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 since 2008, many employers are still out-of-compliance or unsure how the rules apply. The following is a brief overview of the compliance and annual reporting requirements.
Employers are subject if they 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 paid via 1099 or through an agency still count!
Employees working 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 (2020: $102,754 annually) AND be considered a manager/supervisor/confidential employee per HCSO.
Calculating Expenditure Rate (Updated for 2021)
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 $2.12 per hour, while a large employer is 100+ employees with a rate of $3.18 per hour.
Tip: Hours worked include both paid and entitled, like PTO. Maximum hours for the calculation is capped at 172 a month.
Tip: Self-funded employers would evaluate health care expenditures based on calculated claims spend.
For 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 $547 per month on an exempt or 40-hour non-exempt employee. Most medical, dental, and vision premiums, when combined, exceed that amount. Remember that employee contribution amounts cannot be included in the calculation. 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 - Regular
Quarterly expenditures are due 30 days following the end of the quarter. First quarter expenditures are due April 30th. Annual Reporting to HCSO of covered employees and expenditures made are also due April 30th and is completed online. The online form will be posted to the OLSE HCSO website no later than April 1, so mark your calendars.
Due Dates - COVID-19 Relief
Consistent with the Emergency Proclamation by the SF Mayor, the employer requirement to submit the 2019 Annual Reporting Form for the Health Care Security Ordinance and the Fair Chance Ordinance is cancelled. This only means that the 2019 Annual Reporting Form does not need to be submitted to OLSE. Employers must continue to make health care expenditures on behalf of their Covered Employees by making City Option payments and/or paying for health insurance.
Currently, the COVID relief order for 2019 reporting (due in 2020) is still in effect. We expect requirements for the 2020 reporting cycle to be clarified prior to the due date in April 2021.
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 is 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.
SF HCSO Resources including training slides, rules, an administrative guide and FAQs. This site also contains instructions for the online Annual Reporting Form.
2020 HCSO Poster