The Vita Blog

The IRS releases employee benefits annual limits for different plans on different cadences (based on legislative direction). As of October 2024, limits for health plans and HDHPs have been released, however, many are still not yet finalized. Final numbers for health FSAs, QSEHRAs, commute plans, and retirement plan limits are typically released in late October or early November. 

This summary includes employee benefit limits that are finalized and projected limits for those plans that have not yet been released (in a blue font). Following is a recap comparing the 2024 numbers with the 2025 numbers. 

Flexible Spending Accounts (FSA)	2024	2025
Health FSA Election Maximum	$3,200	$3,300	Projected, not finalized. Expect in early Nov.*
Health FSA Rollover Maximum  (20% of Annual)	$640	$660	Projected, not finalized. Expect in early Nov.*
Dependent Care Election Maximum  (Not indexed)	$5,000	$5,000
HRA Limits	2024	2025
QSEHRA – Self Only	$6,150	$6,350	Projected, not finalized. Expect in early Nov.*
QSEHRA - Family	$12,450	$12,850	Projected, not finalized. Expect in early Nov.*
EBHRA	$2,100	$2,200	Projected, not finalized. Expect in early Nov.*
Monthly Commute	2024	2025
Transit Pass Maximum	$315	$325	Projected, not finalized. Expect in early Nov.*
Parking	$315	$325	Projected, not finalized. Expect in early Nov.*
Bicycle  (Not indexed)	$20	$20
Retirement Plans	2024	2025
Elective Deferral Maximum	$23,000	$23,500	Projected, not finalized. Expect in early Nov.*
Catch-up Maximum (50+)	$7,500	$7,500	Projected, not finalized. Expect in early Nov.*
Total Contribution Limit (<50)	$69,000	$70,000	Projected, not finalized. Expect in early Nov.*
Total Contribution Limit (50+)	$76,500	$77,500	Projected, not finalized. Expect in early Nov.*
401(a) Compensation Limit	$345,000	$355,000	Projected, not finalized. Expect in early Nov.*
Compensation Thresholds	2024	2025
Highly Compensated Employee (HCE)	$155,000	$160,000	Projected, not finalized. Expect in early Nov.*
Key Employee Officer Comp	$220,000	$230,000	Projected, not finalized. Expect in early Nov.*
HDHP and HSA Limits	2024	2025
HDHP Minimum Deductible – Self Only	$1,600	$1,650
HDHP Minimum Deductible – Family	$3,200	$3,300
HDHP OOP Limit – Self-Only	$8,050	$8,300
HDHP OOP Limit – Family	$16,100	$16,600
HSA Contribution Limit – Self-Only	$4,150	$4,300
HSA Contribution Limit – Family	$8,300	$8,550
HSA Contribution Limit – Catchup (55+)	$1,000	$1,000
ACA Traditional Health Plan Limits	2024	2025
Health Plan OOP Limit – Self Only (Decreased by 2.6%)	$9,450	$9,200
Health Plan OOP Limit – Family (Decreased by 2.6%)	$18,900	$18,400
ACA Affordability Threshold	8.39%	9.02%
Min. Monthly Contribution for FPL Safe Harbor	$104.94	$113.20
Other Limits	2024	2025
Educational Assistance (Not indexed)	$5,250	$5,250
Adoption Assistance	$16,810	Pending	Projections difficult. Expect in early Nov.*
Social Security Wage Base	$167,700	$176,100

* The indexing formula for health FSA and qualified transportation plan limits is based on the Chained Consumer Price Index for All Urban Consumer (C- CPI-U). The IRS typically releases these in late October or early November. Projections are based on the “Interim” C-CPI-U through June 2025 and “Initial” projections of C-CPI-C for July and August 2025.
 

References

IRS Rev. Proc. 2024-25 (Covering HSA, HDHP, and EBHRA limits)

Social Security Fact Sheet

Chained Consumer Price Index for All Urban Consumer (C- CPI-U)



 

This article aims to provide a comprehensive overview of the complex and changing topic of Medicare Part D creditability determinations and required notifications. The following major topics are covered:

• Overview and Immediate Action Plan

• What is Part D Creditability?

• Employer Notification Requirements

• How is Creditability Determined?

• Medicare Part D Changes in 2025

• The Employee Perspective

• What About Medicare-Secondary Payor Issues?

• Well-Crafted Communication is Important

• Employer Action Items 

 

Overview and Immediate Action Plan

Why all the fuss about 2025?

The Medicare Part D out of pocket maximum was reduced from $8,000 in 2024 to $2,000 in 2025. This has a cascading effect on Medicare Part D creditability determinations because, in order to be creditable, a group health plan must offer coverage that is at least as valuable as Medicare Part D . . . which will be a lot more valuable in 2025.
 

Will Creditability Change for Most Plans in 2025?

Actually, not really. Medicare offers two methods for determining creditability: the “Simplified Method” and the “Actuarial Method.” The good news is that employers may use the Simplified Method through 2025, and the simplified method results in creditable coverage for most comprehensive, fully insured health plans. Therefore, barring any plan change, most plans that were creditable in 2024 will remain creditable in 2025.
 

Non-Creditable Plans Must Provide Notice to All Employees

Employers must take action and provide notification by October 15^th for all plans, particularly for those that are non-creditable. More detail is provided on the required notification process below.
 

The Recommended Vita Strategy

• Creditable Plans: Formal notification of Part D Creditability is included in the Summary Plan Description that is typically provided to all employees at open enrollment.

• Any Non-Creditable Plans: In addition to Part D Creditability being included in the Summary Plan Description, a separate notice highlighting any non-creditable plans and, specifically, any plans that have been newly determined to be non-creditable should be provided by employers to all employees.

The remainder of the article outlines the details of creditability requirements, notice requirements, and what to expect in future years.

 

What is Part D Creditability?

Creditable Coverage Determination

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 requires group health plan sponsors that provide prescription drug coverage to provide a notice to Medicare-eligible individuals as to whether the plan’s coverage is “creditable” or “non-creditable.”

• Creditable: Prescription drug coverage is creditable if the actuarial value of the Rx coverage equals or exceeds the actuarial value of standard Medicare Part D coverage.

• Non-creditable: Prescription drug coverage is non-creditable if the actuarial value of the Rx coverage is less than the actuarial value of standard Medicare Part D coverage.

Why Does it Matter?

Knowing whether prescription drug coverage is creditable or non-creditable is important for Medicare-eligible plan participants. The notice of creditability enables employees to make informed decisions about whether to retain their employer-sponsored prescription drug plan or enroll in Medicare Part D coverage during the Part D annual enrollment period. Without the notice, employees would not have the necessary information and may unknowingly become subject to a late enrollment penalty in future years.

