SF to close workers’ idle healthcare benefit accounts and pocket the funds

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Like many employees in San Francisco, Miguel Vargas, a waiter in the Mission District, had no idea there was a fund under his name that he could use for medical expenses.

So, he was stunned last week to learn he had accumulated about $16,000 in his healthcare benefit account from two employers, accrued over seven years. 

His former employer had opened the account in 2016, and his current employer has been contributing to it, but he doesn’t recall either employer telling him about it. He recently gained access after Mission Local alerted him, and he finished setting up the account last week.

“I definitely would have used that money for my health, doctors, glasses and any other medical expenses over the years,” Vargas said. “I wish I had been more aware.” 

Now more than ever, the city will be trying to reach employees like Vargas. This is because account owners must use their accounts in the three years leading up to April, 2026, or else they will be closed and their money transferred into the city’s General Fund, according to the San Francisco Department of Public Health. 

These accounts and their funds are part of the San Francisco City Option program, in which more than 4,000 employers contribute toward Medical Reimbursement Accounts for more than 400,000 current and former employees citywide — accounts with funds that can cover a wide range of eligible medical expenses, from dental care to psychotherapy. These expenses can date as far back as the first day an employer paid into an employee’s account.

The program exists thanks to the city’s 2006 passage of the Health Care Security Ordinance, which required companies with 20 or more employees, and nonprofit organizations with 50 or more employees, to spend a minimum amount on their employees’ health care. SF City Option began in 2008 as a way for employers to meet the requirement by setting aside the minimum in an account for the employee; over the past 14 or so years, the program has accumulated a total of about $1.4 billion, and about $775 million remains, according to a June, 2022, memo from the Department of Public Health.

Public Service Announcement: If, since 2008, you have worked an average of at least eight hours a week for at least three months for an employer in San Francisco with at least 20 employees, you should fill out this SF City Option form, because you may have funds for medical expenses saved in your name. The same applies for workers for nonprofit organizations with at least 50 employees. Funds can also be spent toward a spouse or dependents. To simply find out if you have funds in the program, you can also ask your employer if they enrolled you in SF City Option; you can also contact SF City Option at (877) 772-0415 or info@sfcityoption.org with any questions about it. You can learn more about the program at https://sfcityoption.org/sfmra/.

Previously, these funds would stay intact permanently for each employee, from one participating employer to the next and, during that time, workers who complete their accounts could access the funds for medical expenses for themselves, a spouse or their dependents. However, approximately 135,000 employees have funds but are unable to access them because they haven’t finished setting up the account their employer made for them, according to the Department of Public Health.

Of special note is some $104 million of these funds, 7.6 percent of the program’s total contributions, that sits in accounts that have been inactive for at least three consecutive years, according to the department. Previously, these inactive accounts remained open; however, in an unprecedented move, on Jan. 4, 2022, the Health Commission voted unanimously to change the program so that San Francisco can claim funds from inactive accounts, and the city has since spent the past year preparing.

Starting in March, San Francisco will begin a three-year countdown, and beginning in April, 2026, the city will close accounts that are inactive for three consecutive years and pocket the funds, according to the Department of Public Health. This process, governed by state law and known as escheatment, will send the money to San Francisco’s General Fund.

“It is the City’s goal to ensure participants activate their accounts and are using their SF City Option benefits,” SF City Option said in a statement. “Escheatment is the last resort, as unclaimed funds cannot be held in the SF City Option program in perpetuity.”

To prevent an account from being closed and to reset the three-year deadline, a city worker must either file a claim for reimbursement on an existing account, or finish setting up an account that their employer started for them, according to SF City Option. An employer’s payment into an account also keeps it open.

The Department of Public Health projects that, after the first round of account closures occur in April, 2026, the city will claim about $38 million annually in future years from inactive accounts.

The Department of Public Health states that on Jan. 10, it began mailing and emailing an initial notice to the program’s employers and employees about the new account closure policy and how to sign up for the program. On the same day, it updated the landing page of SF City Option website to reflect the new policy.

SF City Option states that it will send at least two reminders per year to SF City Option participants who haven’t used their healthcare benefit. Employees at risk of having their accounts permanently closed within a year will be sent at least three reminders before the closure. All communications are sent out in English, Spanish, Chinese and Tagalog, according to SF City Option.

The program states that by the end of the year, it will launch a self-service feature online where employers can download a report of their employees’ enrollment statuses. Before then, employers who want to figure out whether they have employees who still need to enroll can email employerservices@sfcityoption.org. 

And, over the past year, SF City Option has improved the readability and functionality of its website, which is also available in English, Spanish, Chinese and Tagalog. It has a new logo and branding with San Francisco’s seal, to improve credibility. It’s also updated its outreach materials to improve the flyers’ designs and make them more readable.

Vargas, the waiter, said that he’s ultimately thankful for the program. He plans to use his funds to see the doctor more often and get some new glasses, and he hopes the money can help him afford therapy.

“It’s a bit upsetting to only find out about the program now, unfortunately, but I’m also grateful and happy they had money saved for me,” Vargas said. “I definitely would’ve liked for my employer to have let me know about those funds. Makes me wonder how many more folks have a Medical Reimbursement Account and if they have money saved, as well.”

Click here for more information about SF City Option. You can also call (877) 772-0415 or email info@sfcityoption.org.