On Jan. 1, employers in San Francisco will have to make sure that employee health reimbursement accounts the city requires them to fund are available to employees for two years, not just one. Amendments to the Health Care Security Ordinance (HCSO) add to the requirements the city already has in place to establish access to universal health care in the City by the Bay. It was signed into law by Mayor Edwin Lee (D) on Nov. 28.
City Amends Rules for S.F. Employers
City law had provided that unused funds in health reimbursement accounts at the end of the coverage period could not be carried over; the amendment to the ordinance allows accounts to exist for two years. The amendment requires that funds left in accounts at the end of 2011 will be carried over to 2012 and will be available through Dec. 31, 2012.
The amendment also states that:
- if the employer makes contributions because a court has ordered it to do so, the employer must make the reimbursements itself and not by providing funds to the city;
- employers that impose surcharges on customers to provide funds they can use to cover the reimbursements must use the full amount collected through the surcharges for that purpose;
- employers must provide written account summaries to employees 15 days after a quarterly contribution is made;
- employers must provide written notice about account balances to employees who leave their jobs within three days of termination;
- employers must allow reimbursements up to 90 days after employment ends; and
- employers must post notifications from the city about the law.
When HRAs Are Not HRAs
Health reimbursement accounts are not the same thing as health reimbursement arrangements. Health reimbursement arrangements are established under federal law. Through health reimbursement arrangements, employers can reimburse employees, their spouses and their dependents for medical expenses as defined by Section 213 of the federal tax Code up to a set maximum amount during a specified coverage period. Unused funds at the end of the coverage period roll over into the next one.
Unlike health reimbursement arrangements — which an employer may, but is not required, to establish — health reimbursement accounts are compulsory for employers in San Francisco. City law requires employers to cover, through those accounts, health care expenses incurred by employees who work at least eight hours a week. Employers do have an alternative: They can pay the city, which then establishes the accounts and makes the reimbursements.
The Ordinance May Clash with ERISA
The amended San Francisco HCSO only applies in San Francisco. Nonetheless, federal law may affect it. Back in 2009, the ordinance survived several ERISA challenges. It is still uncertain whether the latest amendment might be challenged in court and if there will be a ruling that ERISA preempts it.
ERISA, which regulates the operation of pension, health and welfare benefit plans, preempts almost all state laws that relate to benefit plans. The amended San Francisco HCSO recognizes that; it includes a provision that it does not authorize the city to impose duties or obligations that conflict with state or federal law.