69–006 

115TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 1st Session 115–43 

SMALL BUSINESS HEALTH FAIRNESS ACT OF 2017 

MARCH 17, 2017.—Committed to the Committee of the Whole House on the State 

of the Union and ordered to be printed 

Ms. FOXX, from the Committee on Education and the Workforce, 

submitted the following 

R E P O R T 

together with 

MINORITY VIEWS 

[To accompany H.R. 1101] 

The Committee on Education and the Workforce, to whom was 

referred the bill (H.R. 1101) to amend title I of the Employee Retirement Income Security Act of 1974 to improve access and choice 

for entrepreneurs with small businesses with respect to medical 

care for their employees, having considered the same, report favorably thereon with an amendment and recommend that the bill as 

amended do pass. 

The amendment is as follows: 

Strike all after the enacting clause and insert the following: 

SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 

(a) SHORT TITLE.—This Act may be cited as the ‘‘Small Business Health Fairness 

Act of 2017’’. 

(b) TABLE OF CONTENTS.—The table of contents for this Act is as follows: 

Sec. 1. Short title; table of contents. 

Sec. 2. Rules governing association health plans. 

Sec. 3. Clarification of treatment of single employer arrangements. 

Sec. 4. Enforcement provisions relating to association health plans. 

Sec. 5. Cooperation between Federal and State authorities. 

Sec. 6. Effective date and transitional and other rules. 

SEC. 2. RULES GOVERNING ASSOCIATION HEALTH PLANS. 

(a) IN GENERAL.—Subtitle B of title I of the Employee Retirement Income Security 

Act of 1974 is amended by adding after part 7 the following new part: 


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‘‘PART 8—RULES GOVERNING ASSOCIATION HEALTH 

PLANS 

‘‘SEC. 801. ASSOCIATION HEALTH PLANS. 

‘‘(a) IN GENERAL.—For purposes of this part, the term ‘association health plan’ 

means a group health plan whose sponsor is (or is deemed under this part to be) 

described in subsection (b). 

‘‘(b) SPONSORSHIP.—The sponsor of a group health plan is described in this subsection if such sponsor— 

‘‘(1) is organized and maintained in good faith, with a constitution and bylaws 

specifically stating its purpose and providing for periodic meetings on at least 

an annual basis, as a bona fide trade association, a bona fide industry association (including a rural electric cooperative association or a rural telephone cooperative association), a bona fide professional association, or a bona fide chamber 

of commerce (or similar bona fide business association, including a corporation 

or similar organization that operates on a cooperative basis (within the meaning 

of section 1381 of the Internal Revenue Code of 1986)), for substantial purposes 

other than that of obtaining or providing medical care; 

‘‘(2) is established as a permanent entity which receives the active support of 

its members and requires for membership payment on a periodic basis of dues 

or payments necessary to maintain eligibility for membership in the sponsor; 

and 

‘‘(3) does not condition membership, such dues or payments, or coverage 

under the plan on the basis of health status-related factors with respect to the 

employees of its members (or affiliated members), or the dependents of such employees, and does not condition such dues or payments on the basis of group 

health plan participation. 

Any sponsor consisting of an association of entities which meet the requirements of 

paragraphs (1), (2), and (3) shall be deemed to be a sponsor described in this subsection. 

‘‘SEC. 802. CERTIFICATION OF ASSOCIATION HEALTH PLANS. 

‘‘(a) IN GENERAL.—The applicable authority shall prescribe by regulation a procedure under which, subject to subsection (b), the applicable authority shall certify association health plans which apply for certification as meeting the requirements of 

this part. 

‘‘(b) STANDARDS.—Under the procedure prescribed pursuant to subsection (a), in 

the case of an association health plan that provides at least one benefit option which 

does not consist of health insurance coverage, the applicable authority shall certify 

such plan as meeting the requirements of this part only if the applicable authority 

is satisfied that the applicable requirements of this part are met (or, upon the date 

on which the plan is to commence operations, will be met) with respect to the plan. 

‘‘(c) REQUIREMENTS APPLICABLE TO CERTIFIED PLANS.—An association health plan 

with respect to which certification under this part is in effect shall meet the applicable requirements of this part, effective on the date of certification (or, if later, on 

the date on which the plan is to commence operations). 

‘‘(d) REQUIREMENTS FOR CONTINUED CERTIFICATION.—The applicable authority 

may provide by regulation for continued certification of association health plans 

under this part. 

‘‘(e) CLASS CERTIFICATION FOR FULLY INSURED PLANS.—The applicable authority 

shall establish a class certification procedure for association health plans under 

which all benefits consist of health insurance coverage. Under such procedure, the 

applicable authority shall provide for the granting of certification under this part 

to the plans in each class of such association health plans upon appropriate filing 

under such procedure in connection with plans in such class and payment of the 

prescribed fee under section 807(a). 

‘‘(f) CERTIFICATION OF SELF-INSURED ASSOCIATION HEALTH PLANS.—An association 

health plan which offers one or more benefit options which do not consist of health 

insurance coverage may be certified under this part only if such plan consists of any 

of the following: 

‘‘(1) A plan which offered such coverage on the date of the enactment of the 

Small Business Health Fairness Act of 2017. 

‘‘(2) A plan under which the sponsor does not restrict membership to one or 

more trades and businesses or industries and whose eligible participating employers represent a broad cross-section of trades and businesses or industries. 

‘‘(3) A plan whose eligible participating employers represent one or more 

trades or businesses, or one or more industries, consisting of any of the following: agriculture; equipment and automobile dealerships; barbering and cosVerDate Sep 11 2014 05:16 Mar 18, 2017 Jkt 069006 PO 00000 Frm 00002 Fmt 6659 Sfmt 6621 E:\HR\OC\HR043.XXX HR043

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metology; certified public accounting practices; child care; construction; dance, 

theatrical and orchestra productions; disinfecting and pest control; financial 

services; fishing; food service establishments; hospitals; labor organizations; logging; manufacturing (metals); mining; medical and dental practices; medical 

laboratories; professional consulting services; sanitary services; transportation 

(local and freight); warehousing; wholesaling/distributing; or any other trade or 

business or industry which has been indicated as having average or above-average risk or health claims experience by reason of State rate filings, denials of 

coverage, proposed premium rate levels, or other means demonstrated by such 

plan in accordance with regulations. 

‘‘SEC. 803. REQUIREMENTS RELATING TO SPONSORS AND BOARDS OF TRUSTEES. 

‘‘(a) SPONSOR.—The requirements of this subsection are met with respect to an association health plan if the sponsor has met (or is deemed under this part to have 

met) the requirements of section 801(b) for a continuous period of not less than 3 

years ending with the date of the application for certification under this part. 

‘‘(b) BOARD OF TRUSTEES.—The requirements of this subsection are met with respect to an association health plan if the following requirements are met: 

‘‘(1) FISCAL CONTROL.—The plan is operated, pursuant to a trust agreement, 

by a board of trustees which has complete fiscal control over the plan and which 

is responsible for all operations of the plan. 

‘‘(2) RULES OF OPERATION AND FINANCIAL CONTROLS.—The board of trustees 

has in effect rules of operation and financial controls, based on a 3-year plan 

of operation, adequate to carry out the terms of the plan and to meet all requirements of this title applicable to the plan. 

‘‘(3) RULES GOVERNING RELATIONSHIP TO PARTICIPATING EMPLOYERS AND TO

CONTRACTORS.— 

‘‘(A) BOARD MEMBERSHIP.— 

‘‘(i) IN GENERAL.—Except as provided in clauses (ii) and (iii), the 

members of the board of trustees are individuals selected from individuals who are the owners, officers, directors, or employees of the participating employers or who are partners in the participating employers 

and actively participate in the business. 

‘‘(ii) LIMITATION.— 

‘‘(I) GENERAL RULE.—Except as provided in subclauses (II) and 

(III), no such member is an owner, officer, director, or employee of, 

or partner in, a contract administrator or other service provider to 

the plan. 

‘‘(II) LIMITED EXCEPTION FOR PROVIDERS OF SERVICES SOLELY ON

BEHALF OF THE SPONSOR.—Officers or employees of a sponsor which 

is a service provider (other than a contract administrator) to the 

plan may be members of the board if they constitute not more than 

25 percent of the membership of the board and they do not provide 

services to the plan other than on behalf of the sponsor. 

‘‘(III) TREATMENT OF PROVIDERS OF MEDICAL CARE.—In the case 

of a sponsor which is an association whose membership consists 

primarily of providers of medical care, subclause (I) shall not apply 

in the case of any service provider described in subclause (I) who 

is a provider of medical care under the plan. 

‘‘(iii) CERTAIN PLANS EXCLUDED.—Clause (i) shall not apply to an association health plan which is in existence on the date of the enactment 

of the Small Business Health Fairness Act of 2017. 

‘‘(B) SOLE AUTHORITY.—The board has sole authority under the plan to 

approve applications for participation in the plan and to contract with a 

service provider to administer the day-to-day affairs of the plan. 

‘‘(c) TREATMENT OF FRANCHISE NETWORKS.—In the case of a group health plan 

which is established and maintained by a franchiser for a franchise network consisting of its franchisees— 

‘‘(1) the requirements of subsection (a) and section 801(a) shall be deemed met 

if such requirements would otherwise be met if the franchiser were deemed to 

be the sponsor referred to in section 801(b), such network were deemed to be 

an association described in section 801(b), and each franchisee were deemed to 

be a member (of the association and the sponsor) referred to in section 801(b); 

and 

‘‘(2) the requirements of section 804(a)(1) shall be deemed met. 

The Secretary may by regulation define for purposes of this subsection the terms 

‘franchiser’, ‘franchise network’, and ‘franchisee’. 


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‘‘SEC. 804. PARTICIPATION AND COVERAGE REQUIREMENTS. 

‘‘(a) COVERED EMPLOYERS AND INDIVIDUALS.—The requirements of this subsection 

are met with respect to an association health plan if, under the terms of the plan— 

‘‘(1) each participating employer must be— 

‘‘(A) a member of the sponsor, 

‘‘(B) the sponsor, or 

‘‘(C) an affiliated member of the sponsor with respect to which the requirements of subsection (b) are met, 

except that, in the case of a sponsor which is a professional association or other 

individual-based association, if at least one of the officers, directors, or employees of an employer, or at least one of the individuals who are partners in an 

employer and who actively participates in the business, is a member or such 

an affiliated member of the sponsor, participating employers may also include 

such employer; and 

‘‘(2) all individuals commencing coverage under the plan after certification 

under this part must be— 

‘‘(A) active or retired owners (including self-employed individuals), officers, directors, or employees of, or partners in, participating employers; or 

‘‘(B) the beneficiaries of individuals described in subparagraph (A). 

‘‘(b) COVERAGE OF PREVIOUSLY UNINSURED EMPLOYEES.—In the case of an association health plan in existence on the date of the enactment of the Small Business 

Health Fairness Act of 2017, an affiliated member of the sponsor of the plan may 

be offered coverage under the plan as a participating employer only if— 

‘‘(1) the affiliated member was an affiliated member on the date of certification under this part; or 

‘‘(2) during the 12-month period preceding the date of the offering of such coverage, the affiliated member has not maintained or contributed to a group 

health plan with respect to any of its employees who would otherwise be eligible 

to participate in such association health plan. 

‘‘(c) INDIVIDUAL MARKET UNAFFECTED.—The requirements of this subsection are 

met with respect to an association health plan if, under the terms of the plan, no 

participating employer may provide health insurance coverage in the individual 

market for any employee not covered under the plan which is similar to the coverage contemporaneously provided to employees of the employer under the plan, if 

such exclusion of the employee from coverage under the plan is based on a health 

status-related factor with respect to the employee and such employee would, but for 

such exclusion on such basis, be eligible for coverage under the plan. 

‘‘(d) PROHIBITION OF DISCRIMINATION AGAINST EMPLOYERS AND EMPLOYEES ELIGI- BLE TO PARTICIPATE.—The requirements of this subsection are met with respect to 

an association health plan if— 

‘‘(1) under the terms of the plan, all employers meeting the preceding requirements of this section are eligible to qualify as participating employers for all 

geographically available coverage options, unless, in the case of any such employer, participation or contribution requirements of the type referred to in section 2711 of the Public Health Service Act are not met; 

‘‘(2) upon request, any employer eligible to participate is furnished information regarding all coverage options available under the plan; and 

‘‘(3) the applicable requirements of sections 701, 702, and 703 are met with 

respect to the plan. 

‘‘SEC. 805. OTHER REQUIREMENTS RELATING TO PLAN DOCUMENTS, CONTRIBUTION RATES, 

AND BENEFIT OPTIONS. 

‘‘(a) IN GENERAL.—The requirements of this section are met with respect to an association health plan if the following requirements are met: 

‘‘(1) CONTENTS OF GOVERNING INSTRUMENTS.—The instruments governing the 

plan include a written instrument, meeting the requirements of an instrument 

required under section 402(a)(1), which— 

‘‘(A) provides that the board of trustees serves as the named fiduciary required for plans under section 402(a)(1) and serves in the capacity of a plan 

administrator (referred to in section 3(16)(A)); 

‘‘(B) provides that the sponsor of the plan is to serve as plan sponsor (referred to in section 3(16)(B)); and 

‘‘(C) incorporates the requirements of section 806. 

