A federal judge Wednesday ruled against a plan by the city of San Francisco requiring employers to make healthcare expenditures as part of a citywide program to provide health coverage to all residents. The judge ruled the plan clashes with the federal Employee Retirement Income Security Act of 1974 that prevents local governments from legislating employee benefits.

The rule would have required companies with 20 to 99 employees to make healthcare expenditures of $1.17 per hour for all employees who have worked at the company for more than 90 days and work at least 10 hours a week. Firms with more than 100 employees would have had to spend $1.76 per hour. Those expenditures could have gone to health savings accounts, direct reimbursement to employees for healthcare services, health insurance for workers, or payments to the city to help provide health coverage.

San Francisco's plan also uses funds from the city and individuals. San Francisco mayor Gavin Newsom said in a statement that the city still intends to move forward and will appeal the court's decision. The San Francisco Chronicle reported that, without the fee, the city will limit enrollment in its health plan to residents with annual incomes at or below 300% of the federal poverty level.