO defines Covered Employers as employers with 20 or more employees (50 or more for nonprofit organizations), considering all members of the employer's controlled group, regardless of physical location, as long as they employ workers within the boundaries of the City and County of San Francisco (the City) during a quarter. For-profit entities are also required to obtain a valid San Francisco business registration certificate.
Covered Employees are generally those employees subject to the City's minimum wage ordinance, who have worked for the employer for a minimum of 90 days and who perform at least eight (8) hours of work per week within the geographic boundaries of the City. There is an exemption for management, supervisorial, and confidential employees earning at least $95,101 annually.
The OLSE recently announced the 2017 HCSO employer health care expenditure rates as reflected in the following table:
|Number of Employees||2017 Expenditure Rate||2016 Expenditure Rate|
|All entities with 100 or more employees||$2.64 per hour payable||$2.53 per hour payable|
|For-profit entities with between 20-99 employees||$1.76 per hour payable||$1.68 per hour payable|
|Nonprofit organizations with between 50-99 employees||$1.76 per hour payable||$1.68 per hour payable|
|For-profits with less than 20 employees||Exempt||Exempt|
|Nonprofits with less than 50 employees||Exempt||Exempt|
To comply with the requirements of the Affordable Care Act, the HCSO had been previously amended to include a requirement that all contributions made by a Covered Employer to satisfy its heath care spending requirement cannot be retained by, nor recovered by, or returned to a Covered Employer, effective with contributions payable, beginning January 2015 (representing hours worked during quarters beginning on or after October 1, 2014). This requirement was phased-in over a three-year period:
This new requirement impacted Covered Employers who use HRAs to comply with the HCSO health care spending requirement.
Some examples of health care expenditures that are available to employers include the following:
Information regarding the HCSO is available at http://sfgov.org/olse/health-care-security-ordinance-hcso%20.
For additional information, please contact your Burnham Benefits Consultant or Burnham Benefits at 949-833-2983 or firstname.lastname@example.org.
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