‘‘(2) CONTRIBUTION RATES MUST BE NONDISCRIMINATORY.— 

‘‘(A) The contribution rates for any participating small employer do not 

vary on the basis of any health status-related factor in relation to employees of such employer or their beneficiaries and do not vary on the basis of 

the type of business or industry in which such employer is engaged. 

‘‘(B) Nothing in this title or any other provision of law shall be construed 

to preclude an association health plan, or a health insurance issuer offering 


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health insurance coverage in connection with an association health plan, 

from— 

‘‘(i) setting contribution rates based on the claims experience of the 

plan; or 

‘‘(ii) varying contribution rates for small employers in a State to the 

extent that such rates could vary using the same methodology employed in such State for regulating premium rates in the small group 

market with respect to health insurance coverage offered in connection 

with bona fide associations (within the meaning of section 2791(d)(3) of 

the Public Health Service Act), 

subject to the requirements of section 702(b) relating to contribution rates. 

‘‘(3) FLOOR FOR NUMBER OF COVERED INDIVIDUALS WITH RESPECT TO CERTAIN

PLANS.—If any benefit option under the plan does not consist of health insurance coverage, the plan has as of the beginning of the plan year not fewer than 

1,000 participants and beneficiaries. 

‘‘(4) MARKETING REQUIREMENTS.— 

‘‘(A) IN GENERAL.—If a benefit option which consists of health insurance 

coverage is offered under the plan, State-licensed insurance agents shall be 

used to distribute to small employers coverage which does not consist of 

health insurance coverage in a manner comparable to the manner in which 

such agents are used to distribute health insurance coverage. 

‘‘(B) STATE-LICENSED INSURANCE AGENTS.—For purposes of subparagraph 

(A), the term ‘State-licensed insurance agents’ means one or more agents 

who are licensed in a State and are subject to the laws of such State relating to licensure, qualification, testing, examination, and continuing education of persons authorized to offer, sell, or solicit health insurance coverage in such State. 

‘‘(5) REGULATORY REQUIREMENTS.—Such other requirements as the applicable 

authority determines are necessary to carry out the purposes of this part, which 

shall be prescribed by the applicable authority by regulation. 

‘‘(b) ABILITY OF ASSOCIATION HEALTH PLANS TO DESIGN BENEFIT OPTIONS.—Subject to section 514(d), nothing in this part or any provision of State law (as defined 

in section 514(c)(1)) shall be construed to preclude an association health plan, or a 

health insurance issuer offering health insurance coverage in connection with an association health plan, from exercising its sole discretion in selecting the specific 

items and services consisting of medical care to be included as benefits under such 

plan or coverage, except (subject to section 514) in the case of (1) any law to the 

extent that it is not preempted under section 731(a)(1) with respect to matters governed by section 711, 712, or 713, or (2) any law of the State with which filing and 

approval of a policy type offered by the plan was initially obtained to the extent that 

such law prohibits an exclusion of a specific disease from such coverage. 

‘‘SEC. 806. MAINTENANCE OF RESERVES AND PROVISIONS FOR SOLVENCY FOR PLANS PROVIDING HEALTH BENEFITS IN ADDITION TO HEALTH INSURANCE COVERAGE. 

‘‘(a) IN GENERAL.—The requirements of this section are met with respect to an association health plan if— 

‘‘(1) the benefits under the plan consist solely of health insurance coverage; 

or 

‘‘(2) if the plan provides any additional benefit options which do not consist 

of health insurance coverage, the plan— 

‘‘(A) establishes and maintains reserves with respect to such additional 

benefit options, in amounts recommended by the qualified actuary, consisting of— 

‘‘(i) a reserve sufficient for unearned contributions; 

‘‘(ii) a reserve sufficient for benefit liabilities which have been incurred, which have not been satisfied, and for which risk of loss has 

not yet been transferred, and for expected administrative costs with respect to such benefit liabilities; 

‘‘(iii) a reserve sufficient for any other obligations of the plan; and 

‘‘(iv) a reserve sufficient for a margin of error and other fluctuations, 

taking into account the specific circumstances of the plan; and 

‘‘(B) establishes and maintains aggregate and specific excess/stop loss insurance and solvency indemnification, with respect to such additional benefit options for which risk of loss has not yet been transferred, as follows: 

‘‘(i) The plan shall secure aggregate excess/stop loss insurance for the 

plan with an attachment point which is not greater than 125 percent 

of expected gross annual claims. The applicable authority may by regulation provide for upward adjustments in the amount of such percentage in specified circumstances in which the plan specifically provides 


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for and maintains reserves in excess of the amounts required under 

subparagraph (A). 

‘‘(ii) The plan shall secure specific excess/stop loss insurance for the 

plan with an attachment point which is at least equal to an amount 

recommended by the plan’s qualified actuary. The applicable authority 

may by regulation provide for adjustments in the amount of such insurance in specified circumstances in which the plan specifically provides 

for and maintains reserves in excess of the amounts required under 

subparagraph (A). 

‘‘(iii) The plan shall secure indemnification insurance for any claims 

which the plan is unable to satisfy by reason of a plan termination. 

Any person issuing to a plan insurance described in clause (i), (ii), or (iii) of subparagraph (B) shall notify the Secretary of any failure of premium payment meriting cancellation of the policy prior to undertaking such a cancellation. Any regulations prescribed by the applicable authority pursuant to clause (i) or (ii) of subparagraph (B) may allow for such adjustments in the required levels of excess/stop loss 

insurance as the qualified actuary may recommend, taking into account the specific 

circumstances of the plan. 

‘‘(b) MINIMUM SURPLUS IN ADDITION TO CLAIMS RESERVES.—In the case of any association health plan described in subsection (a)(2), the requirements of this subsection are met if the plan establishes and maintains surplus in an amount at least 

equal to— 

‘‘(1) $500,000, or 

‘‘(2) such greater amount (but not greater than $2,000,000) as may be set 

forth in regulations prescribed by the applicable authority, considering the level 

of aggregate and specific excess/stop loss insurance provided with respect to 

such plan and other factors related to solvency risk, such as the plan’s projected 

levels of participation or claims, the nature of the plan’s liabilities, and the 

types of assets available to assure that such liabilities are met. 

‘‘(c) ADDITIONAL REQUIREMENTS.—In the case of any association health plan described in subsection (a)(2), the applicable authority may provide such additional requirements relating to reserves, excess/stop loss insurance, and indemnification insurance as the applicable authority considers appropriate. Such requirements may 

be provided by regulation with respect to any such plan or any class of such plans. 

‘‘(d) ADJUSTMENTS FOR EXCESS/STOP LOSS INSURANCE.—The applicable authority 

may provide for adjustments to the levels of reserves otherwise required under subsections (a) and (b) with respect to any plan or class of plans to take into account 

excess/stop loss insurance provided with respect to such plan or plans. 

‘‘(e) ALTERNATIVE MEANS OF COMPLIANCE.—The applicable authority may permit 

an association health plan described in subsection (a)(2) to substitute, for all or part 

of the requirements of this section (except subsection (a)(2)(B)(iii)), such security, 

guarantee, hold-harmless arrangement, or other financial arrangement as the applicable authority determines to be adequate to enable the plan to fully meet all its 

financial obligations on a timely basis and is otherwise no less protective of the interests of participants and beneficiaries than the requirements for which it is substituted. The applicable authority may take into account, for purposes of this subsection, evidence provided by the plan or sponsor which demonstrates an assumption of liability with respect to the plan. Such evidence may be in the form of a contract of indemnification, lien, bonding, insurance, letter of credit, recourse under applicable terms of the plan in the form of assessments of participating employers, security, or other financial arrangement. 

‘‘(f) MEASURES TO ENSURE CONTINUED PAYMENT OF BENEFITS BY CERTAIN PLANS

IN DISTRESS.— 

‘‘(1) PAYMENTS BY CERTAIN PLANS TO ASSOCIATION HEALTH PLAN FUND.— 

‘‘(A) IN GENERAL.—In the case of an association health plan described in 

subsection (a)(2), the requirements of this subsection are met if the plan 

makes payments into the Association Health Plan Fund under this subparagraph when they are due. Such payments shall consist of annual payments in the amount of $5,000, and, in addition to such annual payments, 

such supplemental payments as the Secretary may determine to be necessary under paragraph (2). Payments under this paragraph are payable to 

the Fund at the time determined by the Secretary. Initial payments are due 

in advance of certification under this part. Payments shall continue to accrue until a plan’s assets are distributed pursuant to a termination procedure. 

‘‘(B) PENALTIES FOR FAILURE TO MAKE PAYMENTS.—If any payment is not 

made by a plan when it is due, a late payment charge of not more than 

100 percent of the payment which was not timely paid shall be payable by 

the plan to the Fund. 


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‘‘(C) CONTINUED DUTY OF THE SECRETARY.—The Secretary shall not cease 

to carry out the provisions of paragraph (2) on account of the failure of a 

plan to pay any payment when due. 

‘‘(2) PAYMENTS BY SECRETARY TO CONTINUE EXCESS/STOP LOSS INSURANCE COV- ERAGE AND INDEMNIFICATION INSURANCE COVERAGE FOR CERTAIN PLANS.—In any 

case in which the applicable authority determines that there is, or that there 

is reason to believe that there will be: (A) A failure to take necessary corrective 

actions under section 809(a) with respect to an association health plan described 

in subsection (a)(2); or (B) a termination of such a plan under section 809(b) 

or 810(b)(8) (and, if the applicable authority is not the Secretary, certifies such 

determination to the Secretary), the Secretary shall determine the amounts necessary to make payments to an insurer (designated by the Secretary) to maintain in force excess/stop loss insurance coverage or indemnification insurance 

coverage for such plan, if the Secretary determines that there is a reasonable 

expectation that, without such payments, claims would not be satisfied by reason of termination of such coverage. The Secretary shall, to the extent provided 

in advance in appropriation Acts, pay such amounts so determined to the insurer designated by the Secretary. 

‘‘(3) ASSOCIATION HEALTH PLAN FUND.— ‘‘(A) IN GENERAL.—There is established on the books of the Treasury a 

fund to be known as the ‘Association Health Plan Fund’. The Fund shall 

be available for making payments pursuant to paragraph (2). The Fund 

shall be credited with payments received pursuant to paragraph (1)(A), penalties received pursuant to paragraph (1)(B); and earnings on investments 

of amounts of the Fund under subparagraph (B). 

‘‘(B) INVESTMENT.—Whenever the Secretary determines that the moneys 

of the fund are in excess of current needs, the Secretary may request the 

investment of such amounts as the Secretary determines advisable by the 

Secretary of the Treasury in obligations issued or guaranteed by the United 

States. 

‘‘(g) EXCESS/STOP LOSS INSURANCE.—For purposes of this section— 

‘‘(1) AGGREGATE EXCESS/STOP LOSS INSURANCE.—The term ‘aggregate excess/ 

stop loss insurance’ means, in connection with an association health plan, a contract— 

‘‘(A) under which an insurer (meeting such minimum standards as the 

applicable authority may prescribe by regulation) provides for payment to 

the plan with respect to aggregate claims under the plan in excess of an 

amount or amounts specified in such contract; 

‘‘(B) which is guaranteed renewable; and 

‘‘(C) which allows for payment of premiums by any third party on behalf 

of the insured plan. 

‘‘(2) SPECIFIC EXCESS/STOP LOSS INSURANCE.—The term ‘specific excess/stop 

loss insurance’ means, in connection with an association health plan, a contract— 

‘‘(A) under which an insurer (meeting such minimum standards as the 

applicable authority may prescribe by regulation) provides for payment to 

the plan with respect to claims under the plan in connection with a covered 

individual in excess of an amount or amounts specified in such contract in 

connection with such covered individual; 

‘‘(B) which is guaranteed renewable; and 

‘‘(C) which allows for payment of premiums by any third party on behalf 

of the insured plan. 

‘‘(h) INDEMNIFICATION INSURANCE.—For purposes of this section, the term ‘indemnification insurance’ means, in connection with an association health plan, a contract— 

‘‘(1) under which an insurer (meeting such minimum standards as the applicable authority may prescribe by regulation) provides for payment to the plan 

with respect to claims under the plan which the plan is unable to satisfy by 

reason of a termination pursuant to section 809(b) (relating to mandatory termination); 

‘‘(2) which is guaranteed renewable and noncancellable for any reason (except 

as the applicable authority may prescribe by regulation); and 

‘‘(3) which allows for payment of premiums by any third party on behalf of 

the insured plan. 

‘‘(i) RESERVES.—For purposes of this section, the term ‘reserves’ means, in connection with an association health plan, plan assets which meet the fiduciary standards 

under part 4 and such additional requirements regarding liquidity as the applicable 

authority may prescribe by regulation. 

‘‘(j) SOLVENCY STANDARDS WORKING GROUP.— 


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‘‘(1) IN GENERAL.—Within 90 days after the date of the enactment of the 

Small Business Health Fairness Act of 2017, the applicable authority shall establish a Solvency Standards Working Group. In prescribing the initial regulations under this section, the applicable authority shall take into account the recommendations of such Working Group. 

