Revocable Expenditures under the HCSO: Fact Sheet
GGRA asked San Francisco’s Office of Labor Standards Enforcement (OLSE) to provide a fact sheet for revocable expenditures under the Healthcare Security Ordinance (HCSO). Please see the information they provided below:
HCSO – Revocable Expenditures – June 2016
In 2014, the SF Board of Supervisors passed legislation to phase out the use of revocable expenditures (e.g. HRAs) to fulfill the employer spending requirement of the Health Care Security Ordinance. OLSE is currently, in 2016, in the last step of the phase out.
As of January 1, 2017, Revocable Health Care Expenditures cannot be used to fulfill any part of the employer spending requirement of the HCSO. The Board of Supervisors defined Revocable Health Care Expenditure to mean: “any amount of Health Care Expenditure that has been allocated for use by a Covered Employee but retained by the Covered Employer, or any amount that has been paid to a trustee or third party but that may at some time be recovered by or returned to the Covered Employer.” (HCSO §14.1(b))
In order for a Revocable Expenditure to count toward the employer spending requirement for an employee for any quarter in 2016, it must meet all of the following criteria (per the 2011 and 2014 amendments to the HCSO):
1) no more than 20% of the required health care expenditure for each employee, each quarter, is revocable. The other 80% must be spent irrevocably by the quarterly deadline.
2) the employer does not reclaim any part of the expenditure before the earliest of:
- 24 months from the date of the expenditure; or
- 90 days after the employee separates from employment, provided they have received a separation notice (see below).
3) the employer provides written summaries of Revocable Health Care Expenditures to Covered Employees within 15 days of the date the employer makes the expenditure. As enumerated in §14.3(c)(3), the Expenditure Summary must include the following information:
- the name, address, email address, and telephone number of any third party to whom the expenditure was made; and
- the date and amount of the expenditure; and
- the account balance; and
- a summary of how the benefit may be used, including types of Health Care Services available; and
- restrictions on using the revocable benefit; and
- the date on which any portion of this benefit may be revoked.
4) if the employee separates employment:
- any unused portion of a Revocable Expenditure must remain available for at least ninety days after the date of separation.
- the employee must receive, within three business days following the separation, a written separation notice that includes:
- a summary of how the benefit may be used, including types of Health Care Services
- the account balance; and
- restrictions on using the Revocable Expenditure; and
- the date(s) on which the remaining portion(s) of the benefit will be revoked.
Revocable expenditures that do not meet all of these requirements do not qualify as health care expenditures under the HCSO.
Revocable expenditures prior to 2016 had to meet all the same criteria except:
- In 2015, no more than 40% of the required health care expenditure could be revocable.
- In 2014, no more than 20 hours’ worth of required expenditures per week could be made to
- Prior to 2014, there were no percentage limits, but all of the other requirements have been
The written Summary of Revocable Health Care Expenditures, and the Separation Notice, are not required for irrevocable health care expenditures.
All health care expenditures for each calendar quarter are due no later than 30 days after the end of the quarter.
If OLSE investigates a complaint that health care expenditures were not made, the employer must provide evidence that any revocable and irrevocable expenditures were made in a way that complies with the HCSO. If OLSE finds that a revocable expenditure does not count toward the employer spending requirement, documented reimbursements actually made to employees may be credited as irrevocable expenditures.
If OLSE determines that an employer did not make the required health care expenditures during any quarter, OLSE will require payment to each employee of the full amount of expenditures not made. In addition, OLSE will assess a penalty, payable to the City, of up to one and a half times the amount of the unmade expenditure, not to exceed $100 per employee per quarter.
Employees may voluntarily choose to sign an HCSO voluntary waiver (available on the HCSO website), only if the employee has coverage through another employer. Even if an employee has such coverage, they are not required to sign a waiver. Voluntary waivers are only valid for one year from the date signed or until revoked.
For more information on the HCSO, please click here.