• If Creditable: If the employer plan offers creditable coverage, individuals can meet the creditable coverage requirement by enrolling in the employer-sponsored plan. There will be no penalty upon enrolling in Medicare Part D in the future.

• If Non-Creditable: If the employer plan does not offer creditable coverage, individuals would need to find an alternative source of creditable coverage to avoid a future premium penalty. Other coverage may include enrolling in a Medicare Part D plan or electing an alternate employer sponsored plan that offers creditable coverage.

The Penalty

Individuals who do not enroll in Medicare Part D during their initial enrollment period and who subsequently go at least 63 consecutive days without creditable coverage (because they have either no Rx coverage or non-creditable group coverage) will be subject to a premium surcharge if they enroll in a Medicare drug plan later. The premium penalty is equal to 1% of the Medicare base premium for each month of delayed enrollment. Importantly, the monthly penalty is cumulative, so, as an example, if an individual goes 19 months without creditable Part D coverage, the monthly premium would be up to 19% higher than the Medicare Part D base premium. This premium increase is permanent.
 

Who Makes the Determination?

• Fully Insured Plans: Generally, the insurance carrier makes the determination for the employer for fully insured plans.

• Self-Funded Plans: The employer often will need to make this determination for self-insured plans. The CMS provides options for how to determine whether a plan is creditable or not:

  • Simplified Determination Method – There are specific criteria that define when a plan is eligible to use the Simplified Determination. If a plan qualifies, the method is straightforward.

  • Actuarial Analysis – If a plan cannot qualify for the Simplified Determination method, the plan sponsor will need to engage a third party, such as an actuarial service, to perform an actuarial analysis to determine creditability.
    
     

Employer Notification Requirements

Notice of Creditability Requirements

Notice Requirement: Employers that offer prescription drug coverage to Medicare Part D eligible individuals must issue a Medicare Part D Notice to plan participants. The notice must identify whether the coverage is creditable or non-creditable. The disclosure notice must be provided as follows:

• To all Medicare-Eligible Individuals

  • By October 15^th annually

  • Prior to their initial eligibility period/prior to enrollment

  • Whenever a change in creditability occurs

• To the Centers for Medicare Services (CMS)

  • Within 60 days after the beginning date of the plan year (contract year or renewal year). The reporting link is provided in the References section below.

  • Within 30 days of any change in creditable coverage status.

Form of Notice: Many employers elect to include the Medicare Part D Notice for distribution with other open enrollment materials. This method is generally found to be acceptable. However, the notice must be “prominently placed” to ensure receipt by individuals who need the information. In addition, the notice should be included with initial enrollment materials.
 

Who Must Receive the Notice?

• Technically: The notice must be provided to all Medicare-eligible individuals.

• Practically: The notice should be provided to all employees, retirees, and COBRA participants. Why? While, technically, employers are only required to provide notice to those employees who are Medicare-eligible, practically, employers don’t have any reliable way to know all the individuals in their population who may be Medicare-eligible. Certainly, those who are over age 65 would be included. However, other plan participants (under age 65 employees, dependents, COBRA-qualified beneficiaries, etc.) may also be eligible for Medicare due to disability. As such, the correct course of action is to provide notice to all employees. (Notice to employees is considered notice to the employee’s dependents by extension.)
  
   

How is Creditability Determined?

CMS Simplified Determination Criteria

A majority of non-HDHP employer plans today can use the simplified determination of creditability. This method may not be used if an employer plan or union plan is applying for the retiree drug subsidy.

Under the Simplified Determination method, a plan will be deemed creditable if the prescription drug plan design meets all four of the following standards. However, the standards listed under 4(a) and 4(b) may not be used if the employer’s plan has prescription drug benefits that are integrated with other benefits (such as medical or dental benefits) as is the case with HDHP plans. Integrated plans must satisfy the standard in 4(c).

A prescription drug plan is deemed to be creditable if it:

1. Provides coverage for brand and generic prescriptions;

2. Provides reasonable access to retail providers;

3. Is designed to pay, on average, at least 60% of participants’ prescription drug expenses; and

4. Satisfies at least one of the following:

   • The prescription drug coverage has no annual benefit maximum benefit or a maximum annual benefit payable by the plan of at least $25,000, or

   • The prescription drug coverage has an expectation that the amount payable by the plan will be at least $2,000 annually per Medicare-eligible individual.

   • For entities that have integrated health coverage, the integrated health plan has no more than a $250 deductible per year, has no annual benefit maximum or a maximum annual benefit payable by the plan of at least $25,000, and has no less than a $1,000,000 lifetime combined benefit maximum.
      

Certain Criteria Moot

It should be noted that these criteria were promulgated in 2009, prior to the passage of the ACA. The following test prongs are moot, but the guidance has not yet been updated:

• Test 4(a) prong that requires a maximum annual benefit for prescription drugs of at least $25,000.

• Test (c) prongs that reference maximum benefits of $25,000 or $1,000,000.

Plan designs with these types of limits are not compliant with ACA requirements, so they typically are not in play today for non-grandfathered plans.
 

Integrated Plan Definition

For the purpose of the simplified method, an integrated plan is a plan where the prescription drug benefit is combined with other coverage offered by the employer (i.e., medical, dental, vision, etc.), and the plan has all of the following plan provisions:

1. a combined plan year deductible for all benefits under the plan,

2. a combined annual benefit maximum for all benefits under the plan, and

3. a combined lifetime benefit maximum for all benefits under the plan.

In practical terms today, this applies to all HDHP plans. That means that HDHP plans would need to meet steps 1, 2, 3, and 4(c) of the simplified method.
 

The Issue with HDHP Plans

Qualified HDHP plans will always be integrated plans based on the standard plan structure of combining medical and Rx benefits. As such, HDHP plans would need to satisfy test 4(c) to use the Simplified Determination method; however, test 4(c) limits the plan deductible to $250 per year. Given that HDHP plans have statutory minimum deductibles that are much higher than that, the Simplified Determination method would not be available for HDHPs.
 

Can the Value of an HRA be included in the Actuarial Valuation? 

Yes, the value of an HRA can be included in the creditability determination. This is important for employers who offer a high deductible plan (that might be non-creditable on a stand-alone basis) along with an HRA to lower the effective deductible or cost sharing for employees.
 

Can the Value of Employer HSA Contributions be included in the Actuarial Valuation? 

No, employer HSA contributions cannot be included in the actuarial analysis when determining creditability.
 