‘‘(2) MEMBERSHIP.—The Working Group shall consist of not more than 15 

members appointed by the applicable authority. The applicable authority shall 

include among persons invited to membership on the Working Group at least 

one of each of the following: 

‘‘(A) A representative of the National Association of Insurance Commissioners. 

‘‘(B) A representative of the American Academy of Actuaries. 

‘‘(C) A representative of the State governments, or their interests. 

‘‘(D) A representative of existing self-insured arrangements, or their interests. 

‘‘(E) A representative of associations of the type referred to in section 

801(b)(1), or their interests. 

‘‘(F) A representative of multiemployer plans that are group health plans, 

or their interests. 

‘‘SEC. 807. REQUIREMENTS FOR APPLICATION AND RELATED REQUIREMENTS. 

‘‘(a) FILING FEE.—Under the procedure prescribed pursuant to section 802(a), an 

association health plan shall pay to the applicable authority at the time of filing an 

application for certification under this part a filing fee in the amount of $5,000, 

which shall be available in the case of the Secretary, to the extent provided in appropriation Acts, for the sole purpose of administering the certification procedures 

applicable with respect to association health plans. 

‘‘(b) INFORMATION TO BE INCLUDED IN APPLICATION FOR CERTIFICATION.—An application for certification under this part meets the requirements of this section only 

if it includes, in a manner and form which shall be prescribed by the applicable authority by regulation, at least the following information: 

‘‘(1) IDENTIFYING INFORMATION.—The names and addresses of— 

‘‘(A) the sponsor; and 

‘‘(B) the members of the board of trustees of the plan. 

‘‘(2) STATES IN WHICH PLAN INTENDS TO DO BUSINESS.—The States in which 

participants and beneficiaries under the plan are to be located and the number 

of them expected to be located in each such State. 

‘‘(3) BONDING REQUIREMENTS.—Evidence provided by the board of trustees 

that the bonding requirements of section 412 will be met as of the date of the 

application or (if later) commencement of operations. 

‘‘(4) PLAN DOCUMENTS.—A copy of the documents governing the plan (including any bylaws and trust agreements), the summary plan description, and other 

material describing the benefits that will be provided to participants and beneficiaries under the plan. 

‘‘(5) AGREEMENTS WITH SERVICE PROVIDERS.—A copy of any agreements between the plan and contract administrators and other service providers. 

‘‘(6) FUNDING REPORT.—In the case of association health plans providing benefits options in addition to health insurance coverage, a report setting forth information with respect to such additional benefit options determined as of a date 

within the 120-day period ending with the date of the application, including the 

following: 

‘‘(A) RESERVES.—A statement, certified by the board of trustees of the 

plan, and a statement of actuarial opinion, signed by a qualified actuary, 

that all applicable requirements of section 806 are or will be met in accordance with regulations which the applicable authority shall prescribe. 

‘‘(B) ADEQUACY OF CONTRIBUTION RATES.—A statement of actuarial opinion, signed by a qualified actuary, which sets forth a description of the extent to which contribution rates are adequate to provide for the payment 

of all obligations and the maintenance of required reserves under the plan 

for the 12-month period beginning with such date within such 120-day period, taking into account the expected coverage and experience of the plan. 

If the contribution rates are not fully adequate, the statement of actuarial 

opinion shall indicate the extent to which the rates are inadequate and the 

changes needed to ensure adequacy. 

‘‘(C) CURRENT AND PROJECTED VALUE OF ASSETS AND LIABILITIES.—A 

statement of actuarial opinion signed by a qualified actuary, which sets 

forth the current value of the assets and liabilities accumulated under the 

plan and a projection of the assets, liabilities, income, and expenses of the 

plan for the 12-month period referred to in subparagraph (B). The income 


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statement shall identify separately the plan’s administrative expenses and 

claims. 

‘‘(D) COSTS OF COVERAGE TO BE CHARGED AND OTHER EXPENSES.—A statement of the costs of coverage to be charged, including an itemization of 

amounts for administration, reserves, and other expenses associated with 

the operation of the plan. 

‘‘(E) OTHER INFORMATION.—Any other information as may be determined 

by the applicable authority, by regulation, as necessary to carry out the 

purposes of this part. 

‘‘(c) FILING NOTICE OF CERTIFICATION WITH STATES.—A certification granted 

under this part to an association health plan shall not be effective unless written 

notice of such certification is filed with the applicable State authority of each State 

in which at least 25 percent of the participants and beneficiaries under the plan are 

located. For purposes of this subsection, an individual shall be considered to be located in the State in which a known address of such individual is located or in 

which such individual is employed. 

‘‘(d) NOTICE OF MATERIAL CHANGES.—In the case of any association health plan 

certified under this part, descriptions of material changes in any information which 

was required to be submitted with the application for the certification under this 

part shall be filed in such form and manner as shall be prescribed by the applicable 

authority by regulation. The applicable authority may require by regulation prior 

notice of material changes with respect to specified matters which might serve as 

the basis for suspension or revocation of the certification. 

‘‘(e) REPORTING REQUIREMENTS FOR CERTAIN ASSOCIATION HEALTH PLANS.—An association health plan certified under this part which provides benefit options in addition to health insurance coverage for such plan year shall meet the requirements 

of section 103 by filing an annual report under such section which shall include information described in subsection (b)(6) with respect to the plan year and, notwithstanding section 104(a)(1)(A), shall be filed with the applicable authority not later 

than 90 days after the close of the plan year (or on such later date as may be prescribed by the applicable authority). The applicable authority may require by regulation such interim reports as it considers appropriate. 

‘‘(f) ENGAGEMENT OF QUALIFIED ACTUARY.—The board of trustees of each association health plan which provides benefits options in addition to health insurance coverage and which is applying for certification under this part or is certified under 

this part shall engage, on behalf of all participants and beneficiaries, a qualified actuary who shall be responsible for the preparation of the materials comprising information necessary to be submitted by a qualified actuary under this part. The qualified actuary shall utilize such assumptions and techniques as are necessary to enable such actuary to form an opinion as to whether the contents of the matters reported under this part— 

‘‘(1) are in the aggregate reasonably related to the experience of the plan and 

to reasonable expectations; and 

‘‘(2) represent such actuary’s best estimate of anticipated experience under 

the plan. 

The opinion by the qualified actuary shall be made with respect to, and shall be 

made a part of, the annual report. 

‘‘SEC. 808. NOTICE REQUIREMENTS FOR VOLUNTARY TERMINATION. 

‘‘Except as provided in section 809(b), an association health plan which is or has 

been certified under this part may terminate (upon or at any time after cessation 

of accruals in benefit liabilities) only if the board of trustees, not less than 60 days 

before the proposed termination date— 

‘‘(1) provides to the participants and beneficiaries a written notice of intent 

to terminate stating that such termination is intended and the proposed termination date; 

‘‘(2) develops a plan for winding up the affairs of the plan in connection with 

such termination in a manner which will result in timely payment of all benefits for which the plan is obligated; and 

‘‘(3) submits such plan in writing to the applicable authority. 

Actions required under this section shall be taken in such form and manner as may 

be prescribed by the applicable authority by regulation. 

‘‘SEC. 809. CORRECTIVE ACTIONS AND MANDATORY TERMINATION. 

‘‘(a) ACTIONS TO AVOID DEPLETION OF RESERVES.—An association health plan 

which is certified under this part and which provides benefits other than health insurance coverage shall continue to meet the requirements of section 806, irrespective of whether such certification continues in effect. The board of trustees of such 

plan shall determine quarterly whether the requirements of section 806 are met. In 

any case in which the board determines that there is reason to believe that there 


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is or will be a failure to meet such requirements, or the applicable authority makes 

such a determination and so notifies the board, the board shall immediately notify 

the qualified actuary engaged by the plan, and such actuary shall, not later than 

the end of the next following month, make such recommendations to the board for 

corrective action as the actuary determines necessary to ensure compliance with section 806. Not later than 30 days after receiving from the actuary recommendations 

for corrective actions, the board shall notify the applicable authority (in such form 

and manner as the applicable authority may prescribe by regulation) of such recommendations of the actuary for corrective action, together with a description of the 

actions (if any) that the board has taken or plans to take in response to such recommendations. The board shall thereafter report to the applicable authority, in such 

form and frequency as the applicable authority may specify to the board, regarding 

corrective action taken by the board until the requirements of section 806 are met. 

‘‘(b) MANDATORY TERMINATION.—In any case in which— 

‘‘(1) the applicable authority has been notified under subsection (a) (or by an 

issuer of excess/stop loss insurance or indemnity insurance pursuant to section 

806(a)) of a failure of an association health plan which is or has been certified 

under this part and is described in section 806(a)(2) to meet the requirements 

of section 806 and has not been notified by the board of trustees of the plan 

that corrective action has restored compliance with such requirements; and 

‘‘(2) the applicable authority determines that there is a reasonable expectation 

that the plan will continue to fail to meet the requirements of section 806, 

the board of trustees of the plan shall, at the direction of the applicable authority, 

terminate the plan and, in the course of the termination, take such actions as the 

applicable authority may require, including satisfying any claims referred to in section 806(a)(2)(B)(iii) and recovering for the plan any liability under subsection 

(a)(2)(B)(iii) or (e) of section 806, as necessary to ensure that the affairs of the plan 

will be, to the maximum extent possible, wound up in a manner which will result 

in timely provision of all benefits for which the plan is obligated. 

‘‘SEC. 810. TRUSTEESHIP BY THE SECRETARY OF INSOLVENT ASSOCIATION HEALTH PLANS 

PROVIDING HEALTH BENEFITS IN ADDITION TO HEALTH INSURANCE COVERAGE. 

‘‘(a) APPOINTMENT OF SECRETARY AS TRUSTEE FOR INSOLVENT PLANS.—Whenever 

the Secretary determines that an association health plan which is or has been certified under this part and which is described in section 806(a)(2) will be unable to 

provide benefits when due or is otherwise in a financially hazardous condition, as 

shall be defined by the Secretary by regulation, the Secretary shall, upon notice to 

the plan, apply to the appropriate United States district court for appointment of 

the Secretary as trustee to administer the plan for the duration of the insolvency. 

The plan may appear as a party and other interested persons may intervene in the 

proceedings at the discretion of the court. The court shall appoint such Secretary 

trustee if the court determines that the trusteeship is necessary to protect the interests of the participants and beneficiaries or providers of medical care or to avoid 

any unreasonable deterioration of the financial condition of the plan. The trusteeship of such Secretary shall continue until the conditions described in the first sentence of this subsection are remedied or the plan is terminated. 

‘‘(b) POWERS AS TRUSTEE.—The Secretary, upon appointment as trustee under 

subsection (a), shall have the power— 

‘‘(1) to do any act authorized by the plan, this title, or other applicable provisions of law to be done by the plan administrator or any trustee of the plan; 

‘‘(2) to require the transfer of all (or any part) of the assets and records of 

the plan to the Secretary as trustee; 

‘‘(3) to invest any assets of the plan which the Secretary holds in accordance 

with the provisions of the plan, regulations prescribed by the Secretary, and applicable provisions of law; 

‘‘(4) to require the sponsor, the plan administrator, any participating employer, and any employee organization representing plan participants to furnish 

any information with respect to the plan which the Secretary as trustee may 

reasonably need in order to administer the plan; 

‘‘(5) to collect for the plan any amounts due the plan and to recover reasonable expenses of the trusteeship; 

‘‘(6) to commence, prosecute, or defend on behalf of the plan any suit or proceeding involving the plan; 

‘‘(7) to issue, publish, or file such notices, statements, and reports as may be 

required by the Secretary by regulation or required by any order of the court; 

‘‘(8) to terminate the plan (or provide for its termination in accordance with 

section 809(b)) and liquidate the plan assets, to restore the plan to the responsibility of the sponsor, or to continue the trusteeship; 

‘‘(9) to provide for the enrollment of plan participants and beneficiaries under 

appropriate coverage options; and 


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‘‘(10) to do such other acts as may be necessary to comply with this title or 

any order of the court and to protect the interests of plan participants and beneficiaries and providers of medical care. 

‘‘(c) NOTICE OF APPOINTMENT.—As soon as practicable after the Secretary’s appointment as trustee, the Secretary shall give notice of such appointment to— 

‘‘(1) the sponsor and plan administrator; 

‘‘(2) each participant; 

‘‘(3) each participating employer; and 

‘‘(4) if applicable, each employee organization which, for purposes of collective 

bargaining, represents plan participants. 

‘‘(d) ADDITIONAL DUTIES.—Except to the extent inconsistent with the provisions of 

this title, or as may be otherwise ordered by the court, the Secretary, upon appointment as trustee under this section, shall be subject to the same duties as those of 

a trustee under section 704 of title 11, United States Code, and shall have the duties of a fiduciary for purposes of this title. 

‘‘(e) OTHER PROCEEDINGS.—An application by the Secretary under this subsection 

may be filed notwithstanding the pendency in the same or any other court of any 

bankruptcy, mortgage foreclosure, or equity receivership proceeding, or any proceeding to reorganize, conserve, or liquidate such plan or its property, or any proceeding to enforce a lien against property of the plan. 

