Question: What are the basic rules that apply for SF HCSO City Option Contributions that are used to fund a SF MRA for employees?
Compliance Team Response:
City Option Contributions
Employers subject to the SF HCSO must make quarterly contributions to the City Option for covered employees if the employer is not satisfying the required hourly health expenditure (and no exemption applies) through the group health plan. Payments are due within 30 days after the end of each calendar quarter.
The requirement to make City Option contributions is most commonly 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, but not completing the voluntary SF HCSO waiver. It also sometimes caused by 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).
The process requires the employer to make quarterly payments to the City Option via the “Employer Portal.”
Payments are made either by mailed check or EFT online payment from a corporate bank account. There is no file and be billed option.
The payment process is outlined here: http://sfcityoption.org/employers/makeapayment/
SF MRA Overview
For nearly all employees, contributions to the City Option will fund a San Francisco Medical Reimbursement Account (SF MRA) on the employee’s behalf.
The SF MRA is the functional equivalent of an irrevocable HRA maintained by the City (and administered by a TPA) that is designed to reimburse any out-of-pocket medical expense incurred by the employee.
There is a searchable list of the eligible SF MRA expenses here: http://sfcityoption.org/employeeresources/medical-reimbursement-accounts/mraexpenseguide/
The list of SF MRA-eligible expenses essentially tracks the §213(d) tax definition of a medical expense, as summarized in IRS Publication 502.
The funds remain available in the SF MRA into perpetuity, regardless of employment changes, with a few conditions to note:
- There is a $2.75/month administrative fee charged to the SF MRA;
- Employees must file at least one claim every 24 months to keep the SF MRA open;
- If the SF MRA is closed, employees can call the City to have the account reopened and all funds reinstated.
There is no annual use-it-or-lose-it rule or loss of coverage upon termination of employment that applies to the SF MRA. Contributions are irrevocable and will never be returned to the employer.
A few additional useful links:
For more information, see our Newfront San Francisco Health Care Security Ordinance (HCSO) Guide.
About the author
Lead Benefits Counsel
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 with Brian on LinkedIn.
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