The San Francisco Health Care Security Ordinance (SF HCSO) requires covered employers to make a minimum health care expenditure on behalf of their covered employees. SF HCSO rules were first issued in January 2008. While it has been in place for many years, many employers are still out-of-compliance or unsure how the rules apply. Additionally, the reporting was waived for the past two years due to COVID Public Health Emergency. That reporting requirement is again required for the 2021 plan year.
Below is a brief overview of the HCSO. For more details, 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 contains a link and instructions for the online Annual Reporting Form due April 30. The reporting form is available now.
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 counts!
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 (2021: $107,991 annually) AND be considered a manager/supervisor/confidential employee per HCSO.
Calculating Expenditure Rate:
Rates are based on employer size and are calculated per hour payable to covered employees. For 2021, 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. Keep in mind the new expenditure for 2022 is $2.20 per hour for the medium sized employers outlined above and $3.30 per hour for large employers.
Tip: Hours worked include both paid and entitled, like PTO. Maximum hours for the calculation is capped at 172 a month.
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. For 2021, a large employer would need to spend approximately $547 a month on an exempt or 40-hour non-exempt employee (that number increases to approximately $568 for 2022). 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.
Quarterly expenditures are due 30 days following the end of the quarter. First quarter 2022 will be due April 30. Annual Reporting to HCSO of covered employees and expenditures made for the 2021 plan year are also due April 30 and is completed online. The online reporting form
is available now.
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.
SF HCSO Resources including training slides, rules, and administrative guide and FAQs. This site also contains instruction links.