General ACA FAQs from Employers
1. Q: Is the HCSO Employer Spending Requirement scheduled to expire or go away when the ACA takes effect in 2014?
A: No, the HCSO Employer Spending Requirement is not scheduled to expire or go away when federal health reform takes effect in 2014. The ACA does not preempt or regulate the HCSO, and Covered Employers will be required to continue meeting the HCSO Employer Spending Requirement for their Covered Employees in 2014.
2. Q: Has the Affordable Care Act changed federal rules and requirements regarding the use of stand-alone Health Reimbursement Accounts (HRAs)?
A: Yes, the Affordable Care Act has made significant changes to federal regulation and guidance regarding Health Reimbursement Accounts that may impact the permissibility of such contributions under federal law. Consult these federal resources and proper counsel when deciding whether such contributions comply with the ACA:
The HCSO has not changed, and contributions to reimbursement programs, including HRAs, will continue to be valid health care expenditures for the purpose of meeting the HCSO’s Employer Spending Requirement. Section 14.1(b)(7)(A) of the HCSO establishes that contributions to a health savings account “or to any other account having substantially the same purpose or effect” are among the list of valid health care expenditures.
3. Q: If my business elects to no longer allocates funds to HRAs, what are my options to satisfy the HCSO's Employer Spending Requirement in 2014?
A: The options available to your business for satisfying the HCSO’s Employer Spending Requirement in 2014 and beyond remain the same.
The HCSO requires Covered Employers to make Health Care Expenditures to or on behalf of their covered employees each quarter. A Health Care Expenditure is any amount paid by a Covered Employer to its Covered Employees or to a third party on behalf of its Covered Employees for the purpose of providing health care services for Covered Employees or reimbursing the cost of such services for its Covered Employees.
Some examples of Health Care Expenditures that meet the requirements of the HCSO include:
- Payments to a third party to provide health care services for the Covered Employee, such as payments for health insurance or payments to a health care provider;
- Payments on behalf of the Covered Employee to the City Option;
- Contributions on behalf of the Covered Employee to a reimbursement program;
- Payments to the Covered Employee to reimburse the employee for costs incurred in the purchase of health care services; and,
- Costs incurred by the employer in the direct delivery of health care services for the Covered Employee.
4. Q: If my business elects not to make HRA contributions commencing in 2014, what happens to existing HRA balances at the end of 2013?
A: Please see FAQs #11-16 below for more information on HRA balances remaining after December 31, 2013.
(Updated November 27, 2013)
5. Q: Will my business still be able to contribute to the “City Option” as a means of complying with the Employer Spending Requirement in 2014?
A: Yes, your business will be able to contribute to the “City Option” as a means of complying with the Employer Spending Requirement in 2014.
6. Q: How can I find out what new mandates the ACA places on my business?
A: The IRS website provides an overview of the tax provisions of the ACA that affect employers:
Note that he ACA was scheduled to impose new requirements on employers effective January 1, 2014. These were to include new reporting requirements and "shared responsibility payments" for certain employers who failed to provide affordable health insurance to full-time employees.
However, on July 2, 2013, the U.S. Department of Treasury announced that employers will not be subject to these requirements until 2015.
For more information, see the Department's announcement.
7. Q: What processes are under way to review the implementation of the ACA in San Francisco and examine how the ACA integrates with local policy?
A: Mayor Ed Lee reconstituted the Universal Healthcare Council to "examine San Francisco's implementation of the Federal Affordable Care Act (ACA) and engage stakeholders in identifying necessary local policies to support the implementation process." Changes to the HCSO could occur in the future if the Board of Supervisors takes legislative action or the OLSE adopts new regulations.
General ACA FAQs from Employees
8 Q: What is the Individual Mandate of the Affordable Care Act?
A: Under The Affordable Care Act (ACA), starting in 2014, everyone must: 1) have minimum essential health coverage, 2) qualify for an exemption, or 3) pay a federal tax penalty.
Please note that receiving a health benefit from your employer does not necessarily meet the condition of having minimum essential health coverage. Please consult the following resources for more information:
9 Q: Where can I get more information about obtaining affordable health insurance for myself and/or my family?
A: The ACA provides new opportunities to get high-quality, affordable health insurance.
