2024 SF HCSO Expenditure Rates Released
By Brian Gilmore | Published August 30, 2023
The San Francisco Office of Labor Standards Enforcement (OLSE) has released the 2024 Health Care Security Ordinance (HCSO) required employer health care expenditure rates for employees working in San Francisco. HCSO covered employers generally must make health care expenditures on a quarterly basis for those employees for whom the employer contribution to the health plan is not already sufficient—including employees who have declined coverage or are not eligible for the employer’s health plan—by contributing to the City Option.
2024 HCSO Required Health Care Expenditure Rates:
100+ Employees Worldwide: $3.51 per hour payable (11-cent increase)
20+ Employees (50+ Nonprofit) Worldwide: $2.34 per hour payable (7-cent increase)
Table of Required HCSO Health Care Expenditures
Which Employers are Required to Satisfy the Required Health Care Expenditures?
The HCSO health care expenditure requirement applies to “covered employers,” defined as employers that:
Employ one or more workers within the geographic boundaries of the City and County of San Francisco;
Are required to obtain a valid San Francisco business registration certificatepursuant to Article 12 of the Business and Tax Regulations Code; and
Employ 20 or more persons worldwide (for profit) or a nonprofit organization that employs 50 or more persons worldwide.
In addition, covered employers must:
Maintain records to establish their compliance with the spending requirement,
Post the HCSO Poster in the workplaces of the covered employees,
Complete the Annual Reporting Form by April 30 of the following year.
For more details: Newfront San Francisco Health Care Security Ordinance (HCSO) Guide
For Which Employees are Employers Required to Make Health Care Expenditures?
Employers must make the required HCSO health care expenditures for “covered employees,” defined as employees who:
Are entitled to be paid the minimum wage;
Have been employed by the employer for at least 90 calendar days;
Have performed at least 8 hours of work in San Francisco; and
Do not meet any of the exemption criteria below.
The HCSO does not apply to properly classified independent contractors reported via Form 1099 (i.e., workers who are properly not classified as Form W-2 common law employees).
Which Employees are Exempt from the HCSO Health Care Expenditure Requirements?
There are five categories of HCSO exempt employees:
Employees who sign the HCSO Voluntary Waiver Form.
Employees who are document to be eligible for Medicare or TRICARE.
Employees who are employed by a non-profit corporation as a trainee in a bona fide training program.
Employees who receive health care benefits pursuant to the San Francisco Health Care Accountability Ordinance (HCAO)
No health care expenditure requirement for any exempt categories of employees.
Why the HCSO Quarterly Expenditure Requirement Matters
The HCSO is an employer health care spending requirement. It requires covered employers to spend (not merely offer to spend) at least the HCSO required hourly amount for each covered employee up to the 172 hours payable per month maximum, unless one of the above exemptions apply.
Employers subject to the HCSO generally must make quarterly contributions to the City Option for covered employees if the employer is not satisfying the required hourly health expenditure through the group health plan. The City Option contributions typically will be directed to funding a SF medical reimbursement account on behalf of the employee.
Employers making City Option contributions must make payment within 30 days after the end of each calendar quarter via the Employer Portal. Failure to make the required contributions comes with a potential OLSE administrative penalty of $100 for each employee for each quarter that the violation occurs.
For more details: SF HCSO City Option Contributions
Common Situations Where Employers Must Contribute to the City Option
In most situations, employees who enroll in the medical plan will receive sufficient employer contributions to satisfy the SF HCSO hourly healthcare expenditure requirements. However, where the employee declines to enroll in the plan for any reason, the employer will generally need to satisfy the SF HCSO hourly healthcare expenditure requirement through contributions to the City Option.
For more details: The SF HCSO and Employees Who Waive the Health Plan
The requirement to make quarterly City Option contributions for an employee is most often caused by:
An employee (who is not a manager/supervisor with compensation in excess of the applicable exemption threshold) waiving the employer’s health plan without agreeing to complete the voluntary SF HCSO waiver;
An employee not receiving sufficient employer contributions for the health plan to meet the hourly expenditure requirement; or
An employee who is covered by the HCSO (8 hours/week threshold) but not eligible for the employer’s health plan (typically 30 hours/week threshold).
Note for Employers Offering Free Medical Plan Option:
Although there is no formal exemption in any published HCSO guidance, the OLSE has recently been informally communicating with employers to exempt them from the requirement to make City Option contributions for employees who decline the employer’s plan where:
(a) the employer offers to pay 100% of the premium for employee-only coverage, and
(b) that premium amount meets or exceeds the minimum HCSO expenditure requirement.
In order to take advantage of this informal “free plan option” exemption from the spending requirement, the OLSE has informed such employers that they must document the employee’s election to decline the offer of 100% employer-paid health plan coverage. This will be needed in the event of an OLSE audit of the employer’s HCSO compliance.
Remote and Hybrid Employees Working in San Francisco
While employers are not required to make expenditures for any employees who work outside of the geographic boundaries of San Francisco, covered employers still are required to make health care expenditures for any remote employees who live in San Francisco and work from home. For any employees who are working on a hybrid or “drop-in” inconsistent basis in San Francisco, employers should institute procedures to track hours worked in the City to correctly calculate the required spend.
For more details: SF HCSO Compliance in the Work-From-Home Era
HCSO Employer Annual Reporting Form Reminder
Employers are required to complete an HCSO Employer Annual Reporting Form (ARF) each year by the end of the following April. All covered employers in 2023 will be required to complete the 2023 ARF by April 30, 2024. The ARF website includes the report covered employers must complete, as well as instructions, previews, and educational video overviews.
For more details: The SF Health Care Security Ordinance Annual Reporting Form
More SF HCSO Information
For more information on all the HCSO requirements directly from the City, check out the San Francisco OLSE’s official HCSO website.
For more information on the HCSO from the Newfront team, see our Newfront San Francisco Health Care Security Ordinance (HCSO) Guide.
Disclaimer: The intent of this analysis is to provide the recipient with general information regarding the status of, and/or potential concerns related to, the recipient’s current employee benefits issues. This analysis does not necessarily fully address the recipient’s specific issue, and it should not be construed as, nor is it intended to provide, legal advice. Furthermore, this message does not establish an attorney-client relationship. Questions regarding specific issues should be addressed to the person(s) who provide legal advice to the recipient regarding employee benefits issues (e.g., the recipient’s general counsel or an attorney hired by the recipient who specializes in employee benefits law).
Lead Benefits Counsel, VP, Newfront
Brian Gilmore is the Lead Benefits Counsel at Newfront. He assists clients on a wide variety of employee benefits compliance issues. The primary areas of his practice include ERISA, ACA, COBRA, HIPAA, Section 125 Cafeteria Plans, and 401(k) plans. Brian also presents regularly at trade events and in webinars on current hot topics in employee benefits law.Connect on LinkedIn