Many employers are already required to provide healthcare for full-time employees, but the San Francisco Health Care Security Ordinance (HCSO) takes things a few steps further.
The HCSO compels greater employer involvement and a significantly larger healthcare contribution for each eligible employee. Here’s what San Francisco employers need to know about the HCSO and how Mosey can help with corporate compliance.
What Is the San Francisco Health Care Security Ordinance (HCSO)?
The San Francisco Health Care Security Ordinance (HCSO) is a local law that requires employers to provide adequate healthcare coverage to eligible employees. Most medium to large businesses and nonprofits must comply with HCSO by making healthcare contributions on behalf of employees.
Covered employers must spend a minimum hourly amount on healthcare per eligible employee. These healthcare contribution amounts can be significant for medium and large businesses, while most small businesses are completely exempt.
Compliance with the HCSO requires additional effort from the employer. The program adds calculations, contributions, and reporting to an employer’s typical employee healthcare contributions system.
Who Must Comply With the San Francisco HCSO?
The San Francisco Health Care Security Ordinance applies to all businesses with 19 or more employees and all nonprofits with 49 or more employees. Every employee employed for 90 or more days and working eight or more hours per week in San Francisco is eligible for healthcare security from their employer.
How Much Must an Employer Spend on Healthcare Per Employee?
Expenditure rates depend on the size and nature of your business, and rates adjust for inflation and rising healthcare costs every year.
The hourly rates for 2024 are slightly higher than those for 2023:
- Businesses With up to 19 Employees: Exempt
- Nonprofits With up to 49 Employees: Exempt
- Businesses With 20 to 99 Employees: $2.34 per hour per employee
- Nonprofits With 50 to 99 Employees: $2.34 per hour per employee
- Businesses and Nonprofits With 100+ Employees: $3.51 per hour per employee
Expect the rates for 2025 to be slightly higher. It’s important to check every year for the most accurate information.
As of January 2024, confidential, managerial, or executive employees earning an annual salary of at least $121,372 or hourly compensation of $58.35 or more are exempt from HCSO contributions.
How Can Employers Spend HCSO Funds?
The Health Care Security Ordinance only mandates that employers contribute an additional amount toward certain employees’ healthcare expenses. This contribution doesn’t need to be made directly to the employee’s standard health insurance policy.
For example, employers can use the additional hourly contribution to provide dental or vision insurance. Funds can also be used to contribute to healthcare savings reimbursement accounts, such as Health Savings Accounts (HSA) or Flexible Spending Accounts (FSA).
Note that there are annual employer contribution limits for HSA and FSA accounts. If you choose to direct HCSO healthcare contributions to these accounts on your employees’ behalf, you may need to redirect your contributions to a different eligible healthcare expense when the contribution limit is reached.
Contributions can also be made to the San Francisco City Option healthcare reimbursement program if employers are enrolled. Contact the SF City Option if you want to contribute directly to the fund. They’ll work with you to establish a system that is compliant with HCSO.
How To Comply With the San Francisco HCSO
The San Francisco Health Care Security Ordinance requires an employer to exert more effort to maintain compliance. Contributions must be properly calculated and made in a timely manner, records must accurately reflect how contributions were made, and employees must be aware of how the HCSO impacts them.
Make Quarterly Contributions
HCSO contributions should be made each fiscal quarter rather than each pay period. Double-check employee eligibility each quarter. Employees become eligible for contributions after they’ve been employed with you for 90 days. If you hire new employees between quarters, their contributions may start in the middle of a quarter.
Maintain Accurate Records
The Office of Labor Standards Enforcement will verify your contributions, but it’s important to independently keep your own accurate records of payroll, contributions made, and where those contributions were sent. Building your own paper trail will prove your compliance if there’s ever a discrepancy or misunderstanding about your contributions.
Hang Required HCSO Posters
The HCSO labor law poster is a new addition to the ordinance, becoming mandatory as of 2024. You must print and hang the official HCSO rights and responsibilities poster in at least one conspicuous location at every place of business or job site belonging to your company.
Handing employees copies of the poster printed on standard-sized paper serves as official notice of their rights under the ordinance.
Complete and Submit an HCSO Annual Report
Employers with over five employees must file a San Francisco Fair Chance Ordinance compliance report. Anyone who must comply with the Health Care Security Ordinance must also comply with the Fair Chance Ordinance. Both ordinance reports are condensed and combined into a single document that employers must complete and file annually.
Employers must submit their HCSO and FCO annual reports for the previous year by April 30. Forms can be submitted electronically to the San Francisco Office of Labor Standards Enforcement (OLSE).
What Are the Penalties for HCSO Non-Compliance?
The penalties for HCSO noncompliance vary depending on the type of violation committed.
Some penalties are one-time fees due at the end of a quarter of a fiscal year, while other fees accumulate daily, with each day acting as its own instance of a violation:
- Failure To Make Contributions Within Five Days of the Due Date: Maximum penalty of $100 per employee per violation
- Failure To Submit Your HCSO Annual Report: Maximum penalty of $500 for each quarter that you fail to submit
- Retaliation Against Employees Related to HCSO Issues: Maximum penalty of $100 per affected employee per day
- Refusal To Share HCSO Relevant Records With OLSE: Maximum penalty of $25 per employee per day
- Failure To Provide Accurate and Complete Records: Maximum penalty of $500 per quarter
- Failure To Properly Place HCSO Rights Poster: Maximum penalty of $25 per day per location where the notice is required
Penalties can become expensive, especially if a longstanding violation impacts multiple employees. HCSO doesn’t distinguish between accidental and intentional noncompliance, so you’re unlikely to successfully request that penalty fees be waived.
Stay Compliant With Mosey
Mosey’s compliance management system simplifies tracking state and local business compliance requirements. Our dashboard provides all the information you need to stay current on the latest compliance rules and specifications, allowing you to monitor your compliance with just a few clicks.
Schedule a demo with Mosey to learn how we can help you streamline your compliance efforts and avoid costly penalties.