Annual Determination Required

As a reminder, the determination of creditability for a prescription drug plan’s coverage must be performed annually, based on the prescription drug benefits in effect as of the start of the plan year.

 

Medicare Part D Changes in 2025

The Impact of IRA Changes to Medicare Part D

The Inflation Reduction Act of 2022 (IRA) made important changes to the Medicare Part D program that have the potential to impact creditability of coverage calculations for employers in 2025. Specifically, the out-of-pocket maximum (OOPM) limit was reduced from $8,000 in 2024 to $2,000 in 2025. This reduction in the OOPM increases the actuarial value of the Medicare Part D standard plan, effectively raising the bar for employer sponsored plans. As such, employers can expect an impact on the creditability determinations for group health plans.
 

Many Employers get a “Free Pass” for 2025

The CMS recently released a notice updating the Medicare Part D creditability guidelines and confirming creditability disclosure requirements for employers. This contained good news for many employers.

Initially the CMS indicated that the Simplified Determination method would no longer be a valid method to determine prescription drug coverage creditability effective in 2025. However, revised instructions permit the continued use of the existing Simplified Determination methodology for the 2025 calendar year. This means that, for plans that are able to use the Simplified Determination method, the increase in Part D actuarial value will not need to be taken into consideration for 2025.

If the Simplified Determination Method is not available, then updated actuarial valuations of plans will need to be made for the 2025 plan year. This actuarial valuation must take into account the newly enhanced Medicare Part D benefits.
 

Likely No “Free Pass” in 2026 and Beyond

Employers should note that CMS is slated to reevaluate the Simplified Determination method for the 2026 calendar year. It has been hinted that the methodology will establish new criteria for usage. Since the criteria have not been updated since 2003, it is expected that the criteria may be tightened considerably.

 

The Employee Perspective

Decision Required

Medicare-eligible employees who may be covered under a non-creditable plan will need to make important coverage decisions.
 

If Coverage is Newly Non-Creditable

While many plans will take advantage of that “free pass” in 2025, some plans will be newly non-creditable in 2025 because of the Medicare Part D changes. With more plans being deemed non-creditable than in prior years, impacted employers will need to spotlight the issue for employees.
 

Employee Options

Health plan elections are a personal matter. Each employee will need to make a decision from the following general options:

1. Maintain coverage under a non-creditable employer-sponsored plan (and face potential penalties when enrolling in Medicare Part D in the future)

2. Switch to a creditable employer-sponsored plan (assuming one is offered)

3. Waive employer-sponsored coverage and enroll in Medicare (and a Medicare Part D plan)

4. Maintain coverage under a non-creditable employer-sponsored plan and supplement coverage with a Medicare Part D plan to avoid a future penalty. Note that this option would disqualify individuals from making HSA contributions (as the Medicare Part D plan would be considered disqualifying coverage). Please note that Medicare requires enrollment in Part A and/or B to enroll in Part D coverage.
   
    

What About Medicare-Secondary Payor Issues?

Education Permitted

Employers are permitted to provide information and educational resources to Medicare-eligible employees about their creditable coverage status and plan alternatives.
 

Incentives Not Permitted

Employers are not permitted to create arrangements that provide an incentive for employees to decline employer-sponsored health plans in favor of Medicare coverage. Employers should be careful to avoid any such incentive arrangements.
 

Why?

The Medicare Secondary Payor rules expressly prohibit employers from offering any “financial or other incentives” to Medicare-eligible individuals not to enroll (or terminate enrollment) under an employer group health plan that would otherwise be the primary payer. This is because such an election would shift the cost of healthcare to the government (under Medicare) rather than having employers retain the cost of healthcare for working employees who are Medicare-eligible. Avoiding this cost shift (back to the government) is why the Medicare Secondary Payor rules exist.
 

What if Medicare is Better?

In some cases, Medicare may be a better fit for employees than employer-provided health insurance. In addition, some Medicare-eligible employees may not be aware that they could elect Medicare in lieu of employer-sponsored coverage. This is where education may be helpful for employees. Employees who are aware of their options may voluntarily switch to Medicare due to reasons of lower costs or superior coverage. Such situations can be a win-win, with better health coverage or lower costs for employees and reduced costs for employers. However, education and communication must be provided on an unbiased basis to avoid the appearance of incentivizing employees to opt off.
 

What’s the Penalty?

The penalty for violating the Medicare Secondary Payor prohibited incentive rules is $5,000 per violation. This would include any time any individual was incentivized to opt off employer-sponsored coverage in favor of Medicare, regardless of whether it is oral or in writing. 

 

Well-Crafted Communication is Important

Well-Crafted Communication

This subject matter is both complex and rife with potential for confusion. Employers will want to carefully craft communications and plan outreach to impacted participants. The communication should provide information for employees to understand the nuances of creditability and the consequences of not maintaining creditable coverage.
 

Creditability Status Maintained

In the case where health plans maintain creditability in 2025 (either by the Simplified Determination extension or by actuarial analysis), employers must still provide the Medicare Part D Notice of Creditability. However, additional, special communication would not be necessary.
 

Creditability Status Lost

In the case where a plan moves from creditable to non-creditable status, employers should provide a special communication highlighting any plans that are newly non-creditable. This will enable participants to make informed choices about electing a different (creditable) employer sponsored plan or to enroll in a Medicare Part D plan.
 

Timing of Special Communication

The timing of employee communication should also be carefully considered. Employers must provide a notice of creditable or non-creditable coverage to Medicare-eligible individuals by October 15 each year (to coincide with the Medicare annual enrollment period). Technically, the regulations reflect that notice requirement pertains to the current plan year (meaning, for example, an October 15, 2024, notice would report creditability information as of January 1, 2024). However, practically, that does not provide useful information for plan participants.

While technically, the regulations reflect notice on a look back basis, we believe this is inconsistent with the law’s intent. Therefore, whenever possible, we recommend that look-forward notifications be provided to employees. This would mean that the Oct 15, 2024, notice would report creditability information for plans as of January 1, 2025. This will provide the information that plan participants would need in order to avoid potential penalties. To the extent renewal decisions and/or actuarial value determinations are not complete by October 15, the notice should be distributed as soon as possible.

Requests for Creditability Notice

If a participant elects to enroll in Part D for 2025, they may be asked (by the Part D insurance company) for a copy of their Creditability Notice. This will be required for the Part D insurer to confirm prior creditable coverage to avoid the premium penalty. Employers should be prepared to provide information on how participants can access or request a copy of creditability notices.

 

Employer Action Items

Free Pass for 2025 with Simplified Determination

All employers will be required to address plan creditability for 2025 at some level. Plans eligible for the Simplified Determination method are allowed to carry over 2024 creditability determinations and thus will skate by easily.
 

