Executive Summary

The San Francisco Office of Labor Standards Enforcement (OLSE) has released the 2023 Health Care Security Ordinance (HCSO) expenditure rates for 2023.  All covered employers must make the HCSO required health care expenditures on a quarterly basis for all covered employees as outlined below. 

In addition, 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 full details on the employer requirements, see our Newfront San Francisco Health Care Security Ordinance (HCSO) Guide.

Background

The HCSO is a 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 unless an exception applies.

In the vast majority of situations, employees who enroll in the health 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.  This is true even if the health plan offer is free to the employee (or otherwise very generous).

The HCSO is a healthcare spending requirement that cannot be satisfied through the employer-sponsored group health plan if the employee is not enrolled.

 Why do the HCSO Health Care Expenditure Rates Matter?

Employers subject to the 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.”

 For full details, see:

• The SF HCSO and Employees Who Waive the Health Plan

• SF HCSO City Option Contributions

 Who is a Covered Employer?

An employer is an HCSO covered employer required to make the minimum health care expenditures if it meets the following three conditions in any calendar quarter:

• 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 pursuant to Article 12 of the Business and Tax Regulations Code, and

• Employed 20 or more persons worldwide (for profit) or a nonprofit organization that employed 50 or more persons worldwide. 

Which Employees are Covered Employees?

Employees are covered by the HCSO if they:

• Are entitled to be paid the minimum wage;

• Have been employed by the employer for at least 90 days,

• Perform at least 8 hours of work per week in San Francisco, and

• Do not meet one of the five exemption criteria outlined below.  

 Which Employees are Exempt or Excluded from Eligibility under the HCSO?

There are five categories of exempt employees:

1. Employees who sign a waiver form and voluntarily waive their right to have employers make Health Care Expenditures for their benefit. 

2. Employees who qualify as Managers, supervisors or confidential employees AND earn more than the applicable salary exemption amount of $114,141 ($54.88 hourly) for 2023.

3. Employees who are covered by Medicare or Tricare.

4. Employees who are employed by a non-profit corporation as a trainee in a bona fide training program.

5. Employees who receive health care benefits pursuant to the San Francisco Health Care Accountability Ordinance (HCAO).

 A Reminder about the Waiver Form

The  Employee Voluntary Waiver Form permits employees to voluntarily waive their right to employer health care expenditures under the HCSO.  Employers must use the exact form and may not change the form in any way.  Full details here.

Update on Telework During Health Order Restrictions 

With the continuing COVID-19 pandemic, many employees are still working from home.  Originally, the Board stated that covered employers will not be required to make expenditures for any employees who work outside of the geographic boundaries of San Francisco but will be required to make expenditures for any remote employees who live in San Francisco. 

On June 22, 2021, the Board of Supervisors passed an amendment to the HCSO providing that if a public health order places restrictions on onsite work in San Francisco, employees’ hours working from home will be treated as hours worked in San Francisco for HCSO purposes if the employee was, is, or after the pandemic will be permitted or required to work from the employer’s office or worksite in San Francisco.   

Note that currently there is no public health order recommending telework.  The earlier order was removed on June 11, 2021.  Accordingly, unless or until the City issues a new health order with workplace restrictions, employees working remotely outside of San Francisco are not covered by the HCSO employer spending requirements.  However, employers still are required to make health care expenditures for any remote employees who work from home in San Francisco.

With employees returning to work in a San Francisco office inconsistently, or on a “drop-in” basis, employers will need to institute procedures to track hours worked in San Francisco in order to correctly calculate the required spend.

For full details, see:  SF HCSO Compliance in the Work-From-Home Era. 

Annual Reporting

After being canceled for the previous two years, the  April 2022 reporting requirement (due May 2, 2022) for 2021 HCSO expenditures was reinstated.  Employers can expect to complete the annual reporting by May 1, 2023 for the 2022 calendar year since April 30th is a Sunday. 

More HCSO Information

For more information on all of the HSCO requirements directly from the City, check out the San Francisco OLSE’s official HCSO website.

For more information from us, 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).