Vita Viewpoints

San Francisco Health Care Security Ordinance and IRS Inflation Adjustments for 2017

Posted by Vita Companies on November 29, 2016

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Overview

The City and County of San Francisco Health Care Security Ordinance (HCSO) became effective January 1, 2008.

The HCSO requires San Francisco based employers to spend a certain dollar amount on health care on behalf of all employees. Employers can choose to offer health, dental and/or vision insurance, make payments to the City Option or make contributions that reimburse employees for out-of-pocket health care costs.

Required Health Care Expenditure Amounts

The minimum expenditure requirements for 2017 have been released. Please note that there are different expenditure rates for medium and large employers:

Group Size 2014 rate
(per hour paid)
2015 rate
(per hour paid)
2016 rate
(per hour paid)
2017 rate
(per hour paid)
Medium: 20-99
(non-profit 50-99)
$2.44 $1.65 $1.68 $1.76
Large: 100+ $1.63 $2.48 $2.53 $2.64

Small employers under 20, or under 50 if a non-profit, are exempt from this requirement.

Please note that the annual salary exemption has also increased for 2017. An employee classified as a manager, supervisor or confidential employee and who earns more than $95,101 per year is exempt (increased from the 2016 annual maximum of $92,990).

Amendment to Revocability Provision

The HCSO currently allows covered employers to meet their obligation with either irrevocable expenditures, such as insurance premium payments, or revocable expenditures, such as allocations to health reimbursement accounts where unspent funds return to the employer.

The amendment passed in June 2014, which phases in over three years, includes a requirement that health care expenditures must be irrevocably paid. For 2017, all employer health care expenditures must be irrevocable after January 1, 2017.

Interplay with the Affordable Care Act 

The HCSO and the Affordable Care Act continue to stand side by side, and while neither law pre-empts the other, the new irrevocability rules of HCSO make Health Reimbursement Arrangements less viable, as unused HRA funds will no longer revert to the employer. Employers who have opted to use Health Reimbursement Arrangements to meet their HCSO obligation may find it advantageous to transition to a city-run Medical Reimbursement Arrangement (MRA) before the irrevocability amendment takes full effect in 2017.

For more information on the HCSO, you can visit www.sfgov.org/olse/hcso

2017 State Disability Adjustments

The California Employment Development Department (EDD) has announced that the 2017 employee contribution rate for State Disability Insurance (SDI) will remain at 0.9%. The taxable wage base from which the contributions will be taken will increase from $106,742 to $110,902 and the maximum cost to an employee will be $998.12.

SDI provides disability and Paid Family Leave (PFL) benefits equal to 55% of the employee’s base period earnings. For 2017, the maximum weekly benefit will increase from $1,129 to $1,173.

Reminder: Per San Francisco's new Paid Parental Leave Ordinance (PPLO), effective January 1, 2017, San Francisco employers that employ 50 or more employees (total employees, not just those who work in San Francisco) will be required to make up the remaining 45% of the employee's base period earnings, so the employee gets 100% of their normal wages. For more information on the PPLO, you can visit http://sfgov.org/olse/paid-parental-leave-ordinance

2017 IRS Inflation Adjustments

On October 25, 2017, the IRS released Revenue Procedure 2016-55 which details 2017 annual inflation adjustments for more than 50 tax provisions. As expected, the IRS increased the pre-tax allowance for a few accounts but held firm on others. See below for the revised maximums effective January 1, 2017.

  2016 2017
Commuter Benefits    
Qualifed Monthly Parking:  $255 per employee $255 per employee
Qualified Monthly Commuter Transit Pass: $130 per employee $130 per employee
FSA & Dependent Care    
Flexible Spending Account (FSA) Annual Election: $2,550 per employee $2,600 per employee
Dependent Care Account Annual Election: $5,000 per household $5,000 per household
Health Savings Account    
Individual Annual Maximum: $3,350 $3,400
Family Annual Maximum: $6,750 $6,750
401(k)    
401(k) Annual Elective Deferrals: $18,000 $18,000
Catch Up Annual Contribution: $6,000 $6,000

 

Topics: IRS, San Francisco, HCSO

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