2014 HCSO True Up Deadline Extended Until April 10, 2015

As a result of GGRA Lobby Day activities, the Office of Labor Standards Enforcement (OLSE) has issued an extension on the 2014 health care expenditure true up for hours over 20 accrued in a Health Reimbursement Account (HRA) to Friday, April 10, 2015. OLSE recognized that since employees have 90 days to submit health care expenditure claims after the quarter closes, it makes sense to extend the true up through the claims period. Employers can true up by paying the City for hours over 20 accrued for employees or may spend the money on 2015 health care expenditures; there is no true up form — just the annual reporting form, which they will release in early April with an April 30, 2015, deadline. The annual reporting form will ask employers for information in the aggregate for their spend. If choosing to spend the money on 2015 health care expenditures, this spend would be in addition to the 2015 spending requirements. For 2015, employers are required quarterly to spend 60 percent of their health care spend with a third party; accruals are not allowed for the 60 percent, now irrevocable spend.

While GGRA is relieved that the City has acknowledged our concerns related to their treatment of Excepted Benefits HRAs, we still believe that the lack of notice and clarity, as well as the failure to release draft regulations and conduct a public rule-making process warrants leniency. At a minimum, consistency with the HRA holding period of 24 months makes sense. We are thankful to the Mayor’s Office for hearing our concerns and are hopeful that the Mayor’s Office will do more to remedy how this was handled. We are working with OLSE to ensure that guidance for 2015 forward is well publicized, vetted and clear.

Background
In 2013, another Universal Healthcare Council was convened to examine if changes were needed to San Francisco’s Health Care Security Ordinance to align it with the Affordable Care Act. Stakeholders of all types were included in the conversations and a series of conflicting (or opposing) recommendations were made. Ultimately a report was released, but nothing came further of the recommendations.

On December 20, 2013, OLSE posted FAQs on Excepted Benefits HRAs, which included new language regarding the treatment of allocating funds to Excepted Benefit HRAs for employees working more than 20 hours per week. In speaking with OLSE, their rationale for this change was that the ACA market reforms eliminated standalone HRAs. Standalone HRAs had allowed reimbursements for a broad range of medical expenses including health insurance premiums and basic doctor’s visits, which are not permissible by the IRS for an Excepted Benefit HRA. Therefore the only standalone HRAs allowed by the IRS starting 1/1/2014, are excepted benefits: these allow reimbursement for non-essential health care expenses such as vision, dental and long term care.

OLSE’s annual reporting on HRA usage showed that about 24 percent of the funds were spent (the city’s MRA usage is about 58 percent), so they reasoned that the move to excepted benefits HRAs would lead to lower reimbursement rates, thus a numerical threshold for “reasonably calculated to benefit the employee” was necessary.

When the new guidance was posted, OLSE stated several times that there would be a public rule-making process with draft regulations for input. In anticipation of the draft regulations, GGRA hosted a Town Hall meeting in April 2014 featuring OLSE; there was no presentation of draft regulations. OLSE made a presentation of the FAQs from December and answered questions.

As a result of the Town Hall Meeting, OLSE acknowledged that further clarification was needed in the FAQs and said it would happen during the rule-making process. OLSE “concluded that to provide more time for a public discussion about excepted benefits HRAs and clarify how OLSE will enforce the provision that reimbursement programs be reasonably calculated to benefit the employee, OLSE will permit employers to ‘true up’ the excepted benefits HRAs at the end of the calendar year in 2014,” direct language in email from OLSE. This rule-making process did not happen.

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