‘‘(f) JURISDICTION OF COURT.— 

‘‘(1) IN GENERAL.—Upon the filing of an application for the appointment as 

trustee or the issuance of a decree under this section, the court to which the 

application is made shall have exclusive jurisdiction of the plan involved and 

its property wherever located with the powers, to the extent consistent with the 

purposes of this section, of a court of the United States having jurisdiction over 

cases under chapter 11 of title 11, United States Code. Pending an adjudication 

under this section such court shall stay, and upon appointment by it of the Secretary as trustee, such court shall continue the stay of, any pending mortgage 

foreclosure, equity receivership, or other proceeding to reorganize, conserve, or 

liquidate the plan, the sponsor, or property of such plan or sponsor, and any 

other suit against any receiver, conservator, or trustee of the plan, the sponsor, 

or property of the plan or sponsor. Pending such adjudication and upon the appointment by it of the Secretary as trustee, the court may stay any proceeding 

to enforce a lien against property of the plan or the sponsor or any other suit 

against the plan or the sponsor. 

‘‘(2) VENUE.—An action under this section may be brought in the judicial district where the sponsor or the plan administrator resides or does business or 

where any asset of the plan is situated. A district court in which such action 

is brought may issue process with respect to such action in any other judicial 

district. 

‘‘(g) PERSONNEL.—In accordance with regulations which shall be prescribed by the 

Secretary, the Secretary shall appoint, retain, and compensate accountants, actuaries, and other professional service personnel as may be necessary in connection 

with the Secretary’s service as trustee under this section. 

‘‘SEC. 811. STATE ASSESSMENT AUTHORITY. 

‘‘(a) IN GENERAL.—Notwithstanding section 514, a State may impose by law a contribution tax on an association health plan described in section 806(a)(2), if the plan 

commenced operations in such State after the date of the enactment of the Small 

Business Health Fairness Act of 2017. 

‘‘(b) CONTRIBUTION TAX.—For purposes of this section, the term ‘contribution tax’ 

imposed by a State on an association health plan means any tax imposed by such 

State if— 

‘‘(1) such tax is computed by applying a rate to the amount of premiums or 

contributions, with respect to individuals covered under the plan who are residents of such State, which are received by the plan from participating employers located in such State or from such individuals; 

‘‘(2) the rate of such tax does not exceed the rate of any tax imposed by such 

State on premiums or contributions received by insurers or health maintenance 

organizations for health insurance coverage offered in such State in connection 

with a group health plan; 

‘‘(3) such tax is otherwise nondiscriminatory; and 

‘‘(4) the amount of any such tax assessed on the plan is reduced by the 

amount of any tax or assessment otherwise imposed by the State on premiums, 

contributions, or both received by insurers or health maintenance organizations 

for health insurance coverage, aggregate excess/stop loss insurance (as defined 

in section 806(g)(1)), specific excess/stop loss insurance (as defined in section 

806(g)(2)), other insurance related to the provision of medical care under the 


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plan, or any combination thereof provided by such insurers or health maintenance organizations in such State in connection with such plan. 

‘‘SEC. 812. DEFINITIONS AND RULES OF CONSTRUCTION. 

‘‘(a) DEFINITIONS.—For purposes of this part— 

‘‘(1) GROUP HEALTH PLAN.—The term ‘group health plan’ has the meaning provided in section 733(a)(1) (after applying subsection (b) of this section). 

‘‘(2) MEDICAL CARE.—The term ‘medical care’ has the meaning provided in 

section 733(a)(2). 

‘‘(3) HEALTH INSURANCE COVERAGE.—The term ‘health insurance coverage’ has 

the meaning provided in section 733(b)(1). 

‘‘(4) HEALTH INSURANCE ISSUER.—The term ‘health insurance issuer’ has the 

meaning provided in section 733(b)(2). 

‘‘(5) APPLICABLE AUTHORITY.—The term ‘applicable authority’ means the Secretary, except that, in connection with any exercise of the Secretary’s authority 

regarding which the Secretary is required under section 506(d) to consult with 

a State, such term means the Secretary, in consultation with such State. 

‘‘(6) HEALTH STATUS-RELATED FACTOR.—The term ‘health status-related factor’ 

has the meaning provided in section 733(d)(2). 

‘‘(7) INDIVIDUAL MARKET.— 

‘‘(A) IN GENERAL.—The term ‘individual market’ means the market for 

health insurance coverage offered to individuals other than in connection 

with a group health plan. 

‘‘(B) TREATMENT OF VERY SMALL GROUPS.— 

‘‘(i) IN GENERAL.—Subject to clause (ii), such term includes coverage 

offered in connection with a group health plan that has fewer than 2 

participants as current employees or participants described in section 

732(d)(3) on the first day of the plan year. 

‘‘(ii) STATE EXCEPTION.—Clause (i) shall not apply in the case of 

health insurance coverage offered in a State if such State regulates the 

coverage described in such clause in the same manner and to the same 

extent as coverage in the small group market (as defined in section 

2791(e)(5) of the Public Health Service Act) is regulated by such State. 

‘‘(8) PARTICIPATING EMPLOYER.—The term ‘participating employer’ means, in 

connection with an association health plan, any employer, if any individual who 

is an employee of such employer, a partner in such employer, or a self-employed 

individual who is such employer (or any dependent, as defined under the terms 

of the plan, of such individual) is or was covered under such plan in connection 

with the status of such individual as such an employee, partner, or self-employed individual in relation to the plan. 

‘‘(9) APPLICABLE STATE AUTHORITY.—The term ‘applicable State authority’ 

means, with respect to a health insurance issuer in a State, the State insurance 

commissioner or official or officials designated by the State to enforce the requirements of title XXVII of the Public Health Service Act for the State involved 

with respect to such issuer. 

‘‘(10) QUALIFIED ACTUARY.—The term ‘qualified actuary’ means an individual 

who is a member of the American Academy of Actuaries. 

‘‘(11) AFFILIATED MEMBER.—The term ‘affiliated member’ means, in connection 

with a sponsor— 

‘‘(A) a person who is otherwise eligible to be a member of the sponsor but 

who elects an affiliated status with the sponsor, 

‘‘(B) in the case of a sponsor with members which consist of associations, 

a person who is a member of any such association and elects an affiliated 

status with the sponsor, or 

‘‘(C) in the case of an association health plan in existence on the date of 

the enactment of the Small Business Health Fairness Act of 2017, a person 

eligible to be a member of the sponsor or one of its member associations. 

‘‘(12) LARGE EMPLOYER.—The term ‘large employer’ means, in connection with 

a group health plan with respect to a plan year, an employer who employed an 

average of at least 51 employees on business days during the preceding calendar year and who employs at least 2 employees on the first day of the plan 

year. 

‘‘(13) SMALL EMPLOYER.—The term ‘small employer’ means, in connection with 

a group health plan with respect to a plan year, an employer who is not a large 

employer. 

‘‘(b) RULES OF CONSTRUCTION.— 

‘‘(1) EMPLOYERS AND EMPLOYEES.—For purposes of determining whether a 

plan, fund, or program is an employee welfare benefit plan which is an association health plan, and for purposes of applying this title in connection with such 


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plan, fund, or program so determined to be such an employee welfare benefit 

plan— 

‘‘(A) in the case of a partnership, the term ‘employer’ (as defined in section 3(5)) includes the partnership in relation to the partners, and the term 

‘employee’ (as defined in section 3(6)) includes any partner in relation to the 

partnership; and 

‘‘(B) in the case of a self-employed individual, the term ‘employer’ (as defined in section 3(5)) and the term ‘employee’ (as defined in section 3(6)) 

shall include such individual. 

‘‘(2) PLANS, FUNDS, AND PROGRAMS TREATED AS EMPLOYEE WELFARE BENEFIT

PLANS.—In the case of any plan, fund, or program which was established or is 

maintained for the purpose of providing medical care (through the purchase of 

insurance or otherwise) for employees (or their dependents) covered thereunder 

and which demonstrates to the Secretary that all requirements for certification 

under this part would be met with respect to such plan, fund, or program if 

such plan, fund, or program were a group health plan, such plan, fund, or program shall be treated for purposes of this title as an employee welfare benefit 

plan on and after the date of such demonstration.’’. 

(b) CONFORMING AMENDMENTS TO PREEMPTION RULES.— (1) Section 514(b)(6) of such Act (29 U.S.C. 1144(b)(6)) is amended by adding 

at the end the following new subparagraph: 

‘‘(E) The preceding subparagraphs of this paragraph do not apply with respect to 

any State law in the case of an association health plan which is certified under part 

8.’’. 

(2) Section 514 of such Act (29 U.S.C. 1144) is amended— 

(A) in subsection (b)(4), by striking ‘‘Subsection (a)’’ and inserting ‘‘Subsections (a) and (f)’’; 

(B) in subsection (b)(5), by striking ‘‘subsection (a)’’ in subparagraph (A) 

and inserting ‘‘subsection (a) of this section and subsections (a)(2)(B) and 

(b) of section 805’’, and by striking ‘‘subsection (a)’’ in subparagraph (B) and 

inserting ‘‘subsection (a) of this section or subsection (a)(2)(B) or (b) of section 805’’; and 

(C) by adding at the end the following new subsection: 

‘‘(f)(1) Except as provided in subsection (b)(4), the provisions of this title shall supersede any and all State laws insofar as they may now or hereafter preclude, or 

have the effect of precluding, a health insurance issuer from offering health insurance coverage in connection with an association health plan which is certified under 

part 8. 

‘‘(2) Except as provided in paragraphs (4) and (5) of subsection (b) of this section— 

‘‘(A) In any case in which health insurance coverage of any policy type is offered under an association health plan certified under part 8 to a participating 

employer operating in such State, the provisions of this title shall supersede 

any and all laws of such State insofar as they may preclude a health insurance 

issuer from offering health insurance coverage of the same policy type to other 

employers operating in the State which are eligible for coverage under such association health plan, whether or not such other employers are participating 

employers in such plan. 

‘‘(B) In any case in which health insurance coverage of any policy type is offered in a State under an association health plan certified under part 8 and the 

filing, with the applicable State authority (as defined in section 812(a)(9)), of the 

policy form in connection with such policy type is approved by such State authority, the provisions of this title shall supersede any and all laws of any other 

State in which health insurance coverage of such type is offered, insofar as they 

may preclude, upon the filing in the same form and manner of such policy form 

with the applicable State authority in such other State, the approval of the filing in such other State. 

‘‘(3) Nothing in subsection (b)(6)(E) or the preceding provisions of this subsection 

shall be construed, with respect to health insurance issuers or health insurance coverage, to supersede or impair the law of any State— 

‘‘(A) providing solvency standards or similar standards regarding the adequacy of insurer capital, surplus, reserves, or contributions, or 

‘‘(B) relating to prompt payment of claims. 

‘‘(4) For additional provisions relating to association health plans, see subsections 

(a)(2)(B) and (b) of section 805. 

‘‘(5) For purposes of this subsection, the term ‘association health plan’ has the 

meaning provided in section 801(a), and the terms ‘health insurance coverage’, ‘participating employer’, and ‘health insurance issuer’ have the meanings provided such 

terms in section 812, respectively.’’. 

(3) Section 514(b)(6)(A) of such Act (29 U.S.C. 1144(b)(6)(A)) is amended— 


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(A) in clause (i)(II), by striking ‘‘and’’ at the end; 

(B) in clause (ii), by inserting ‘‘and which does not provide medical care 

(within the meaning of section 733(a)(2)),’’ after ‘‘arrangement,’’, and by 

striking ‘‘title.’’ and inserting ‘‘title, and’’; and 

(C) by adding at the end the following new clause: 

‘‘(iii) subject to subparagraph (E), in the case of any other employee welfare 

benefit plan which is a multiple employer welfare arrangement and which provides medical care (within the meaning of section 733(a)(2)), any law of any 

State which regulates insurance may apply.’’. 

(4) Section 514(d) of such Act (29 U.S.C. 1144(d)) is amended— 

(A) by striking ‘‘Nothing’’ and inserting ‘‘(1) Except as provided in paragraph (2), nothing’’; and 

(B) by adding at the end the following new paragraph: 

‘‘(2) Nothing in any other provision of law enacted on or after the date of the enactment of the Small Business Health Fairness Act of 2017 shall be construed to 

alter, amend, modify, invalidate, impair, or supersede any provision of this title, except by specific cross-reference to the affected section.’’. 

(c) PLAN SPONSOR.—Section 3(16)(B) of such Act (29 U.S.C. 102(16)(B)) is amended by adding at the end the following new sentence: ‘‘Such term also includes a person serving as the sponsor of an association health plan under part 8.’’. 

(d) DISCLOSURE OF SOLVENCY PROTECTIONS RELATED TO SELF-INSURED AND FULLY

INSURED OPTIONS UNDER ASSOCIATION HEALTH PLANS.—Section 102(b) of such Act 

(29 U.S.C. 102(b)) is amended by adding at the end the following: ‘‘An association 

health plan shall include in its summary plan description, in connection with each 

benefit option, a description of the form of solvency or guarantee fund protection secured pursuant to this Act or applicable State law, if any.’’. 

