Using an HRA with HCSO, San Francisco’s Health Care Ordinance
The San Francisco Labor Standards Enforcement allows a health reimbursement account (HRA) to be used to meet the Health Care Security Ordinance (HCSO) requirements of San Francisco. In this article, we will cover using a HRA to pay for HCSO Health Care Expenditures (HCEs).
One of the many benefits of using an HRA to comply with San Francisco’s HCSO ordinance, compared with using a traditional group health insurance plan, is that the employer may recoup unused expenses after an employee leaves the company.
In fact, among employers that used HRAs in 2011 to satisfy the HCSO requirements, just 17% of the nearly $66 million was actually reimbursed to employees, according to a report issued by the city's Office of Labor Standards Enforcement.
Since 2011, these new provisions have been put into place for businesses wishing to use an HRA to pay for employee HCEs:
- The contributions must be reasonably calculated to benefit the employee;
- The contributions must remain available to the employee for a minimum of twenty-four months from the date of the contribution;
- The employee must receive a written summary of each contribution within 15 days of the date of the contribution; and
- Upon separation, employees must be provided with a written summary of their account within 3 days and the funds must remain available for a minimum of 90 days.
We will analyze each of these provisions below.
1. The Contribution Must be Reasonably Calculated to Benefit the Employee
The contribution must be available to the employee for reimbursement of all IRS-approved medical expenses, and, upon expiration, the covered employee must be provided with 90 days to submit an eligible claim.
2. The Contributions Remain Available to Covered Persons for a Minimum of 24 Months from the Date of the Contribution
Contributions an employer makes to the HRA must be made regularly, and no later than 30 days after the end of the preceding quarter. All contributions must remain available for the employee to seek reimbursement on any eligible expenses incurred during the two-year period following the date of the contribution.
3. A Written Summary of Contributions Must be Provided Within 15 days of the Contribution Date
- The summary must include the name, address, and telephone number where the contribution was made;
- the date and amount of the contribution;
- any other debits or credits;
- account balance; and
- expirations for available funds.
The city provides a sample contribution summary for reference. The use of a third party HRA Administrator can ensure compliance with this and other requirements.
4. If an Employee Leaves, Funds Must Remain Available for 90 Days
Whether an employee quits, is fired, or laid-off, any remaining balance must remain available to the employee and other covered persons for a minimum of 90 days. A Separation Notice must also be provided within three days of the separation. The Separation Notice should include the balance and applicable expiration dates. A sample separation notice is available here. This requirement would automatically take place when using an HRA Administrator such as Zane Benefits.
Using HRA Admin Software to Manage HCSO Accounts
In all, about 20% of San Francisco employers use an HRA to reimburse employees the Health Care Expenditures under HCSO.
With an HRA Admin Software program, employers will not only ensure compliance with the rules and regulations of the Healthy San Francisco ordinance, they will reap the benefits of many additional features and cut administration time to less than five minutes per month. Request a demo of Zane's HRA administration software.
Some of the benefits of using a HRA Administrator such as Zane Benefits include:
- HIPAA & ERISA Compliance
- Reduced Administration Time
- Manage Anywhere in the Cloud
- Quick Claims Processing
- Easy Online Claim Submission
- Integrated Documents On-Demand
Note: This should not be taken as legal or tax advice.