For more information, please check the following resources:
10 Q: My employer currently offers an HRA. Will I be able to seek reimbursements through the HRA for my out-of-pocket health care expenses in 2014?
A: Please see FAQs 11-16 below for more information on HRA balances remaining after December 31, 2013.
(Updated November 27, 2013)
FAQs on Remaining Balances in Stand-Alone Health Reimbursement Accounts
11. Q: Under the Health Care Security Ordinance (HCSO), what are an employer’s obligations with respect to unused funds credited to stand-alone HRA accounts before January 1, 2014?
A: To constitute a Health Care Expenditure on behalf of a Covered Employee, the HCSO requires that a contribution designated or paid to a reimbursement program, which is not irrevocably paid to a third party, remain available to the Covered Employee for a minimum of 24 months from the date of contribution.
12. Q: Given that most stand-alone HRAs will not comply with the requirements of the Affordable Care Act (ACA) that go into effect on January 1, 2014, will an employer face a federal tax penalty for continuing to administer its HRA (ie: without making new deposits) until the 24-month availability requirement is satisfied?
A: Probably not. Unused HRA funds credited before January 1, 2014, may still be used after December 31, 2013, in accordance with the terms of the HRA as they existed on January 1, 2013, without subjecting the employer to a penalty. However, the employer may not make any new contributions to non-ACA-compliant HRAs on or after January, 1, 2014, and some contributions made in 2013 may be subject to a ceiling.
13. Q: Can employees use remaining HRA funds to purchase health insurance through Covered California?
A: Possibly. If an employer’s HRA plan permits employees to seek reimbursement for health insurance premiums, employees may use HRA funds to reimburse the cost of health insurance premiums purchased through health care exchanges such as Covered California the same as any other health insurance coverage.
Please note, however, that employees with health reimbursement accounts will be ineligible for federal premium assistance tax credits (subsidies) when purchasing insurance through Covered California for any month in which HRA funds remain available to the employee. This is true regardless of whether the employee uses the HRA funds to buy insurance through the exchange, uses them for other reimbursable expenses, or does not use the funds at all.
14. Q: Are there any federal tax consequences for employees who have access to funds remaining in an employer’s Health Reimbursement Arrangement (HRA) after December 31, 2013?
A: Yes. The Internal Revenue Service considers an employee with a HRA to be enrolled in an employer-sponsored group health plan that constitutes “Minimum Essential Coverage.” Beginning January 1, 2014, the Affordable Care Act requires each individual taxpayer to have Minimum Essential Coverage or pay a tax penalty. Employees with HRAs will not be subject to this penalty. However, as noted in question 3, employees with HRAs will also be ineligible for federal premium assistance tax credits for any month in which the HRA funds remain available to the employee.
15. Q: Can employees opt out of HRAs and become eligible for federal premium assistance tax credits to assist with purchasing health insurance through Covered California?
A: Yes. Employees may forfeit the available funds. If they do so, those employees who meet certain residency, citizenship and income requirements and who do not have another source of Minimum Essential Coverage become eligible for federal premium assistance tax credits in the following month.
16. Q: If an employee opts out of an HRA and forfeits funds before the funds have been available for 24 months from the date of contribution, what are the employer’s responsibilities under the HCSO?
A: If an employee opts out of an HRA and forfeits available funds before those funds have been available for a minimum of 24 months from the date of contribution, the forfeited funds do not constitute Health Care Expenditures and do not satisfy the employer’s obligations under the Employer Spending Requirement of the HCSO. A contribution designated or paid to a reimbursement program, which is not irrevocably paid to a third party, constitutes a health care expenditure only if that contribution remains available to the employee for a minimum of 24 months from the date of contribution and meets other conditions described in Section 14.1(b)(7)(B) of the Ordinance. If the forfeited funds were not available for a minimum of 24 months, the employer will be required to make a valid Health Care Expenditure of an equivalent amount through another HCSO compliance strategy. See FAQ #3 for examples of Health Care Expenditures.
Back to HCSO Home