Without Simplified Determination, Action Required

Plans that are not eligible for the Simplified Determination Method will require more attention for 2025.
 

Determine Creditability for Plans

Employers will need to confirm creditability for each health plan. This will be provided by the insurance carrier if fully insured or completed via Simplified Determination or Actuarial Analysis if the plan is self-funded.
 

Action For Plans that Are Creditable

For health plans that have creditable drug coverage or no change to creditability, employers should provide the standard annual Medicare Part D Creditable Coverage Notice to employees as part of their 2025 Open Enrollment communication.
 

Actions For Plans that are Newly Non-Creditable

For health plans that are newly non-creditable, employers should take the following three steps:

1. Provide the standard Medicare Part D Non-Creditable Coverage Notice to employees.

2. Provide special communication highlighting non-creditable plans and any loss in creditability status to Medicare-eligible employees covered by impacted plans.

3. Strive to communicate to Medicare-eligible employees the consequences of not having creditable coverage and their options for securing creditable coverage (either by selecting a different employer sponsored health plan or by purchasing a stand-alone Medicare Part D plan).
    

Vita Support

Vita Account Managers will be working with employers and carriers to clarify plan creditability status as soon as it is available. Vita Account Managers will also be guiding employers on creating a communication strategy so that Medicare-eligible employees will be apprised of any changes in creditability and the personal consequences of retaining non-creditable coverage.
 

References

• CMS Model Notice Letters

• CMS Creditable Coverage Simplified Determination

• CMS Annual Disclosure Form (to CMS)
  
  
  
   

The IRS recently announced the 2025 indexing adjustments under the Affordable Care Act (ACA). The affordability percentage threshold was changed as follows:

• 2023: 9.12%

• 2024: 8.39%

• 2025: 9.02%

Adjustments (both up and down) are made annually from the baseline percentage provided in the ACA of 9.5%.
 

What’s the Impact?

The affordability percentage defines the maximum self-only premium contribution that certain employees are required to pay in order for the coverage to be considered “affordable.” This matters because Applicable Large Employers must offer affordable, minimum value coverage to full-time employees, or they may be liable for ACA shared responsibility penalties.

The newly increased affordability threshold creates a slightly higher allowable maximum premium contribution. Note that it has not risen back to the higher 2023 threshold of 9.12%.

Employers will need to carefully review health plan offerings and contributions to ensure that affordability thresholds are met for all employees based on the updated affordability threshold.
 

Affordability Safe Harbor Options

There are three safe harbor options available to employers in calculating premium affordability. All are based on the required contribution for the employer’s lowest cost, minimum value, and self-only coverage.

1. W-2 Safe Harbor: The W-2 safe harbor bases affordability on whether the employee’s required contribution does not exceed 9.02% of that employee’s W-2 wages from the employer for that calendar year.

2. Rate of Pay Safe Harbor: The rate of pay safe harbor is split in two parts, depending on whether the employee is paid on an hourly or salaried basis.

• Hourly Employees - Affordability is based on whether the employee’s required contribution for the month does not exceed 9.02% of the employee’s hourly rate of pay multiplied by 130 hours.
• Salaried Employees - Affordability is based on whether the employee’s required monthly contribution does not exceed 9.02% of the employee’s monthly salary.

3. Federal Poverty Line (FPL) Safe Harbor: The FPL safe harbor bases affordability on whether the employee’s required contribution does not exceed 9.02% of the monthly FPL for a single person.

Employers using the FPL method must offer at least one minimum value health plan with an employee only contribution of $113.20 or less. (That is calculated as the 2025 Single Person FPL of $15,060 ¸ 12 x 9.02%.) Employers using other methods must evaluate plan offerings to confirm that premium contributions meet the 9.02% threshold.
 

Employer Action Item

Employers must carefully review their health plan offerings and contributions to ensure that 2025 plans meet the newly updated affordability threshold.


 

California SB 729 was signed into law by Governor Newsom on September 29, 2024. The law mandates large group health insurance plans to cover fertility treatments.
 

Coverage Mandate Summary

Large Group Policies: The bill mandates that large group insurance policies (covering 100+ employees) provide coverage for the diagnosis and treatment of infertility and fertility services, including in vitro fertilization (IVF). 

Small Group Policies: The bill does not mandate small group policies to provide infertility coverage. However, the bill does require small group contracts to offer infertility coverage. This means that carriers must offer the coverage as an option on small group health insurance policies. Employers must be able to elect coverage for infertility services but are not required to provide it under their policies. 

Self-Insured Employers: This bill does not apply. As with all self-funded plans, ERISA preempts state laws that relate to employee benefit plans.

Religious Employers: The bill exempts religious employers from these requirements.
 

What fertility services are mandated?

Required fertility coverage includes a maximum of three completed oocyte retrievals with unlimited embryo transfers in accordance with the guidelines of the American Society for Reproductive Medicine (ASRM), using single embryo transfer when recommended and medically appropriate.
 

Impetus of the Law

The law aims to make IVF more accessible, particularly for those who face financial barriers or belong to the LGBTQ+ community. One significant provision removes the requirement that patients must attempt natural conception for 12 months prior to becoming eligible for fertility treatments, benefiting same-sex couples and others who face unique challenges in family-building.
 

Discrimination Prohibited

The law is very clear that discrimination of any sort is prohibited. Specifically, coverage for the treatment of infertility and fertility services must be provided without discrimination based on:

• Age

• Ancestry

• Color

• Disability

• Domestic partner status

• Gender

• Gender expression

• Gender identity

• Genetic information

• Marital status

• National origin

• Race

• Religion

• Sex

• Sexual orientation
   

Effective Date

Contracts issued, amended, or renewed on or after July 1, 2025, must comply with the new mandate. For employers with calendar year renewal cycles, that means January 1, 2026.
 

What the Future Holds

Large employers subject to this law should expect standardized infertility coverage to be included in fully insured plans. A premium increase can be expected. However, at this early stage, it is premature to project what the premium impact might be.
 

___________________________________________________________________________________

Coverage Details (For Those Who Want the Nitty-Gritty)

Definition of Infertility

The law defines infertility as a condition or status characterized by any of the following:

1. A licensed physician’s findings, based on a patient’s medical, sexual, and reproductive history, age, physical findings, diagnostic testing, or any combination of those factors. This definition shall not prevent testing and diagnosis of infertility before the 12-month or 6-month period to establish infertility in paragraph (3).

