August 2025
Diana Craig, Associate Director, Benefits Compliance
Summary
The San Francisco Office of Labor Standards Enforcement (“OLSE”) recently released 2026 HCSO required health expenditure rates. As a reminder, under the HCSO, employers with 20 or more employees nationwide (50 or more for non-profits) are required to make minimum health care expenditures for employees who regularly work at least 8 hours per week in the City & County of San Francisco and who have been employed for more than 90 days. The new 2026 rates are as follows:
| Size | Number of Employees | 2025 Rate | 2026 Rate |
|---|---|---|---|
| Large | 100+ | $3.85 per hour | $4.11 per hour |
| Medium | 20-99 or Nonprofits 50-99 | $2.56 per hour | $2.74 per hour |
| Small | 0-19 or Nonprofits 0-49 | Exempt | Exempt |
OLSE also released the 2026 increased applicable salary exemption amounts for certain exempt employees. This HCSO exemption is specifically for employees who qualify as managers (policy makers), supervisors (authority to hire and fire), or confidential employees (confidential labor relations) and who earn a minimum annual or hourly rate. For 2025, managerial, supervisory, and confidential employees who earned more than $125,405 per year (or $60.29 per hour) were exempt. As of January 1, 2026, the new threshold will be $128,861 per year (or $61.95 per hour).
For employers with fully insured plans, expenditures must be made on a quarterly basis for covered employees declining coverage (without a valid OLSE waiver) or if the employer contribution for elected coverage is less than the required expenditure. Quarterly expenditure payments are due 30 days after the end of each quarter. For the first quarter (January 1 to March 31), the deadline is April 30. For the second quarter (April 1 to June 30), the deadline is July 30. For the third quarter (July 1 to September 30), the deadline is October 30. Finally, for the fourth quarter (October 1 to December 31), the deadline is January 30.
For employers with self-funded plans, quarterly expenditures are required for covered employees who decline coverage (without a valid OLSE waiver) but the expenditure for employees covered by self-funded plans is determined at the end of the calendar year and any shortfall is then paid during the subsequent February as a “top off” payment. The per-hour expenditure is calculated by dividing the self-funded plan’s total paid claims for that year, less employee contributions, by the total number of hours payable to all of the employees in the plan (employer may elect whether to include the expenditures and hours for all employees enrolled in the plan nationwide or only respecting those HCSO covered employees who are enrolled in the plan). The Annual Reporting Form is generally due to the OLSE by ~April 30th of the following year.
Employer Action Items
- Evaluate expenditures. Review employer expenditures for insured medical, dental, and vision plans (EAPs and HSA funding may count, as well) as compared to the 2026 increase.
- Evaluate claims history. Review claims history expenditures for self-funded medical, dental, and vision plans (EAPs and HSA funding may count, as well) as compared to the 2026 increase.
- Communicate. Prepare to communicate with HCSO covered employees details regarding the ordinance and make sure to review the OLSE-specific waiver form with any employee electing to decline the employer’s offer of coverage.
- Plan for additional funding requirements. Prepare to make any shortfall expenditure contribution amounts, generally as paid via San Francisco’s City Option.
Additional Information and Resources
For more information
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