San Francisco Releases Expenditure Rates for Health Care Security Ordinance

San Francisco recently released the required 2027 expenditure reate for its Health Care Security Ordinance (HCSO).

The HCSO requires covered employers to spend a certain dollar amount on health care (i.e. medical, dental, vision, prescription drug) for its covered employees. 

Calculating Required Healthcare Expenditures

The minimum health care expenditure for each covered employee is determined quarterly by multiplying the employee’s total number of payable hours in the quarter by the applicable health care expenditure rate. Payable hours include hours paid and hours entitled to payment, such as paid time off or paid leave, earned within San Francisco.

Quarterly Payment Requirements

Covered employers must make irrevocable health care expenditures each quarter no later than 30 days after the end of the preceding quarter. Simply providing additional pay to the employee is not considered a valid health care expenditure.

Self-funded Health Plans

Employers with self-funded health plans must calculate the value of those plans, and pay any necessary top-offs, by February 28^th each year for the prior calendar year.  For more information contact your OneDigital Consultant.  Details and training are also provided in the Special Cases>Self-funded Employers section at https://www.sf.gov/information--health-care-security-ordinance

Note: Compliance with the HCSO employer spending requirements does not alleviate the need for applicable large employers to comply with the Affordable Care Act (ACA) Employer Shared Responsibility provisions. Additionally, amounts paid for health care expenditures that satisfy the ACA may not fully satisfy the HCSO employer spending requirement.

2027 HCSO Expenditure Rates for Employers

As a reminder, all employers covered by the HCSO must:

• Meet Employer Spending Requirements (ESR) by making required health care expenditures on behalf of all covered employees;
• Maintain records showing compliance with the ESR;
• Post a notice in the workplaces with covered employees; and
• Submit an annual reporting form to the Office of Labor Standards Enforcement (OLSE).

Covered Employers and Employees

An employer is covered by the HCSO for any calendar quarter if it meets the following three conditions:

• employs one or more workers within the geographic boundaries of the City and County of San Francisco;
• is required to obtain a valid San Francisco business registration certificate, and
• is a for-profit business with 20 or more employees or a nonprofit organization with 50 or more employees. The employer must count all employees for this purpose – not just those working in San Francisco

An employee is considered to be a covered employee if they work for a covered employer and:

• is entitled to be paid the minimum wage;
• has been employed by their employer for at least 90 calendar days;
• performs at least 8 hours of work per week within the geographic boundaries of San Francisco; and
• does not meet one of the exemption criteria
  • Beginning January 1, 2027, managers and supervisors that at least $63.35 per hour or $131,763 per year are exempt

Employer Reporting Requirement

Covered employers are required to submit an Annual Reporting Form each year by May 2nd. Even employers who already meet minimum spending requirements through their company-paid premiums are required to do annual reporting.

The filing is done on-line.  Regulators typically make the form available by April 1 each year. Employers can sign up for an email notification each year when the form is available:  https://sfgov.org/olse/email-sign-employers-20-or-more-employees

The reporting asks for details on the number of employees eligible for HCSO as well as the company’s spending on health care premiums and contributions to HSAs or the San Francisco-run City Option.

Notice and Record Retention Requirements

Covered employers must post the unaltered official OLSE notice in a conspicuous place at any workplace where any covered employee works. Additionally, for a period of four years from each covered employee’s date of employment, a covered employer must keep the following records: (1) itemized pay statements; (2) the employee’s address, telephone number, date of first day of work; (3) records of health care expenditures made; (4) documentation supporting any employee exemption; and (5) documentation of quarterly health care expenditures.

Penalties

Failure to comply with the HCSO may result in maximum administrative penalties for the following violations:

If you have questions about your HCSO compliance responsibilities, contact your OneDigital consultant.