January 2026
Diana Craig, Director, Benefits Compliance
The San Francisco HCSO requires employers with self-funded plans to calculate whether they have met their required expenditure for covered employees at the end of each calendar year and then make a “top-off” payment by February 28th of the following year to cover any shortfalls. As a reminder, 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 2025 expenditure rates were $3.85 per hour for large employers (100+ employees) and $2.56 per hour for small employers (20-99 employees or nonprofits with 50-99 employees). The maximum hours payable for each employee per month are capped at 172 hours.
For self-funded plans, 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). Other employer premiums for fully insured plans, including dental, vision, and EAPs can also count towards required spend. Employer HSA funding can count, as well.
For employees entitled to a top-off payment, the payment is made on a pro-rata basis based on the number of hours worked by that employee during the year. This ensures that full-time employees and part-time employees get a proportionate percentage of the top-off and that employees who worked the full year receive more than employees who separated from employment during the year. The most practical way to make top off payments is the SF City Option program on behalf of the employee. Direct cash payments to employees are not permitted. Notify current and former employees, in writing, about the top-off payment. Employers are also required to notify employees of the dollar amount of any top-off payment and where the payment will be made. Employers are encouraged to use the Sample Letter to Employees regarding HCSO Top-Off Payments developed by OLSE.
The Annual Reporting Form for 2026 is due to the OLSE by ~April 30, 2026. Employers are encouraged to sign up for e-mail reminders from OLSE.
Employer Action Items
- Evaluate claims history. Review paid claims for self-funded medical, dental, and vision plans (EAPs and HSA funding may count, as well) to see if there are expenditure shortfalls.
- Evaluate other expenditures. Review employer expenditures for insured medical, dental, and vision plans (EAPs and HSA funding may count, as well) and include those in expenditure calculations.
- Make any required top-off payments. Prepare to make any shortfall expenditure contribution amounts, generally as paid via San Francisco’s City Option.
- Communicate. Prepare to communicate with HCSO covered employees the details of any top-off payments. Employers are encouraged to use OLSE’s Sample Letter to Employees.
Additional Information and Resources
For more information
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