(e) SAVINGS CLAUSE.—Section 731(c) of such Act is amended by inserting ‘‘or part 

8’’ after ‘‘this part’’. 

(f) REPORT TO THE CONGRESS REGARDING CERTIFICATION OF SELF-INSURED ASSOCIATION HEALTH PLANS.—Not later than January 1, 2022, the Secretary of Labor 

shall report to the Committee on Education and the Workforce of the House of Representatives and the Committee on Health, Education, Labor, and Pensions of the 

Senate the effect association health plans have had, if any, on reducing the number 

of uninsured individuals. 

(g) CLERICAL AMENDMENT.—The table of contents in section 1 of the Employee Retirement Income Security Act of 1974 is amended by inserting after the item relating to section 734 the following new items: 

‘‘PART 8. RULES GOVERNING ASSOCIATION HEALTH PLANS

‘‘801. Association health plans. 

‘‘802. Certification of association health plans. 

‘‘803. Requirements relating to sponsors and boards of trustees. 

‘‘804. Participation and coverage requirements. 

‘‘805. Other requirements relating to plan documents, contribution rates, and benefit options. 

‘‘806. Maintenance of reserves and provisions for solvency for plans providing health benefits in addition to 

health insurance coverage. 

‘‘807. Requirements for application and related requirements. 

‘‘808. Notice requirements for voluntary termination. 

‘‘809. Corrective actions and mandatory termination. 

‘‘810. Trusteeship by the Secretary of insolvent association health plans providing health benefits in addition 

to health insurance coverage. 

‘‘811. State assessment authority. 

‘‘812. Definitions and rules of construction.’’. 

SEC. 3. CLARIFICATION OF TREATMENT OF SINGLE EMPLOYER ARRANGEMENTS. 

Section 3(40)(B) of the Employee Retirement Income Security Act of 1974 (29 

U.S.C. 1002(40)(B)) is amended— 

(1) in clause (i), by inserting after ‘‘control group,’’ the following: ‘‘except that, 

in any case in which the benefit referred to in subparagraph (A) consists of 

medical care (as defined in section 812(a)(2)), two or more trades or businesses, 

whether or not incorporated, shall be deemed a single employer for any plan 

year of such plan, or any fiscal year of such other arrangement, if such trades 

or businesses are within the same control group during such year or at any time 

during the preceding 1-year period,’’; 

(2) in clause (iii), by striking ‘‘(iii) the determination’’ and inserting the following: 

‘‘(iii)(I) in any case in which the benefit referred to in subparagraph (A) consists of medical care (as defined in section 812(a)(2)), the determination of 

whether a trade or business is under ‘common control’ with another trade or 

business shall be determined under regulations of the Secretary applying principles consistent and coextensive with the principles applied in determining 

whether employees of two or more trades or businesses are treated as employed 

by a single employer under section 4001(b), except that, for purposes of this 


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paragraph, an interest of greater than 25 percent may not be required as the 

minimum interest necessary for common control, or 

‘‘(II) in any other case, the determination’’; 

(3) by redesignating clauses (iv) and (v) as clauses (v) and (vi), respectively; 

and 

(4) by inserting after clause (iii) the following new clause: 

‘‘(iv) in any case in which the benefit referred to in subparagraph (A) consists 

of medical care (as defined in section 812(a)(2)), in determining, after the application of clause (i), whether benefits are provided to employees of two or more 

employers, the arrangement shall be treated as having only one participating 

employer if, after the application of clause (i), the number of individuals who 

are employees and former employees of any one participating employer and who 

are covered under the arrangement is greater than 75 percent of the aggregate 

number of all individuals who are employees or former employees of participating employers and who are covered under the arrangement,’’. 

SEC. 4. ENFORCEMENT PROVISIONS RELATING TO ASSOCIATION HEALTH PLANS. 

(a) CRIMINAL PENALTIES FOR CERTAIN WILLFUL MISREPRESENTATIONS.—Section 

501 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1131) is 

amended by adding at the end the following new subsection: 

‘‘(c) Any person who willfully falsely represents, to any employee, any employee’s 

beneficiary, any employer, the Secretary, or any State, a plan or other arrangement 

established or maintained for the purpose of offering or providing any benefit described in section 3(1) to employees or their beneficiaries as— 

‘‘(1) being an association health plan which has been certified under part 8; 

‘‘(2) having been established or maintained under or pursuant to one or more 

collective bargaining agreements which are reached pursuant to collective bargaining described in section 8(d) of the National Labor Relations Act (29 U.S.C. 

158(d)) or paragraph Fourth of section 2 of the Railway Labor Act (45 U.S.C. 

152, paragraph Fourth) or which are reached pursuant to labor-management 

negotiations under similar provisions of State public employee relations laws; 

or 

‘‘(3) being a plan or arrangement described in section 3(40)(A)(i), 

shall, upon conviction, be imprisoned not more than 5 years, be fined under title 

18, United States Code, or both.’’. 

(b) CEASE ACTIVITIES ORDERS.—Section 502 of the Employee Retirement Income 

Security Act of 1974 (29 U.S.C. 1132) is amended by adding at the end the following 

new subsection: 

‘‘(n) ASSOCIATION HEALTH PLAN CEASE AND DESIST ORDERS.— 

‘‘(1) IN GENERAL.—Subject to paragraph (2), upon application by the Secretary 

showing the operation, promotion, or marketing of an association health plan 

(or similar arrangement providing benefits consisting of medical care (as defined 

in section 733(a)(2))) that— 

‘‘(A) is not certified under part 8, is subject under section 514(b)(6) to the 

insurance laws of any State in which the plan or arrangement offers or provides benefits, and is not licensed, registered, or otherwise approved under 

the insurance laws of such State; or 

‘‘(B) is an association health plan certified under part 8 and is not operating in accordance with the requirements under part 8 for such certification, 

a district court of the United States shall enter an order requiring that the plan 

or arrangement cease activities. 

‘‘(2) EXCEPTION.—Paragraph (1) shall not apply in the case of an association 

health plan or other arrangement if the plan or arrangement shows that— 

‘‘(A) all benefits under it referred to in paragraph (1) consist of health insurance coverage; and 

‘‘(B) with respect to each State in which the plan or arrangement offers 

or provides benefits, the plan or arrangement is operating in accordance 

with applicable State laws that are not superseded under section 514. 

‘‘(3) ADDITIONAL EQUITABLE RELIEF.—The court may grant such additional equitable relief, including any relief available under this title, as it deems necessary to protect the interests of the public and of persons having claims for 

benefits against the plan.’’. 

(c) RESPONSIBILITY FOR CLAIMS PROCEDURE.—Section 503 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1133) is amended by inserting ‘‘(a) IN

GENERAL.—’’ before ‘‘In accordance’’, and by adding at the end the following new 

subsection: 

‘‘(b) ASSOCIATION HEALTH PLANS.—The terms of each association health plan 

which is or has been certified under part 8 shall require the board of trustees or 


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16 

the named fiduciary (as applicable) to ensure that the requirements of this section 

are met in connection with claims filed under the plan.’’. 

SEC. 5. COOPERATION BETWEEN FEDERAL AND STATE AUTHORITIES. 

Section 506 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 

1136) is amended by adding at the end the following new subsection: 

‘‘(d) CONSULTATION WITH STATES WITH RESPECT TO ASSOCIATION HEALTH

PLANS.— 

‘‘(1) AGREEMENTS WITH STATES.—The Secretary shall consult with the State 

recognized under paragraph (2) with respect to an association health plan regarding the exercise of— 

‘‘(A) the Secretary’s authority under sections 502 and 504 to enforce the 

requirements for certification under part 8; and 

‘‘(B) the Secretary’s authority to certify association health plans under 

part 8 in accordance with regulations of the Secretary applicable to certification under part 8. 

‘‘(2) RECOGNITION OF PRIMARY DOMICILE STATE.—In carrying out paragraph 

(1), the Secretary shall ensure that only one State will be recognized, with respect to any particular association health plan, as the State with which consultation is required. In carrying out this paragraph— 

‘‘(A) in the case of a plan which provides health insurance coverage (as 

defined in section 812(a)(3)), such State shall be the State with which filing 

and approval of a policy type offered by the plan was initially obtained, and 

‘‘(B) in any other case, the Secretary shall take into account the places 

of residence of the participants and beneficiaries under the plan and the 

State in which the trust is maintained.’’. 

SEC. 6. EFFECTIVE DATE AND TRANSITIONAL AND OTHER RULES. 

(a) EFFECTIVE DATE.—The amendments made by this Act shall take effect 1 year 

after the date of the enactment of this Act. The Secretary of Labor shall first issue 

all regulations necessary to carry out the amendments made by this Act within 1 

year after the date of the enactment of this Act. 

(b) TREATMENT OF CERTAIN EXISTING HEALTH BENEFITS PROGRAMS.— (1) IN GENERAL.—In any case in which, as of the date of the enactment of this 

Act, an arrangement is maintained in a State for the purpose of providing benefits consisting of medical care for the employees and beneficiaries of its participating employers, at least 200 participating employers make contributions to 

such arrangement, such arrangement has been in existence for at least 10 

years, and such arrangement is licensed under the laws of one or more States 

to provide such benefits to its participating employers, upon the filing with the 

applicable authority (as defined in section 812(a)(5) of the Employee Retirement 

Income Security Act of 1974 (as amended by this subtitle)) by the arrangement 

of an application for certification of the arrangement under part 8 of subtitle 

B of title I of such Act— 

(A) such arrangement shall be deemed to be a group health plan for purposes of title I of such Act; 

(B) the requirements of sections 801(a) and 803(a) of the Employee Retirement Income Security Act of 1974 shall be deemed met with respect to 

such arrangement; 

(C) the requirements of section 803(b) of such Act shall be deemed met, 

if the arrangement is operated by a board of directors which— 

(i) is elected by the participating employers, with each employer having one vote; and 

(ii) has complete fiscal control over the arrangement and which is responsible for all operations of the arrangement; 

(D) the requirements of section 804(a) of such Act shall be deemed met 

with respect to such arrangement; and 

(E) the arrangement may be certified by any applicable authority with respect to its operations in any State only if it operates in such State on the 

date of certification. 

The provisions of this subsection shall cease to apply with respect to any such 

arrangement at such time after the date of the enactment of this Act as the 

applicable requirements of this subsection are not met with respect to such arrangement. 

(2) DEFINITIONS.—For purposes of this subsection, the terms ‘‘group health 

plan’’, ‘‘medical care’’, and ‘‘participating employer’’ shall have the meanings 

provided in section 812 of the Employee Retirement Income Security Act of 

1974, except that the reference in paragraph (7) of such section to an ‘‘association health plan’’ shall be deemed a reference to an arrangement referred to in 

this subsection. 


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1 U.S.C. § 1001 et seq. (1974) [hereinafter ERISA]. 2 H.R. 525, 109th Cong. (2005). 

3 H.R. 525, Small Business Health Fairness Act: Markup Before the H. Comm. on Educ. and 

the Workforce, 109th Cong. (Feb. 2, 2005). 4 H. Rept. 109–41, (2005). 

5 H.R. 3200, 111th Cong. (2009). H.R. 3200 was the House precursor to the law known as the 

Affordable Care Act (See infra note 8). 

PURPOSE

H.R. 1101, the Small Business Health Fairness Act of 2017, 

amends the Employee Retirement Income Security Act of 1974 

(ERISA) 1 to improve access to affordable health coverage options 

for workers employed by small businesses. The bill amends Title I 

of ERISA to authorize the creation of association health plans 

(AHPs). The legislation allows small businesses to band together 

across state lines through bona fide trade or professional associations to purchase health insurance for their workers, thus increasing their bargaining power with plans and providers and placing 

them on a more level playing field with larger companies and 

unions. H.R. 1101 frees small businesses from costly state mandated benefit packages, spreads risk among a larger group, and 

lowers overhead costs, enabling employers to offer more affordable 

health care coverage to their workers. 

COMMITTEE ACTION

109TH CONGRESS

Introduction of H.R. 525, Small Business Health Fairness Act 

On February 2, 2005, Rep. Sam Johnson (R–TX), then-Chairman 

of the Employer-Employee Relations Subcommittee of the Committee on Education and the Workforce (Committee), introduced 

the Small Business Health Fairness Act (H.R. 525),2 along with 53 

bipartisan original cosponsors, including then-Chairman of the 

Committee, John Boehner (R–OH) and Reps. Nydia Vela ́zquez (D– 

NY) and Albert Wynn (D–MD). 

Committee Passes H.R. 525, Small Business Health Fairness Act 

On March 16, 2005, the Committee ordered H.R. 525, without 

amendment, favorably reported to the House of Representatives by 

a vote of 25 to 22.3 On April 13, 2005, the Committee filed its committee report, which detailed the history of the need for the legislation and prior committee action.4 On July 26, 2015, H.R. 525 

passed the full House by a vote of 263 to 165. 

111TH CONGRESS

Full Committee markup of H.R. 3200, America’s Affordable Health 

Choices Act of 2009 

Between July 15–17, 2009, the Committee met to mark up H.R. 

