San Francisco Clarifies Role of HRAs and HCSO


The City of San Francisco has further clarified the role of Health Reimbursement Arrangements (HRAs) in complying with the Health Care Security Ordinance (HCSO).  As background, the City of San Francisco requires employers to provide a certain amount of health coverage to employees based on hours worked in a month.  In addition to complying with the HCSO, employers must also ensure they are staying in compliance and meeting any necessary requirements of  the Affordable Care Act (ACA).


Many employers have chosen to comply with HCSO by providing HRAs for their employees.  Under the rules for HCSO, these contributions are often considered revocable contributions because they revert back to the employer if not used after a certain amount of time.  The HCSO  updates require a specific percentage of the required contributions to be made as irrevocable contributions (contributions that do not revert back to the employer, for example, the City Option), with only a certain percentage being able to be allocated as revocable.

The following allocations of funds and applicable plan years have been outlined in FAQs released by the City of San Francisco in October and November 2014:

  • 2015 – maximum of 40% of contributions can be revocable (contributed to an HRA)
  • 2016 – maximum of 20% of contributions can be revocable (contributed to an HRA)
  • After 2016, 100% of contributions made for each covered employee must be irrevocable.

Employers who currently offer HRA plans where the funds are returned back to the employer will no longer be able to offer these types of plans starting in 2017.   Employers will want to begin reviewing their options and determining how they need to adjust their benefit offerings in order to stay in compliance with the HCSO, as well as ACA.  For questions regarding your specific plan or plan designs offered by myCafeteriaPlan, please contact your dedicated myCafeteriaPlan Account Representative.

For complete information regarding the HCSO, you can visit their  website at



BusinessPlans, Inc. – myCafeteriaPlan does not intend to provide legal or tax advice and information contained in this article should not be interpreted as such.  Regulations governing pretax plans are often open to interpretation and should be reviewed with your legal or tax advisor before making any decisions regarding your plan.



Posted 4/21/15