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San Francisco ups health spending law earnings exemption

San Francisco ups health spending law earnings exemption

Managerial, supervisory or confidential employees who earn an annual salary of at least $88,212 in 2014 are exempt from a San Francisco law that requires employers to spend a certain amount of money on their employees' health care coverage.

The increase from this year's exemption limit of $86,593 is tied to the rise in the consumer price index for urban wage earners and clerical workers in the San Francisco-Oakland-San Jose metropolitan statistical area, according to the City and County of San Francisco Office of Labor Standards Enforcement, which administers the law.

The law requires employers with 100 or more employees to spend $2.33 per hour per covered employee on health care in 2013, while in 2014 the spending requirement will rise to $2.44 per hour. Employers with 20 through 99 employees must spend at least $1.55 per hour per covered employee this year and $1.63 hour in 2014.

The spending requirement applies to employees who work at least eight hours per week and who have been employed for more than 90 days.

The spending requirement can be satisfied in various ways, including payment of employees' health insurance premiums and contributions to a city fund.

However, an alternative way — making contributions to stand-alone health reimbursement arrangements — that some employers have utilized to satisfy the spending requirements appears coming to an end.

That is because stand-alone HRAs will not be allowed under the Patient Protection and Affordable Care Act effective in 2014.


Stand-alone HRAs run afoul of reform law provisions that bar plans from imposing annual and lifetime dollar limits.

In recent guidance, the San Francisco Office of Labor Standards Enforcement noted that the Patient Protection and Affordable Care Act has made significant changes to HRAs “that may impact the permissibility of such contributions under federal law.”

If an employer decides to end the stand-alone HRA approach to satisfying the San Francisco law, account balances, under a 2011 law, would have to remain available for 24 months after the contribution.

For terminating employees, the account balance would have to be available for 90 days after the employee leaves.

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