3200, the America’s Affordable Health Choices Act of 2009.5 During 

the markup, Rep. Howard P. ‘‘Buck’’ McKeon (R–CA) offered an 

amendment to create a new title at the end of Division A of H.R. 

3200, titled Title IV—Small Business Health Fairness. The amendment included rules governing AHPs, the treatment of single employer arrangements, enforcement provisions, and other provisions 


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6 H.R. 3962, 111th Cong. (2009). 

7 H. Amend. 510 to H.R. 3962, 111th Cong. (2009). 

8Patient Protection and Affordable Care Act, Pub. L. No. 111–148 (2010). 

9 Health and Education Reconciliation Act, Pub. L. No. 111–152 (2010). 

10Patient Protection and Affordable Care Act, Pub. L. No. 111–148 (2010), and Health and 

Education Reconciliation Act, Pub. L. No. 111–152 (2010) [hereinafter Affordable Care Act, 

Obamacare, or ACA]. 

related to AHPs. The amendment was defeated by a vote of 21 to 

27. 

Passage of Affordable Health Care for America Act 

On November 7, 2009, the House passed H.R. 3962, the Affordable Health Care for America Act.6 During the debate, formerSpeaker John Boehner (R–OH) included the AHP legislative text in 

the Republican motion to recommit.7

Passage of the Affordable Care Act 

On March 21, 2010, the U.S. House of Representatives passed 

the Patient Protection and Affordable Care Act (PPACA) by a vote 

of 219 to 212 to resolve differences with the Senate. The bill was 

signed by President Obama on March 23, 2010.8 On March 25, 

2010, the U.S. House of Representatives passed the Health Care 

and Education Reconciliation Act of 2010 by a vote of 220 to 207 

to resolve differences with the Senate. This bill was signed into law 

by President Obama on March 30, 2010.9 Collectively, the two bills 

are known as the Affordable Care Act (ACA or Obamacare).10 The 

ACA did not include AHP legislative text. 

112TH CONGRESS

Full Committee hearing on examining The Impact of the Health 

Care Law on the Economy, Employers, and the Workforce 

On February 9, 2011, the Committee held a hearing entitled 

‘‘The Impact of the Health Care Law on the Economy, Employers, 

and the Workforce.’’ This was the Committee’s first hearing to investigate Obamacare and hear directly from job creators about how 

the 2010 law affects their ability to expand their business and hire 

new workers. The witnesses before the Committee were Dr. Paul 

Howard, Senior Fellow, Manhattan Institute, New York, New York; 

Ms. Gail Johnson, President and CEO, Rainbow Station, Inc., 

Glenn Allen, Virginia; Dr. Paul Van de Water, Senior Fellow, Center on Budget and Policy Priorities, Washington, D.C.; and Mr. Neil 

Trautwein, Vice President and Employee Benefits Policy Counsel, 

National Retail Federation, Washington, D.C. 

Subcommittee hearing examining The Pressures of Rising Costs on 

Employer Provided Health Care 

On March 10, 2011, the Subcommittee on Health, Employment, 

Labor, and Pensions (HELP) held a hearing entitled ‘‘The Pressures of Rising Costs on Employer Provided Health Care’’ to examine how increased health care costs are creating uncertainty for 

employers, including an examination of the impact of ACA on employer coverage. The witnesses were Mr. Tom Miller, Resident Fellow, American Enterprise Institute, Washington, D.C.; Mr. Brett 

Parker, Vice Chairman and Chief Financial Officer, Bowlmor 

Lanes, New York, New York; Mr. John Houser, Owner, Hawthorne 


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Auto, Portland, Oregon; and Mr. J. Michael Brewer, President, 

Lockton Benefit Group, Lockton Companies, LLC, Kansas City, 

Missouri. 

Subcommittee hearing examining Barriers to Lower Health Care 

Costs for Workers and Employers 

On May 31, 2012, the HELP Subcommittee held a hearing entitled ‘‘Barriers to Lower Health Care Costs for Workers and Employers’’ to examine rising health care costs facing employers and 

employees, including the destructive impact of ACA. The witnesses 

were Mr. Ed Fensholt, Senior Vice President, Lockton Companies, 

LLC, Kansas City, Missouri; Mr. Roy Ramthun, President, HAS 

Consulting Services, Washington, D.C.; Ms. Jody Hall, Founder 

and Owner, Cupcake Royale, Seattle, Washington; and Mr. Bill 

Streitberger, Vice President of Human Resources, Red Robin, 

Greenwood Village, Colorado. 

113TH CONGRESS

Joint Subcommittee hearing regarding The Employer Mandate: Examining the Delay and Its Effect on Workplaces 

On July 23, 2013, the HELP Subcommittee and the Workforce 

Protections Subcommittee jointly held a hearing entitled ‘‘The Employer Mandate: Examining the Delay and Its Effect on Workplaces’’ to review the impact of the Obama administration’s decision to delay the employer mandate. Witnesses before the subcommittees were Ms. Grace-Marie Turner, President, Galen Institute, Alexandria, Virginia; Mr. Jamie T. Richardson, Vice President, White Castle System, Inc., Columbus, Ohio; Mr. Ron Pollack, 

Executive Director, Families USA, Washington, D.C.; and Dr. 

Douglas Holtz-Eakin, President, American Action Forum, Washington, D.C. 

Subcommittee hearing regarding Health Care Challenges Facing 

Kentucky’s Workers and Job Creators 

On August 27, 2013, the HELP Subcommittee held a field hearing entitled ‘‘Health Care Challenges Facing Kentucky’s Workers 

and Job Creators,’’ which included an examination of the harmful 

impact of ACA on Kentucky’s employers and their employees. Witnesses before the subcommittee were Mr. Tim Kanaly, Owner and 

President, Gary Force Honda, Bowling Green, Kentucky; Mr. Joe 

Bologna, Owner, Joe Bologna’s—Italian Restaurant & Pizzeria, 

Lexington, Kentucky; Ms. Carrie Banahan, Executive Director, Office of the Kentucky Health Benefit Exchange, Frankfort, Kentucky; Mr. John Humkey, President, Employee Benefit Associates, 

Inc., Lexington, Kentucky; Ms. Janey Moores, President and CEO, 

BJM & Associates, Inc., Lexington, Kentucky; Mr. Donnie Meadows, Vice President of Human Resources, K–VA–T Food Stores, 

Inc., Abingdon, VA; Ms. Debbie Basham, Southwest Breast Cancer 

Awareness Group, Louisville, Kentucky; and Mr. John McPhearson, 

CEO, Lectrodryer, Richmond, Kentucky. 


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11 H.R. 1101, 115th Cong. (2017). 

114TH CONGRESS

Subcommittee hearing on Five Years of Broken Promises: How the 

President’s Health Care Law is Affecting America’s Workplaces 

On April 14, 2015, the HELP Subcommittee held a hearing entitled ‘‘Five Years of Broken Promises: How the President’s Health 

Care Law is Affecting America’s Workplaces,’’ which examined the 

continuing negative impact of ACA on employer-sponsored health 

coverage. Witnesses before the subcommittee were the Honorable 

Tevi Troy, Ph.D., President, American Health Policy Institute, 

Washington, D.C.; Mr. Rutland Paal, Jr., President, Rutland Beard 

Floral Group, Scotch Plains, New Jersey; Michael Brev, President, 

Brev Corp. t/a Hobby Works®, WingTOTE Manufacturing, LLC, 

Laurel, Maryland; and Ms. Sally Roberts, Human Resources Director, Morris Communications Company, LLC, Augusta, Georgia. 

115TH CONGRESS

Full Committee hearing on Rescuing Americans from the Failed 

Health Care Law and Advancing Patient-Centered Solutions 

On February 1, 2017, the Committee held a hearing entitled 

‘‘Rescuing Americans from the Failed Health Care Law and Advancing Patient-Centered Solutions,’’ which examined failures of 

the ACA. Witnesses before the Committee were Mr. Scott 

Bollenbacher, CPA, Managing Partner, Bollenbacher & Associates, 

LLC, Portland, Indiana; Mr. Joe Eddy, President and Chief Executive Officer, Eagle Manufacturing Company, Wellsburg, West Virginia; Ms. Angela Schlaack, St. Joseph, Michigan; and Dr. Tevi 

Troy, Chief Executive Officer, American Health Policy Institute, 

Washington, D.C. 

Introduction of H.R. 1101, Small Business Health Fairness Act of 

2017 

On February 16, 2017, Rep. Sam Johnson (R–TX) introduced the 

Small Business Health Fairness Act of 2017 (H.R. 1101) along with 

HELP Subcommittee Chairman Tim Walberg (R–MI).11 As Congress works to provide Americans with a patient-centered health 

care system, H.R. 1101 reduces burdens on small businesses in 

order to promote a healthy workforce and enable employers to offer 

more affordable health care coverage to employees. 

Full Committee hearing on Legislative Proposals to Improve Health 

Care Coverage and Provide Lower Costs for Families 

On March 1, 2017, the Committee held a hearing entitled ‘‘Legislative Proposals to Improve Health Care Coverage and Provide 

Lower Costs for Families,’’ which examined H.R. 1101, among other 

proposals. Witnesses before the Committee were Mr. Jon B. Hurst, 

President, Retailers Association of Massachusetts, Boston, Massachusetts; Ms. Allison R. Klausner, J.D., Principal, Government Relations Leader, Conduent, Secaucus, New Jersey; Ms. Lydia Mitts, 

Associate Director of Affordability Initiatives, Families USA, Washington, D.C.; and Mr. Jay Ritchie, Executive Vice President, Tokio 

Marine HHC, Kennesaw, Georgia. 


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12 H.R. 1101, Small Business Health Fairness Act of 2017: Markup Before the H. Comm. on 

Educ. and the Workforce, 115th Cong. (Mar. 8, 2017). 

Committee passes H.R. 1101, Small Business Health Fairness Act 

of 2017 

On March 8, 2017, the Committee considered H.R. 1101, the 

Small Business Health Fairness Act of 2017.12 HELP Subcommittee 

Chairman Walberg offered an amendment in the nature of a substitute, making technical changes to the introduced bill. The Committee voted to adopt the amendment in the nature of a substitute 

by voice vote. Rep. Susan Davis (D–CA) offered an amendment to 

prevent the bill from taking effect under certain circumstances. 

The amendment failed by a vote of 17 to 22. The Committee favorably reported H.R. 1101, as amended, to the House of Representatives by a vote of 22 to 17. 

SUMMARY

On February 16, 2017, Rep. Sam Johnson (R–TX) and HELP 

Subcommittee Chairman Walberg introduced H.R. 1101, the Small 

Business Health Fairness Act. H.R. 1101 amends the Employee Retirement Income Security Act of 1974 (ERISA) to allow for the establishment of AHPs. H.R. 1101 allows small businesses to join together across state lines through bona fide trade associations to become larger purchasers of health insurance. The bill puts small 

businesses on an equal playing field with unions and larger corporations, enabling them to have greater ability to negotiate lower 

health care costs for their employees. In turn, this makes it easier 

for small businesses to offer their employees access to quality, affordable health care coverage. 

More specifically, H.R. 1101 relieves small businesses that form 

AHPs from costly state-mandated benefit laws that often make coverage prohibitively expensive, thus lowering the costs of health insurance and making it possible for small firms to offer coverage. 

H.R. 1101 establishes a class certification for fully-insured AHPs 

prescribed by the Secretary of Labor. Likewise, self-funded AHPs 

must meet certain criteria to insure the businesses covered will be 

of average health risk to avoid pulling healthy individuals from the 

small group market (to avoid cherry picking). The legislation also 

contains protections to ensure self-funded AHPs meet and maintain 

solvency standards (e.g., maintaining at minimum $500,000 in surplus reserves), which will be reviewed quarterly by the AHP’s 

board of trustees to determine they are being met. Self-funded 

AHPs also will be required to obtain stop-loss and indemnification 

insurance coverage. Additionally, H.R. 1101 allows small business 

owners to have the option to provide coverage to their employees 

by driving down costs and lowering barriers to access. 

COMMITTEE VIEWS

Background on Employer-sponsored insurance coverage 

Since World War II, employers have offered health care benefits 

as a way to recruit and retain talent and ensure a healthy and productive workforce. Employer-sponsored insurance is one of the primary means by which Americans obtain health care coverage. According to the Kaiser Family Foundation, more than 150 million 


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13Kaiser Family Found., Employer Health Benefits Survey (2016), http://files.kff.org/attachment/Report-Employer-Health-Benefits-2016-Annual-Survey. 14Troy, T., and Wilson, D.M., Health Coverage Cost Per Covered Life: Government vs. Employment-Sponsored Programs, AMERICAN HEALTH POLICY INSTITUTE (2014), http:// 

www.americanhealthpolicy.org/Content/documents/resources/ 

AHPI_STUDY_Cost_Per_Covered_Life.pdf. 15Kaiser Family Found., supra note 11. 16 Id. 17 Jess Henig & Lori Robertson, Obama’s Inflated Health ‘Savings’, FACTCHECK.ORG (Jun. 16, 

2008), http://www.factcheck.org/2008/06/obamas-inflated-health-savings/. 18 Rescuing Americans from the Failed Health Care Law and Advancing Patient-Centered Solutions: Hearing Before the H. Comm. on Educ. and the Workforce, 115th Cong. (2017). (Statement of Scott Bollenbacher, Managing Partner, Bollenbacher & Assoc’s., LLC). 19Statement on the Small Business Health Care Crisis: Possible Solutions, U.S. Chamber of 

Commerce (Feb. 5, 2003), https://www.uschamber.com/testimony/statement-small-businesshealth-care-crisis-possible-solutions (Statement of the U.S. Chamber of Commerce before the S. 

