San Francisco Clarifies Health Care Spending Rules

San Francisco regulators have provided further guidance on how to comply with a controversial ordinance that imposes a health care spending requirement on employers.

The latest guidance, which was issued in response to questions from employers, clarifies how much employees must earn in order for them to qualify as exempt employees, for whom employers do not have to make the required contributions.

Under the law, which was passed in 2006, employers with at least 100 employees must make in 2008 a health care contribution of $1.76 per hour per covered employee, while employers with 20 to 99 employees must make a contribution of $1.17 per hour per covered employee. Employers with fewer than 20 employees are excluded from the spending mandate.

The law, which went into effect earlier this year pending the outcome of a challenge in the 9th U.S. Circuit Court of Appeals, gives employers a choice of several options—such as payment of group health insurance premiums or contributions to employees’ health savings accounts—to satisfy the spending contribution requirement.

The spending requirement, though, does not apply to several categories of exempt employees, including those managers and supervisors earning more than $76,851 in 2008.

In the latest guidance, San Francisco regulators said the $76,851 figure refers to individuals’ base salary and that bonuses and overtime should be excluded in determining whether the employee has hit the cutoff.

Additionally, regulators say the $76,851 annual earnings figure applies not only to compensation actually earned, but also to entitled salary.

For example, an employee hired as a manager in December and who has a base annual salary of $120,000 would be excluded in employer calculations even though the individual would have earned only $10,000 for that employer in 2008.

Filed by Jerry Geisel of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforcecom.

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