2. A person’s inability to reproduce either as an individual or with their partner without medical intervention.

3. The failure to establish a pregnancy or to carry a pregnancy to live birth after regular, unprotected sexual intercourse. For purposes of this section, “regular, unprotected sexual intercourse” means no more than 12 months of unprotected sexual intercourse for a person under 35 years of age or no more than 6 months of unprotected sexual intercourse for a person 35 years of age or older. Pregnancy resulting in miscarriage does not restart the 12-month or 6-month period to qualify as having infertility.
    

Prohibitions in the Law

The law also outlines specific exclusions that are prohibited under the law. The headings below are intended to quickly capture the high level intent of each paragraph. The wording that follows is the actual text of the law for reference. 

The policy may not include any of the following:

1. Exclusions for Fertility Rx: Any exclusion, limitation, or other restriction on coverage of fertility medications that are different from those imposed on other prescription medications.

2. Exclusions for Third-Party Involvement: Any exclusion or denial of coverage of any fertility services based on a covered individual’s participation in fertility services provided by or to a third party. For purposes of this section, “third party” includes an oocyte, sperm, or embryo donor, gestational carrier, or surrogate that enables an intended recipient to become a parent.

3. Different Cost Sharing for Fertility: Any deductible, copayment, coinsurance, benefit maximum, waiting period, or any other limitation on coverage for the diagnosis and treatment of infertility, except as provided in subdivision (a) that are different from those imposed upon benefits for services not related to infertility.
   
   
   
   
   
    

The San Francisco Healthcare Security Ordinance (HCSO) requires covered employers to spend a minimum amount set by law on healthcare for each employee who works 8+ hours each week in San Francisco.
 

2025 Expenditure Rates

Following are the required expenditure rates, effective January 1, 2025. These reflect an increase of more than 8% over the 2024 rates.
 

Category	2025 Expenditure Rate	2025 FTE Monthly Max*
100+ Employees	$3.85 per hour	$662.20
20 to 99 Employees (For Profit) 50-99 Employees (Nonprofit)	$2.56 per hour	$440.32
0 to 19 Employees (For Profit) 0-49 Employees (Nonprofit)	Exempt	N/A

There is an exemption for certain managerial, supervisory, and confidential employees who earn more than $125,405 per year or $60.29 per hour for 2025. These employees are considered exempt, and the HCSO expenditure requirements do not apply to them.

* Total hours for which a healthcare expenditure is required are capped at 172 per employee per month.

 

SF HCSO Primer

For those who might want a refresher!

 
Covered Employers

An employer need not be physically located in San Francisco to be a covered employer. HCSO applies to all employers that must obtain a San Francisco business registration certificate and meet one of the following criteria:

• Private Employers: Private employers who employ 20+ employees where any single employee works at least 8 hours per week in San Francisco.
• Non-Profit Employers: Non-profit employers who employ 50+ employees where any single employee works at least 8 hours in San Francisco.

Employer size counts are based on the average number of employees per week who perform work for compensation during an applicable quarter (not just those employees working in San Francisco).
 

Covered Employees

A covered employee is any person who meets all of the following four criteria:

1. Works for a covered employer
2. Is entitled to be paid minimum wage
3. Has been employed by the employer for at least 90 days
4. Performs at least eight hours of work per week in San Francisco.

The definition of employee under the ordinance includes all employees, even if they are temporary, part-time, commissioned, or contracted (unless they are a legitimate independent contractor).

Work performed by an employee who lives in San Francisco and works from home is considered work performed within San Francisco.

Employees who travel through San Francisco while carrying out their job duties are not considered to have performed work in San Francisco. However, if an employee's job requires him or her to make stops in San Francisco (e.g., deliveries), the employee is considered to have performed work in San Francisco. For these employees, hours worked include travel within the geographic boundaries of San Francisco.
 

Exempt Employees

There is an exemption for certain managerial, supervisory, and confidential employees who earn more than the compensation thresholds outlined below. These employees are considered exempt, and the HCSO expenditure requirements do not apply to them, regardless of whether they meet the “work in San Francisco” requirements.
 

Category	2024 Thresholds	2025 Thresholds
Salary for Exempt Employees	$121,372	$125,405
Hourly Rate for Nonexempt Employees	$58.35	$60.29

Employees covered by Medicare or TRICARE may also be excluded if the employer maintains documentation of employee eligibility.
 

Creditable Expenditures

Fully Insured Plans: Employers can count toward their required HCSO expenditures any premium payments for healthcare coverage (for employee and/or dependent coverage). This includes medical, dental, and vision plans, as well as EAP plans that qualify as health coverage. In addition, payments to the SF City Option also qualify.

Self-Funded Plans: Employers may not use COBRA premium rates to calculate required health care expenditures. For self-funded plans in which the employer pays claims as they are incurred, the employer may calculate the health care expenditures on an annual basis. If the employer’s annual spend falls short of the HCSO expenditure rate, the employer must make “top-off” payments for employees enrolled in these plans by the end of February of the following year. There are very specific requirements on how to calculate premiums for self-funded plans. Refer to the OLSE documentation on Calculations for Self-Funded Plans for more information.

HSA Contributions: Employer contributions to an employee’s HSAs qualify.

HRA Funding: The rules for HRA funding require that contributions be irrevocable in order to qualify. This results in “traditional” HRAs rarely qualifying as healthcare expenditures. Employer contributions must meet both of the following conditions to qualify:

• Employer contributions must be irrevocable. This means that no portion of the contribution may ever be recovered by the employer, even if an employee terminates.
• Employer contributions must be paid into a separate account on the employee’s behalf within 30 days of the end of each quarter.

Most typical HRAs do not pass either of these criteria. Thus, few (if any) will qualify as health care expenditures for HCSO purposes.
 

Employee Waivers

Employers may ask employees who have other employer-provided coverage to waive the expenditure. However, such employees are not required to waive the expenditure (and in many circumstances, it does not behoove them to do so).

If an employee elects to waive, they must do so using the authorized HCSO voluntary waiver form. The waiver form must be signed each year, cannot be retroactive, and is revocable at any time.

If an employee with other coverage does not sign the voluntary waiver, the employer must still make the required health care expenditure on their behalf and may be liable for noncompliance penalties if expenditures are not made.
 

Insufficient Health Care Expenditures

If health care expenditures fall short of the required amount, employers have 30 days after the end of the calendar quarter to remit the difference to the SF City Option program. These payments fund a Medical Reimbursement Account (MRA) in the employee’s name.
 

Reporting Requirements

The SF HCSO requires that employers submit the employer Annual Report Form (ARF) by April 30th each year. The report must be submitted to the Office of Labor Standards Enforcement (OLSE), the organization with oversight over the HCSO ordinance.