Comm. on Small Bus. & Entrepreneurship). 

Americans, or 55.5 percent of working Americans, are covered by 

a health benefit plan offered by their employer.13 A report by the 

American Health Policy Institute found that employers spent 

$578.6 billion in 2012 providing health coverage for 168.6 million 

employees, retirees, and dependents.14 Almost all firms with at 

least 200 or more employees offer health benefits, and just over 

half of smaller firms with 3–199 employees offer health benefits.15

Employer-provided health benefits are regulated by a number of 

laws, including ERISA as amended by the ACA. The Department 

of Labor (DOL) implements and enforces ERISA. By virtue of its 

jurisdiction over ERISA, the Committee has jurisdiction over employer-provided health coverage. 

Small and large employers offer health care coverage to employees in self-funded arrangements (self-insurance) or purchase fullyinsured plans. ERISA regulates both fully-insured and self-insured 

plans, but only self-insured plans are exempt from a patchwork of 

benefit mandates imposed under state insurance law. Employers 

sponsoring self-insured plans are not subject to the same requirements under the ACA as those with fully-insured plans. Therefore, 

employer-provided plans have different requirements and costs depending on funding arrangements. Last year, approximately 61 

percent of workers with coverage were enrolled in a self-funded 

plan, up from 49 percent in 2000 and 54 percent in 2005.16

Obamacare has failed, proving the need for a better way of providing access to affordable, quality health care 

The ACA attempted to expand access to health insurance 

through a complicated structure of federal subsidies, Medicaid expansion, and new rules governing health insurance markets. The 

law has severely damaged America’s health care system and is collapsing under its own weight. For example, President Obama famously promised the ACA would ‘‘lower premiums by up to $2,500 

for a typical family per year,’’ yet the evidence suggests otherwise.17 Additionally, small businesses and their employees have 

been ‘‘badly hurt by the cost increases of the ACA’’ 18 as the law 

did nothing to address the affordability of coverage crisis small 

businesses had been struggling with for years.19

The ACA placed additional mandates and administrative burdens on employers, increasing the cost of insurance coverage and 

making it more difficult to hire workers and grow their businesses. 

According to a recent study by the American Action Forum, roughly 


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20Gitis, B. and Batkins, S., Update: Obamacare’s Impact on Small Business Wages and Employment, AMERICAN ACTION FORUM, (2017), https://www.americanactionforum.org/research/update-obamacares-impact-small-business-wages-employment/. 21Paul Fronstin, Fewer Small Employers Offering Health Coverage; Large Employers Holding 

Steady, EBRI Educ. and Research Fund (Jul. 2016), https://www.ebri.org/pdf/notespdf/ 

EBRI_Notes_07-No8-July16.Small-ERs.pdf. 22 2015 Medical Expenditure Panel Survey-Insurance Component: Table I.A.2, AGENCY FOR

HEALTHCARE AND QUALITY, CENTER FOR FINANCING, ACCESS AND COSTS TRENDS (2015), https:// 

meps.ahrq.gov/data_stats/summ_tables/insr/national/series_1/2015/tia2.pdf; 2010 Medical 

Expenditure Panel Survey-Insurance Component: Table I.A.2, AGENCY FOR HEALTHCARE AND

QUALITY, CENTER FOR FINANCING, ACCESS AND COSTS TRENDS (2010), https://meps.ahrq.gov/ 

data_stats/summ_tables/insr/national/series_1/2010/tia2.pdf. 23 Holly Wade, Small Business’s Introduction to the Affordable Care Act Part III, NFIB Research Found. (Nov. 2015), http://www.nfib.com/assets/nfib-aca-study-2015.pdf. 24Legislative Proposals to Improve Health Care Coverage and Provide Lower Costs for Families: Hearing Before the H. Comm. On Educ. and the Workforce, 115th Cong. (2017). (Statement 

of Jon Hurst, President, Retailers Association of Massachusetts). 

300,000 small business jobs were lost and 10,000 small businesses 

closed as a result of ACA’s costs and regulations.20

Since 2008, approximately 36 percent of small businesses with 

fewer than 10 employees have stopped offering coverage, leaving 

workers with even fewer health care options.21 In 2015, the offer 

rate for businesses with fewer than 50 employees dropped to 29 

percent, compared with 39 percent in 2010 when ACA passed.22

Due to their size and economies of scale, large businesses and labor 

organizations have the ability to negotiate on behalf of their employees for high-quality health care at more affordable costs. By offering a qualified group health plan under ERISA, these large employers and labor organizations are also exempt from myriad state 

rules and regulations on health insurance. Small businesses, however, do not have the same bargaining power as larger businesses 

and are unable to band together to increase their bargaining power 

in the health insurance marketplace. 

According to a National Federation of Independent Business 

(NFIB) study, 52 percent of small business employers that do not 

currently offer coverage cite the cost of health insurance coverage 

as the top reason for not offering their employees coverage.23 In 

testimony before the Committee, on behalf of the National Retail 

Federation, Mr. Jon Hurst, President of the Retailers Association 

of Massachusetts, noted just how significantly the ACA hurt small 

businesses, saying: 

Under the Affordable Care Act (ACA) our nation’s small 

businesses and their employees have been relegated to a 

second class consumer status versus their large, self-funded, ERISA exempt competitors when it comes to access 

and affordability of health insurance coverage. . . . The 

ACA, in mandating the purchase of health insurance coverage yet failing to provide consumer equitable treatment 

under the law in terms of access and pricing[,] is not only 

unfair it is discriminatory.24

One significant factor contributing to the high cost of health care 

for small employers is their inability to band together in order to 

unlock the financial benefits of small business pooling arrangements. These cost-saving benefits—economies of scale, freedom 

from state regulation, and increased administrative efficiencies— 

would help small employers access coverage at a more affordable 

price and decrease the number of uninsured individuals who work 


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25 According to 2010 Census data, smaller firms (less than 500 employees) were almost twice 

as likely to be uninsured than larger firms (more than 500 employees), with 36 percent of the 

uninsured working population being employed at a firm with 10 or fewer employees. SMALL BUS. ADMIN., WHAT IS THE LEVEL OF AVAILABILITY AND COVERAGE OF HEALTH INSURANCE IN SMALL

FIRMS? (2012), https://www.sba.gov/sites/default/files/Health-Insurance.pdf. 26Kaiser Family Found., supra note 11. 27 Id. 28Legislative Proposals to Improve Health Care Coverage and Provide Lower Costs for Families: Hearing Before the H. Comm. On Educ. and the Workforce, 115th Cong. (2017). (Letter from 

Coalition of AHP supporters entered into the record by HELP Subcommittee Chairman 

Walberg). 29 Hurst, supra note 22. 30MASS. GEN. LAWS ch. 3, § 38C (2017) https://malegislature.gov/Laws/SessionLaws/Acts/ 

2010/Chapter288. 

in small businesses.25 That is particularly important because the 

percentage of smaller firms that offer coverage has fallen from 57 

percent to 53 percent since 2011.26

To address the damage to small businesses caused by the ACA, 

Mr. Hurst added, ‘‘the solution to this problem is to provide small 

businesses more flexibility . . . to look outside the traditional markets available to them to secure their coverage,’’ 27 namely the ability to pool together through industry or professional organizations 

to offer health insurance coverage to their employees. 

In June 2016, House Republicans released ‘‘A Better Way,’’ which 

included a step-by-step approach to give every American access to 

quality, affordable health care. This consensus plan is the basis for 

repealing and replacing Obamacare in the 115th Congress. The 

Committee has jurisdiction over three components of ‘‘A Better 

Way’’: preserving the option for employers of all sizes to self-insure; 

eliminating resulting roadblocks to employee wellness programs; 

and, amending ERISA to allow small businesses to band together 

in AHPs to increase their purchasing power and negotiate better 

health coverage prices. These three components were the focus of 

a Committee legislative hearing, as part of broader Republican efforts to replace the ACA. 

The need for small business pooling 

More specifically, AHPs will give small businesses another option 

for offering health insurance coverage. In a letter to Rep. Johnson 

and HELP Subcommittee Chairman Walberg, 34 groups representing small businesses affirmed the potential benefits of AHPs, 

saying: 

We believe AHPs will help lower the cost of health insurance by allowing small business owners the same opportunities that larger businesses now experience. AHPs will 

allow small business owners to band together across state 

lines through their membership in bona fide trade or professional association to purchase health coverage. Establishing health insurance benefits through associations will 

make coverage more affordable by spreading risk among a 

much larger group, strengthening negotiating power with 

plans and providers, and reducing administrative costs.28

Mr. Hurst agreed, noting these pooling arrangements would level 

the playing field for small businesses in relation to larger businesses and unions, while providing additional benefits beyond 

health insurance.29 In August 2010, Massachusetts enacted Chapter 288 of the Acts of 2010,30 establishing small business group 


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31 Hurst, supra note 22. 32 Id. 33Legislative Proposals to Improve Health Care Coverage and Provide Lower Costs for Families: Hearing Before the H. Comm. On Educ. and the Workforce, 115th Cong. (2017). (Statement 

of Jay Ritchie, Exec. Vice President, Tokio Marine HHC). 34 Id. 

purchasing cooperatives similar to association health plans. During 

the Committee’s hearing examining H.R. 1101, Mr. Hurst testified 

that the Retailers Association of Massachusetts Health Insurance 

Cooperative ‘‘is outperforming similarly sized large groups in terms 

of overall claims experience and is below several small group 

benchmarks’’ 31 and covers more lives than those covered by the 

Massachusetts Health Connector, the state’s ACA exchange, at no 

cost to the taxpayer. Mr. Hurst’s testimony underscores the fact 

that small businesses want pooling as an option to purchase health 

insurance coverage. This is not surprising, because as Mr. Hurst 

explained: 

Employment-based group coverage can be distinguished 

from public pools because employees come to the business 

to work rather than seek coverage, as opposed to public 

pool[s, like the ACA exchanges,] where the sole objective 

is to obtain coverage. The difference in presentation of 

risk, though subtle, is important. Private, employmentbased group plans work better and provide more affordable 

coverage.32

A key element of H.R. 1101 is that AHPs would have the ability 

to self-fund, which in turn would allow small businesses to band 

together across state lines to offer coverage. Self-insuring also allows employers to offer plans designed to meet the needs of their 

employees, while controlling costs. These plans provide excellent, 

well-regulated benefits. As Mr. Jay Ritchie, Executive Vice President of Tokio Marine HCC Stop-Loss Group and the current Chairman of the Board of the Self-Insurance Institute of America, Inc. 

recently testified, ‘‘Self-insurance plans are regulated by no less 

than 10 federal laws, including [ERISA] and [HIPAA].’’ 33 Larger 

businesses and unions that self-fund are regulated under these 

rules, and prohibiting AHPs from self-funding would punish small 

businesses and deny them the same protections. Further, there is 

no data to substantiate critics’ claims that self-funded AHPs will 

have any effect on the fully-insured small group market or ACA’s 

Small Business Health Options Program Exchanges.34

Some states already allow pooling arrangements within their 

state. Association Health Plans not certified under Part 8 of ERISA 

remain subject to all federal and state laws otherwise applicable to 

such plans, and the provisions of the Act are not intended to modify the application or interpretation of such laws to such plans. 

Support for creating options and flexibility for small businesses 

Because this legislation benefits both employers and working 

families, the legislation is endorsed by a broad swath of groups representing job creators, including: National Federation of Independent Businesses, U.S. Chamber of Commerce, American Association of Advertising Agencies, Air Conditioning Contractors of 

America, American Council of Engineering Companies, American 

Farm Bureau Federation, American Foundry Society, American 


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Hotel & Lodging Association, American Rental Association, American Society of Association Executives, Associated Builders and 

Contractors, Associated General Contractors, Auto Care Association, Electronic Security Association, Far West Equipment Dealers 

Association, Farm Equipment Manufacturers Association, 

FASTSIGNS International, Inc., Heating, Air-Conditioning & Refrigeration Distributors International, International Franchise Association, Manufacturers Education and Training Alliance of CT, 

National Association of Chemical Distributors, National Association 

of Home Builders, National Association of Manufacturers, National 

Association of REALTORS®, National Association of WholesalerDistributors, National Restaurant Association, National Retail Federation, National Roofing Contractors Association, National Tooling 

and Machining Association, National Utility Contractors Association, North American Die Casting Association, Precision Machined 

Products Association, Precision Metalforming Association, Self-Insurance Institute of America, Inc., Small Business & Entrepreneurship Council, and the Western Equipment Dealers Association. 

