The San Francisco Health Care Security Ordinance (SF HCSO) requires covered employers to make a minimum health care expenditure on a quarterly basis on behalf of all covered employees. While the ordinance has been in place for many years (since 2008), many employers are still out-of-compliance or unsure how the rules apply. With the annual reporting requirement being due next month (April 30), now is a good time to review your employer obligation under the SF HCSO.
Below is a brief overview of the HCSO. For more details, please visit the San Francisco Office of Labor Standards Enforcement (OLSE) page on HCSO, which includes training slides, new rules, an administrative guide and FAQ, as well as links to the required HCSO poster and waiver form. The OLSE page also contains a link and instructions for the online Annual Reporting Form due April 30. The reporting form should be available no later than April 1.
Covered Employers: Have 20+ employees (50+ for non-profits), with 1 or more working in the geographic boundary of San Francisco, and required to obtain a San Francisco business registration certificate. Small employers 0-19 (0-49 non-profit) are exempt.
Tip: The headcount for determining your company size under HCSO – both for determining applicability and expenditure rate – includes ALL employees, regardless of status, classification, or contract status. That means even temp or contract employees that are 1099 or through an agency still count!
Covered Employees: Works an average of 8 or more hours per week in San Francisco and entitled to be paid minimum wage. There is a waiting period of 90 days.
Tip: Look at the exemption criteria closely. The manager/supervisor exemption is coupled with the salary exemption amount, meaning the two are not separate. An employee needs to make more than the salary exemption (2019: $100,796 annually) AND be considered a manager/supervisor/confidential employee per HCSO.
Calculating Expenditure Rate (Updated for 2019): Rates are based on employer size and are calculated per hour payable to covered employees. A medium size employer is 20-99 employees (50-99 non-profit) with a rate of $1.95 per hour, while a large employer is 100+ employees with a rate of $2.93 per hour.
Tip: Hours worked include both paid and entitled, like PTO. Maximum hours for the calculation is capped at 172 a month.
Making Expenditures: For your full-time, benefit eligible employees, average costs for medical, dental, and vision can be used. For most employers, the minimum expenditure is easily reached. A large employer would need to spend approximately $507 a month on an exempt or 40-hour non-exempt employee. Most medical, dental, and vision premiums, when combined, would exceed that amount. Just be sure to factor out employee contribution amounts. For non-benefit eligible employees, the expenditure would be made quarterly. The simplest method for making an expenditure is via the San Francisco City Option.
Tip: Being benefit eligible does not immediately mean that HCSO requirements are met and expenditures do not need to be made. If a benefit-eligible employee waives the employer’s company sponsored health plan, the employer is still required to make a minimum expenditure on behalf of that employee. That means paying into the City Option, similar to non-benefit eligible employees. The exception is if the employee voluntarily signs the HCSO Waiver Form. You may NOT coerce an employee to sign the form and the form language dissuades one from signing it! Due diligence would mean sending the form to a waived employee and if the employee chooses not to sign, be sure to make the quarterly expenditure.
Due Dates: Quarterly expenditures are due 30 days following the end of the quarter. First quarter 2019 will be due April 30. Annual Reporting to HCSO of covered employees and expenditures made are also due April 30 and is completed online. The online form will be posted to the OLSE HCSO website no later than April 1, so mark your calendars.
Risk: There are penalties for non-compliance – up to $100 per employee per quarter for failure to make expenditures and up to $500 per quarter if the annual reporting is not submitted. There are other penalties as well for retaliation, failure to provide records to OLSE, and failure to post the required notice. However, while there’s no guarantee, the OLSE generally does not fine an employer that has been out-of-compliance that now comes into compliance. The bigger risk is if an employee complains as that is generally when the OLSE would take action and penalize for non-compliance.