The purpose of the Annual Report Form is to provide OLSE with a snapshot of each employer’s compliance with this ordinance. The penalty for failing to submit the form by the deadline is $500 per quarter.
 

Reporting Details

The reporting requirement includes basic business data as well as data to clarify Covered Employer status. In addition, the following data points are requested:

• Number of individuals employed in each quarter
• Number of employees covered by HCSO in each quarter
• Employer’s total spending on healthcare
• Types of healthcare coverage the employer offered to employees.

The Annual Report Form must be completed online. OLSE provides robust assistance material online, including instructions for completing the ARF, form previews, and a video guide to completing the Annual Reporting Form Resource Guide.
 

Expenditure Requirements

Following are the required expenditure rates required for covered employees:
 

2024	Expenditure Rate	Monthly Maximum*
100+ Employees	$3.51 per hour	$603.72
20 to 99 Employees (For Profit) 50-99 Employees (Nonprofit)	$2.34 per hour	$402.48
0 to 19 Employees (For Profit) 0-49 Employees (Nonprofit)	Exempt	N/A

 
 

2025	Expenditure Rate	Monthly Maximum*
100+ Employees	$3.85 per hour	$662.20
20 to 99 Employees (For Profit) 50-99 Employees (Nonprofit)	$2.56 per hour	$440.32
0 to 19 Employees (For Profit) 0-49 Employees (Nonprofit)	Exempt	N/A

* Total hours for which a healthcare expenditure is required are capped at 172 per employee per month.

 

Resources

PCORI fee filings are due on July 31^st each year. That means it is time to get a refresher on requirements and responsibilities.
 

What is PCORI?

The Patient-Centered Outcomes Research Institute (PCORI) is an independent, non-profit research organization created to help patients and providers make better informed healthcare decisions. The organization commissions research within the framework of creating actionable, evidence-based medicine.

PCORI was created as part of the Affordable Care Act and is funded by a fee that was also included in the legislation. The fee is paid by all health plans, including fully insured health plans, self-funded health plans, and account-based plans.
 

PCORI Counting Rules

1. Per Human Not Per Employee: Counting for PCORI fees is based on number of covered persons (not just covered employees). As such, each employee and each dependent must be counted for PCORI fee payment purposes.

2. Exception for Account-Based Plans (HRAs): The one exception is for calculation of PCORI fees for account-based plans (such as HRA plans), which are counted on a per employee basis even if dependent expenses are eligible for reimbursement under an account-based plan. This includes plans such as HRAs and funded or matched FSAs. The regulations provide this special rule where dependents are not counted for account-based plans only. 

3. Exception for More Than One Self-Funded Plan: There is also a special rule that PCORI fees are only payable for one self-funded plan, even if an employer has more than one self-funded plan, and even if an individual may be covered under more than one of the employer’s self-funded plans. This special rule eliminates “double-paying” for participants.
    

Who pays the fee?

Fully Insured Plans: Insurance carriers pay the fee on behalf of fully insured employers. The PCORI fee is baked into the fully insured premium. Therefore, no action is required for employers with only fully insured plans (and no account based plans).

Self-Funded Plans and HRAs: Plan sponsors/employers are required to pay the fee directly for all self-funded plans and any HRA plans. This includes the following plan types:

• Self-funded medical plans (including hybrid plans, such as level-funded, balance funded, or graded)

• Health Reimbursement Arrangements (HRAs) that are not considered excepted benefits (such as dental and vision only)

• Employer-funded Health Flexible Spending Accounts (FSAs) in excess of $500 or in excess of a $1:$1 match
   

Current PCORI Rate

The updated PCORI rate for 2024 filings (based on 2023 Plan Year data) is $3.22 per covered life (or per participant for HRA plans).

This rate applies for policy and plan years ending on or after October 1, 2023 (which includes calendar year plans ending on December 31, 2023).
 

PCORI Reporting

PCORI Fees are paid on the Q2 IRS Form 720.

The fees are reported in the first section of Part II, under the clump of rows numbered “133” on Form 720.
 
Fees paid on behalf of self-funded plans should be reported under the “Applicable self-insured plans” section of Form 720. (The “Specified health insurance policies” applies to health insurance carriers reporting on behalf of their fully insured populations.)
 
The Q2 Form 720 is due on July 31, 2024 (one month after the last day of the quarter).
 

Complex Counting Example

The following is an example of an employer with 500 employees. Employees have a choice between a self-funded health plan and a Kaiser HMO plan. In addition, the employer provides a non-integrated medical travel HRA plan that covers all employees.
 

Plan	Covered Employees	Persons Counted for PCORI	Persons for whom PCORI Payment is Due	Who Pays PCORI Fee
Self-Funded Plan	400	1,000	1,000	Employer
Fully Insured Kaiser Plan	100	250	250	Kaiser
Medical Travel HRA Plan	500	500 by special rule	100	Employer

In this example, PCORI fees would be due as follows: 

• Employer pays PCORI fees for the 1,000 humans on the self-funded health plan.

• Kaiser pays the PCORI fee for the 250 humans on the Kaiser plan.

• Employer also pays PCORI fees for the 100 “extra” employees that are covered under the self-funded HRA plan (but whose health plan PCORI fee was paid by Kaiser because they are covered under the fully insured Kaiser plan). The employer owes a PCORI fee for these 100 employees (but not their dependents because of the special rule for account-based plans).

• Employer would report 1,100 covered lives and pay the PCORI fee accordingly.

As an aside, if there was not a Kaiser plan in place, only one PCORI fee would be due for the 1,000 humans on the self-funded medical plan. In the above example, the 500 employees covered by the medical travel HRA plan would be a "gimme" because that would be a second self-funded plan. 




 

The IRS recently announced the 2025 cost-of-living adjustments to the applicable dollar limits for the following accounts and plans: 

• Health savings accounts (HSAs)
• High-deductible health plans (HDHPs)
• Excepted benefit health reimbursement arrangements (HRAs).

All the dollar limits currently in effect for 2024 will change for 2025 (except the HSA catch-up contribution for individuals ages 55 and older as this limit is not subject to cost-of-living adjustments).
 

High Deductible Health Plan Policy Limits

2025 Minimum Deductible

• Individual: $1,650  (2024 - $1,600)
• Family: $3,300  (2024 - $3,200)

 

2025 Maximum Out of Pocket Limit

• Individual: $8,300  (2024 - $8,050)
• Family: $16,600  (2024 - $16,100)

Health Savings Account Limits

2025 Maximum HSA Contribution

• Individual: $4,300  (2024 - $4,150)
• Family: $8,550  (2024 - $8,300)

 

Over Age 55 Catch-Up Contribution

• 2025: $1,000  (2024 - $1,000)
   

Excepted Benefit HRA Limit

• EBHRA Per Employee: $2,150 (2024 - $2,100)

High Deductible Health Plan Policy Limits

Any amount can be contributed to an HSA up to the maximum annual contribution, regardless of the actual deductible of the underlying HDHP plan.
 
