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November 4, 2014

Updates: San Francisco’s Health Care Security Ordinance (article)

2015 Salary Exemption Limit

Along with adjusting an employer’s health care expenditure amounts for 2015 (see San Francisco HCSO Expenditure Rates for 2015, Benefit Beat, 7/8/14) for purposes of the San Francisco’s Health Care Security Ordinance (HCSO), the Office of Labor Standards Enforcement (OLSE) has adjusted the salary exemption figure. An employee who is a manager, supervisor, or confidential employee, and who earns at or above an annual salary of $90,745 (or, $43.63 hourly) in 2015 is exempt from coverage under the HCSO. In 2014, the annual salaried figure was $88,212 or $42.41 hourly.

 

Clarification Guidance relating to Expenditures

The Office of Labor Standards Enforcement have recently updated and released several pieces of guidance relating to the Health Care Security Ordinance (HCSO):

Of particular note is the guidance relating to revocable and irrevocable health care expenditures.  Irrevocable expenditures refer to monies that cannot be retained or returned to the employer, even in the event of termination of employment or cessation of business.  Examples of these types of expenditures include payments for medical, dental, or vision insurance premiums, contributions to the City Option, or contributions to reimbursements accounts such as a health savings account or medical savings account.

 

A revocable expenditure is one that the employer allocates for or on behalf of an employee which could revert back to the employer.

 

According to this guidance, an employer can provide a portion of its obligation in the form of a revocable contribution; however, over the next few years, the portion that can be revocable will be phased out.  In 2015, forty percent of the employer contribution can be revocable; the revocable percentage decreases to 20% in 2016.   Beginning in 2017, all employer contributions must be irrevocable.

 

There are four criteria for determining a revocable expenditure; they are:

  1. The expenditure is reasonably calculated to benefit the employee;
  2. No portion of the expenditure can be returned to the employer prior to a specified amount of time;
  3. The employee receives notification within 15 days of the employer’s expenditure; and
  4. The employee separating from employment receives notification within 3 days of termination explaining that any unused portions of the revocable expenditure will continue to be available for a minimum of 90 days following termination, how remaining amounts can be used, the current account balance, restrictions for using the revocable expenditure, and the date of when the account monies will no longer be available.

The minimum length of time a revocable expenditure must remain available prior to when an employer can reclaim any unused funds occurs on the earliest of:

  • 24 months from the expenditure date;
  • 90 days following an employee’s separation from employment; or
  • Where revocable expenditures are made prior to January 1, 2014, the date an employee waives, in writing, the unused portion.

The information contained in this article is provided as general guidance and may be affected by changes in law or regulation. This article is not intended to replace or substitute for accounting or other professional advice. Please consult a CBIZ professional. This information is provided as-is with no warranties of any kind. CBIZ shall not be liable for any damages whatsoever in connection with its use and assumes no obligation to inform the reader of any changes in laws or other factors that could affect the information contained herein..

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