2024 SF HCSO Expenditure Rates Released

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2024 SF HCSO Expenditure Rates Released

By Brian Gilmore | Published August 30, 2023

Executive Summary
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:

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:

In addition, covered employers must:

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:

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:

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.

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:

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:

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.

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.

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.