The general rule is that HSA contributions are calculated on a monthly basis (reflecting the number of months that an individual was covered under a qualified HDHP).

For individuals covered under an HDHP for only a portion of the calendar year, there is a special rule that allows them to contribute the full annual maximum to an HSA. This is known as the “full contribution rule.” The catch is that individuals who make contributions in reliance upon the full contribution rule must remain HSA-eligible (that is, covered under an HDHP without other disqualifying coverage) during a 13-month period from December of that year through the following calendar year) to avoid adverse tax consequences.
 

A Reminder about Embedded Deductibles

HDHPs are typically structured with an aggregate family deductible. This means that when any dependents are covered on the plan, the deductible applies collectively to all family members, and the individual deductible is not taken into account.

However, there are some plans that have an embedded individual deductible. Notably, California law requires that HDHPs have an embedded individual deductible. This means that once an individual covered on a family plan meets the embedded individual deductible, the plan coinsurance would start to pay for that individual (but not for other family members). In order for such a plan to remain a qualified HDHP, the embedded individual deductible must be at least the minimum family deductible outlined above. As an example, the minimum embedded individual deductible on a family plan in 2025 would be $3,300.
 

References

Revenue Procedue 2024-25

On April 10, 2024, the Centers for Medicare and Medicaid Services (CMS) announced that the Prescription Drug Data Collection (RxDC) submissions portal is now open for 2023 submissions. The system is known as Health Insurance Oversight System (HIOS). Employers who are responsible for submitting any of the required files directly must be registered with HIOS.
 

Who Needs to Register and Submit Files?

As a reminder, the required process includes the submission of eight data files. The reality of who is responsible for filing the various data file elements is a function of whether plans are fully insured or self-funded AND how the self-funded carriers are contracted to handle the filing.

Fully Insured Employers: Fully insured employers will rely on their carriers for the full submission process, assuming the client has participated in the data gathering process if required. It is important to remember that employers must obtain and retain written confirmation that their carriers will be handling the RxDC submission on their behalf. Many fully insured carriers are requiring employers to submit or confirm certain data points by a specified deadline in order for the fully insured carrier to complete the reporting on the employer’s behalf.

Self-Funded Employers: Self-funded employers will need to coordinate with their Administrative Services Only (ASO) and Pharmacy Benefits Manager (PBM) partners to confirm filing requirements. As a reminder, while most of the data is in the hands of the PBMs, some of the required data elements are only known by the employer. Therefore, some measure of coordination will be required. Some vendors are collecting required employer data from clients and doing the complete filing on their behalf. Other vendors are splitting the file submission process between the PBM and the employer.

Some action is required for all self-funded employers. Depending on the structure of the arrangement, either:

• Provide the required data to PBM vendor for them to complete the full filing (when vendor has responsibility for submitting all files).

OR

• Register for HIOS portal and submit required files directly (when employer has direct responsibility for submitting any data files).

 

Resources for Navigating Registration

For those self-funded employers who must submit any data files directly, CMS has provided several resources for navigating the registration process:

• HIOS Access Training

• HIOS Access RxDC User Guide

• RxDC User Manual

The registration process can take several weeks, so employers are encouraged to register early.
 

Deadline

The RxDC filing for the 2023 reference year submission is due June 1, 2024, regardless of renewal term.



 

Administration

Independent Audit Time for Large Retirement Plan Filers

Now that the retirement plan nondiscrimination testing season is wrapping up for calendar year retirement plans, steps should be taken toward completion of the annual independent audit. The independent audit report must be included with the 2023 Form 5500 filing, due on July 31, 2024, or by October 15, 2024, for plans that are on the extended filing due date.

The independent audit requirement applies to employers who sponsor “large” plans – those with over 100 participants on the first day of the Plan Year (January 1st for Calendar Year plans). There are special rules that allow for growing companies to first exceed 120 participants before becoming subject to the audit requirement, and thereafter continue to be subject to the requirement while staying above the 100-participant threshold.

Please contact Vita Planning Group if you have questions about whether the independent audit applies to your plan. For other important dates on the horizon, download our online Compliance Calendar.
 

Market Update¹

While equity and bond markets moved in tandem during 2023, we saw a separation in returns between these two major asset classes in Q1 2024. US equity markets continued to rise on the expectation of a “soft landing” with positive GDP growth through 2024, while bond markets declined on the expectation of “higher rates for longer” with delayed and/or fewer FED rate decreases in 2024. Overseas equity markets also started the year positively, with both the developed market MSCI EAFE index up 5.9% for the quarter (in USDs) and the MSCI Emerging Markets index up 2.44%, despite a decline of 2.2% in Chinese equities in Q1 (in USDs). While US economic conditions appear favorable for the remainder of 2024, the biggest unknown will be the US presidential election which has historically heightened volatility during an election year.

The US Bureau of Economic Analysis (“BEA”) announced that the US economy grew at an annual rate of 3.4% in Q4 2023 resulting in 2.5% growth for all of 2023². The Philadelphia Federal Reserve Bank’s survey of forecasters median forecast for Q1 2024 GDP growth is 2.1% (up from last quarter’s 0.8% estimate), while the median forecast for the full-year 2024 has risen slightly to 2.4%³. The labor market continues to be strong. March 2024 saw non-farm payrolls grow by 303,000, and US unemployment was 3.8%, making this the longest period with unemployment below 4% since the 1960s⁴. The American consumers, who account for 68% of US GDP, are expected to maintain their level of spending in 2024 with the continued improvement in personal finance and wealth accumulation; American businesses have increased fixed investment spending, due in part to legislation (the CHIPS and Infrastructure Acts) as well as the AI revolution and productive capacity due to labor shortages.

Inflation in the US continues to trend downward, despite hiccups such as the rise in March 2024 to 3.5% (annualized), up from 3.2% in February. Shelter accounts for approximately 38% of the Consumer Price Index (“CPI”), which along with gasoline and automobile insurance appear to be the main factors for the bump up in inflation. But with shelter a lagging indicator and gasoline prices notoriously volatile, there is still the expectation that inflation will decline through 2024 bringing us closer to the FED’s target of 2%. The FED is on record to cut rate three times in 2024, but bond markets are nervous whether the strength of the US economy and the stickiness of inflation may cause the FED to delay or to limit rate cuts this year.

The first quarter of 2024 seemed to indicate that the US can maintain economic growth even in the face of continued inflation. For US equity markets to continue to rise, it will be important to see whether the rally in large cap tech stocks can be broadened to include other sectors. The FED’s apparent willingness to cut rates to counteract any decrease in GDP growth should continue to support equities until corporate earnings can catch up to currently high multiples. Conversely, US Bond markets are expected to continue to be under pressure, as indicated by the inverted US bond yield curve (yield on short-term bonds higher than long term bonds), given the possibility of the FED keeping rates higher for longer if it is not comfortable with progress on inflation. The biggest unknown is the US presidential election, which can impact markets quite separately to the economic factors discussed above.


 

Sources:

1. Unless otherwise indicated, data and commentary for the Market Update is sourced from two JPMorgan Asset Management sources: 1) Guide to the Markets – U.S. Economic and Market Update, 2Q 2024, December 31, 2024, and 2) the “2Q 2024 Guide to the Markets Webcast” on April 1, 2024.

2. https://www.bea.gov/data/gdp/gross-domestic-product

3. https://www.philadelphiafed.org/surveys-and-data/real-time-data-research/spf-q1-2024

4. https://www.bls.gov/news.release/pdf/empsit.pdf

Disclosures:

This material represents an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Past performance does not guarantee future results.

+The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is a market value weighted index with each stock's weight in the index proportionate to its market value.

++ Indices are unmanaged and investors cannot invest directly in an index. Unless otherwise noted, performance of indices do not account for any fees, commissions or other expenses that would be incurred. Returns do not include reinvested dividends.

The Bloomberg Barclays US Aggregate Bond Index, or the Agg, is a broad base, market capitalization-weighted bond market index representing intermediate term investment grade bonds traded in the United States. Investors frequently use the index as a stand-in for measuring the performance of the US bond market.

The MSCI All Country World Index ex USA Investable Market Index (IMI) captures large, mid and small cap representation across 22 of 23 Developed Markets (DM) countries (excluding the United States) and 23 Emerging Markets (EM) countries*. With 6,062 constituents, the index covers approximately 99% of the global equity opportunity set outside the US.

The MSCI EAFE Index (Europe, Australasia, Far East) is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the US & Canada.

The MSCI Emerging Markets Index is a float-adjusted market capitalization index that consists of indices in 21 emerging economies: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Morocco, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand, and Turkey.

The FTSE NAREIT All Equity REITs Index is a free-float adjusted, market capitalization-weighted index of U.S. Equity REITs. Constituents of the Index include all tax-qualified REITs with more than 50 percent of total assets in qualifying real estate assets other than mortgages secured by real property.

The Consumer Price Index (CPI) is a measure of inflation compiled by the US Bureau of Labor Studies.



 

The San Francisco Health Care Security Ordinance (HCSO) requires that employers submit the employer Annual Report Form by May 3, 2024. The report must be submitted to the Office of Labor Standards Enforcement (OLSE), the organization with oversight over the HCSO ordinance.

The purpose of the Annual Report Form is to provide OLSE with a snapshot of each employer’s compliance with this ordinance. The penalty for failing to submit the form by the deadline is $500 per quarter.
 

Reporting Details

The reporting requirement includes basic business data as well as data to clarify Covered Employer status. In addition, the following data points are requested:

• Number of individuals employed in each quarter of 2023
• Number of employees covered by HCSO in each quarter
• Employer’s total spending on healthcare
• Types of healthcare coverage the employer offered to employees.

The Annual Report Form (ARF) must be completed online. OLSE provides robust assistance material online, including instructions for completing the ARF, form previews, and a video guide to completing the ARF: ARF Instructions.

The deadline for filing the 2023 form is May 3, 2024.

 

HCSO Primer

For those that might want a Refresher!

Covered Employers

An employer need not be physically located in San Francisco to be a covered employer. HCSO applies to the following employers:

• Private Employers: Private employers who employ 20+ employees where any single employee works at least 8 hours per week in San Francisco

• Non-Profit Employers: Non-profit employers who employ 50+ employees where any single employee works at least 8 hours in San Francisco.  

Employer size counts are based on the average number of employees per week who perform work for compensation during an applicable quarter (not just those employees working in San Francisco).
 

Covered Employees

A covered employee is any person who meets the following four criteria:

1. Works for a covered employer

2. Is entitled to be paid minimum wage

3. Has been employed by the employer for at least 90 days

4. Performs at least eight hours of work per week in San Francisco.

The definition of employee under the ordinance includes all employees, even if they are temporary, part-time, commissioned or contracted.

Work performed by an employee who lives in San Francisco and works from home is considered work performed within San Francisco.

Employees who travel through San Francisco while carrying out their job duties are not considered to have performed work in San Francisco; however, if an employee's job requires him or her to make stops in San Francisco (e.g., deliveries), the employee is considered to have performed work in San Francisco. For these employees, hours worked include travel within the geographic boundaries of San Francisco.
 

Employee Waivers

Employers may ask employees who have other employer-provided coverage to waive the expenditure. However, such employees are not required to waive the expenditure (and in many circumstances, it does not behoove them to do so).

If an employee elects to waive, they must do so using the authorized HCSO voluntary waiver form. The waiver form must be signed each year, cannot be retroactive, and is revocable at any time.

If an employee with other coverage does not sign the voluntary waiver, the employer must still make the required health care expenditure on their behalf and may be liable for noncompliance penalties if expenditures are not made.
 

Expenditure Requirements

The ordinance requires covered employers to spend a minimum amount set by law on healthcare for each employee who works 8+ hours each week in San Francisco. Following are the required expenditure rates:
 

2023 Expenditure Rates	Expenditure Rate	Monthly Maximum*
100+ Employees	$3.40 per hour	$584.80
20 to 99 Employees (For Profit)  50-99 Employees (Nonprofit)	$2.27 per hour	$390.44
0 to 19 Employees (For Profit)  0-49 Employees (Nonprofit)	Exempt	N/A

* Total hours for which a healthcare expenditure is required are capped at 172 per employee per month. 

There is an exemption for certain managerial, supervisory, and confidential employees who earn more than $114,141 per year (or $54.88 per hour) in 2023. These employees are exempt and the HCSO expenditure requirements do not apply to them.
 

Resources

Administrative Guidance for SF HCSO

San Francisco Business Registration Certificate

HCSO Voluntary Waiver Form

2024 HCSO Poster

SF City Option Program

HCSO Annual Report Form Resource Guide

HCSO Self-Funded Premium Calculations