CONCLUSION

H.R. 1101, the Small Business Health Fairness Act, makes it 

easier for small businesses to promote a healthy workforce and 

offer more affordable health care coverage. By allowing small businesses to join together in AHPs, the bill puts smaller businesses on 

a more level playing field with larger companies and unions, and 

it increases their bargaining power with insurance providers. More 

importantly, it provides smaller employers—many of whom have 

limited resources—with a greater opportunity to offer their workers 

quality and affordable health care coverage. If enacted, H.R. 1101 

will empower small businesses to provide quality health care coverage at a lower cost for their employees. 

SECTION-BY-SECTION

The following is a section-by-section analysis of the Amendment 

in the Nature of a Substitute offered by HELP Subcommittee 

Chairman Walberg and reported favorably by the Committee. 

Section 1. Short title; Table of Contents 

Section 1 provides the short title is the ‘‘Small Business Health 

Fairness Act of 2017.’’ 

Section 2. Rules governing association health plans 

Section 2 amends Subtitle B of Title I of ERISA to add a new 

Part 8 (Rules Governing Association Health Plans), after part 7: 

Section 801. Provides that a sponsor of an AHP must be a 

bona fide trade, industry, or professional association; chamber 

of commerce; or similar organization established for substantial purposes other than that of obtaining or providing medical 

care. The sponsor must be a permanent entity receiving membership payment on a periodic basis that does not condition 

membership, dues, or coverage under the health plan on the 

basis of health status. 

Section 802. Requires the Secretary of Labor (Secretary) to 

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cation. For AHPs that purchase a fully-insured group health 

plan from an insurance company, the Secretary will establish 

a class certification. For those that will offer a self-insured 

health benefit, the bill establishes several criteria in order to 

insure the businesses covered will be of average health risk, to 

avoid pulling only healthy individuals from the small employer 

market (cherry-picking). To be certified, a self-funded AHP 

must have one of the following: (1) offered such self-funded coverage on the date of enactment, (2) represent a broad cross-section of trades and businesses or industries, or (3) represent one 

or more trades with average or above average health insurance 

risk or health claims experience. 

Section 803. Establishes additional eligibility requirements 

for AHPs. Applicants must demonstrate the sponsor of the 

AHP has been in existence for a continuous period of at least 

three years for substantial purposes other than providing coverage under a group health plan. AHPs must be operated, pursuant to a trust agreement, by a board of trustees, which 

serves as the plan sponsor and is the fiduciary of the plan. The 

board of trustees must have complete fiscal control and be responsible for all operations of the plan. The board of trustees 

must consist of individuals who are owners, officers, directors 

or employees of the employers who participate in the plan. 

Section 804. Requires all employers participating in the AHP 

to be members or affiliated members of the sponsor. All individuals under the plan must be active or retired employees, 

owners, officers, directors, partners or their beneficiaries. This 

applies to partnerships and self-employed individuals. Expressly prohibits discrimination by requiring (1) all employers 

that are association members are eligible for participation; (2) 

all geographically available coverage options are made available upon request to eligible employers; and (3) eligible individuals cannot be excluded from enrolling because of health status. The bill also stipulates that no participating employer may 

exclude an employee by purchasing an individual policy of 

health insurance coverage for such person based on his or her 

health status. 

Section 805. Requires contribution rates for any particular 

employer comply with the Health Insurance Portability and Accountability Act (HIPAA), which prohibits group health plans 

from excluding high-risk individuals based on high claims experience. Thus, it will not be possible for AHPs to cherry pick 

because sick or high-risk groups or individuals cannot be denied coverage. Contribution rates can only vary to the extent 

already allowed under the relevant state community rating insurance law. State-licensed health insurance agents must be 

used to distribute health insurance coverage provided to small 

employers under an AHP, and must also be used to distribute 

self-insured benefits to small employers through an AHP, if the 

AHP also offers fully-insured plans. In addition, AHPs must be 

allowed to design benefit options. Specifically, the bill mandates that no provision of state law shall preclude an AHP or 

health insurance issuer from exercising its discretion in designing the items and services of medical care to be included as 

health insurance coverage under the plan. 


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Section 806. Establishes capital reserve requirements (unearned contributions, benefit liabilities, expected administrative costs, any other obligations) for self-insured AHP’s and requires them to obtain both specific and aggregate stop loss coverage and solvency indemnification insurance. In addition, the 

AHP must maintain minimum surplus reserves of at least 

$500,000, and the Secretary may increase the surplus reserve 

minimum to $2 million. Establishes an Association Health 

Plan Fund, managed by the Department of Labor, to guarantee 

that indemnification insurance is always available, and penalties apply if payments are not made. All certified AHPs 

would be required to pay $5,000 into the fund annually. The 

measure requires the Secretary to establish a Solvency Standards Working Group within 90 days of enactment to recommend initial regulations. 

Section 807. Sets forth additional criteria that AHPs must 

meet to qualify for certification. The Secretary shall grant certification to a plan only if (1) a complete application has been 

filed, accompanied by the filing fee of $5,000; and (2) all other 

terms of the certification are met (including financial, actuarial, reporting, participation, and such other requirements as 

may be specified by the Secretary as a condition of the certification). AHPs also are required to file their certification with 

the applicable state authority of each state in which at least 

25 percent of the participants and beneficiaries under the plan 

are located. 

Section 808. Requires that, except as provided in section 809, 

an AHP may voluntarily terminate only if the board of trustees 

provides 60 days advance written notice to participants and 

beneficiaries and submits to the applicable authority a plan 

providing for timely payment of all benefit obligations. 

Section 809. Requires that the board of trustees of a self-insured AHP must determine quarterly whether the capital reserve requirements under section 806 are met. If not, in consultation with the qualified actuary, the board must develop a 

plan to ensure compliance and report such information to the 

Secretary. 

Section 810. Sets forth procedures whereby the Secretary 

may become the trustee of insolvent AHPs. Whenever the Secretary determines an AHP will not be able to provide benefits, 

or is otherwise in financial distress, the Secretary must act as 

trustee to administer the plan for the duration of insolvency. 

Section 811. Allows a state to assess newly certified AHPs a 

contribution tax to the same extent they tax health insurance 

plans. This will enable states to maintain the revenue source 

for funding state priorities such as high-risk insurance pools. 

Section 812. Defines the following terms: group health plan, 

medical care, health insurance coverage, health insurance 

issuer, applicable authority, health status-related factor, individual market, treatment of very small groups, participating 

employer, applicable state authority, qualified actuary, affiliated member, large employer, and small employer. Also, clarifies the treatment of ERISA’s preemption rules with regard to 

AHPs. For certified AHPs, state law is preempted to the extent 

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dition, state law is also preempted in order to allow health insurance issuers to offer health insurance coverage of the same 

policy type as offered in connection with a particular AHP to 

eligible employers, regardless of whether such employers are 

members of the particular association. Health insurance coverage policy forms filed and approved in a particular state in 

connection with an insurer’s offering under an AHP are 

deemed to be approved in any other state in which such coverage is offered when the insurer provides a complete filing in 

the same form and manner to the authority in the other state. 

Not later than January 1, 2022, the Secretary shall report to 

Congress regarding the effect AHPs have had, if any, on reducing the number of uninsured individuals. 

Section 3. Clarification of treatment of single employer arrangements 

Section 3 amends the definition of multiple employer welfare arrangement and control group with regard to the treatment of single 

employer arrangements and collectively bargained arrangements. 

Section 4. Enforcement provisions relating to association health 

plans 

Section 4 amends ERISA to establish enforcement provisions relating to AHPs and multiple employer welfare arrangements 

(MEWAs). Establishes criminal penalties for willful misrepresentation as a certified AHP, or as a collectively-bargained plan, or as 

a MEWA established pursuant to a collective bargaining agreement; authorizes DOL to issue cease activity orders against fraudulent health plans; and outlines the responsibility of the board of 

trustees for meeting the required claims procedures. 

Section 5. Cooperation between federal and state authorities 

Section 5 amends section 506 of ERISA (relating to coordination 

and responsibility of agencies enforcing ERISA and related laws) to 

require the Secretary to consult with state insurance departments 

with regard to the Secretary’s authority under sections 502 and 504 

to enforce provisions applicable to certified AHPs. 

Section 6. Effective date and transitional and other rules 

Section 6 provides the amendments made by this Act shall take 

effect one year after the date of enactment. Requires the Secretary 

to issue regulations to carry out the amendments made by this Act 

within one year after the date of enactment. Deems certain requirements of this legislation met for previously existing AHPs meeting 

certain stringent requirements. 

EXPLANATION OF AMENDMENTS

The amendments, including the amendment in the nature of a 

substitute, are explained in the body of this report. 

APPLICATION OF LAW TO THE LEGISLATIVE BRANCH

Section 102(b)(3) of Public Law 104–1 requires a description of 

the application of this bill to the legislative branch. H.R. 1101 imVerDate Sep 11 2014 05:16 Mar 18, 2017 Jkt 069006 PO 00000 Frm 00029 Fmt 6659 Sfmt 6602 E:\HR\OC\HR043.XXX HR043

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proves access to affordable health coverage options for workers employed by small businesses. 

UNFUNDED MANDATE STATEMENT

With respect to the requirements of Section 423 of the Congressional Budget and Impoundment Control Act (as amended by Section 101(a)(2) of the Unfunded Mandate Reform Act, P.L. 104–4), 

the Committee has requested but not received from the Director of 

the Congressional Budget Office a statement as to whether the provisions of the reported bill include unfunded mandates. 

EARMARK STATEMENT

H.R. 1101 does not contain any congressional earmarks, limited 

tax benefits, or limited tariff benefits as defined in clause 9 of 

House Rule XXI. 

ROLL CALL VOTES

Clause 3(b) of rule XIII of the Rules of the House of Representatives requires the Committee Report to include for each record vote 

on a motion to report the measure or matter and on any amendments offered to the measure or matter the total number of votes 

for and against and the names of the Members voting for and 

against. 


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STATEMENT OF GENERAL PERFORMANCE GOALS AND OBJECTIVES

In accordance with clause (3)(c) of House Rule XIII, the goal of 

H.R. 1101 is to improve access to affordable health coverage options for workers employed by small businesses. 

DUPLICATION OF FEDERAL PROGRAMS

No provision of H.R. 1101 establishes or reauthorizes a program 

of the Federal Government known to be duplicative of another Federal program, a program that was included in any report from the 

Government Accountability Office to Congress pursuant to section 

21 of Public Law 111–139, or a program related to a program identified in the most recent Catalog of Federal Domestic Assistance. 

DISCLOSURE OF DIRECTED RULE MAKINGS

The committee estimates that enacting H.R. 1101 does not specifically direct the completion of any specific rule makings within 

the meaning of 5 U.S.C. 551. 

STATEMENT OF OVERSIGHT FINDINGS AND RECOMMENDATIONS OF

THE COMMITTEE

In compliance with clause 3(c)(1) of rule XIII and clause 2(b)(1) 

of rule X of the Rules of the House of Representatives, the Committee’s oversight findings and recommendations are reflected in the 

body of this report. 

NEW BUDGET AUTHORITY AND CBO COST ESTIMATE COMMITTEE

COST ESTIMATE

With respect to the requirements of clause 3(c)(2) of rule XIII of 

the Rules of the House of Representatives and section 308(a) of the 

Congressional Budget Act of 1974 and with respect to requirements 

of clause (3)(c)(3) of rule XIII of the Rules of the House of Representatives and section 402 of the Congressional Budget Act of 

1974, the Committee has requested but not received a cost estimate 

for this bill from the Director of Congressional Budget Office. The 

Committee has requested but not received from the Director of the 

Congressional Budget Office a statement as to whether this bill 

contains any new budget authority, spending authority, credit authority, or an increase or decrease in revenues or tax expenditures. 

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause 3(e) of rule XIII of the Rules of the 

House of Representatives, changes in existing law made by the bill, 

as reported, are shown as follows (new matter is printed in italic 

and existing law in which no change is proposed is shown in 

roman): 

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause 3(e) of rule XIII of the Rules of the 

House of Representatives, changes in existing law made by the bill, 

as reported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italic, 


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and existing law in which no change is proposed is shown in 

roman): 

EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 

1974 

SHORT TITLE AND TABLE OF CONTENTS 

SECTION 1. This Act may be cited as the ‘‘Employee Retirement 

Income Security Act of 1974’’. 

* * * * * * * 

TITLE I—PROTECTION OF EMPLOYEE BENEFIT RIGHTS 

* * * * * * * 

Subtitle B—Regulatory Provisions 

* * * * * * * 

PART 7—GROUP HEALTH PLAN REQUIREMENTS

* * * * * * * 

Subpart C—General Provisions 

* * * * * * * 

PART 8. RULES GOVERNING ASSOCIATION HEALTH PLANS

801. Association health plans. 

802. Certification of association health plans. 

803. Requirements relating to sponsors and boards of trustees. 

804. Participation and coverage requirements. 

805. Other requirements relating to plan documents, contribution rates, and benefit 

options. 

806. Maintenance of reserves and provisions for solvency for plans providing health 

benefits in addition to health insurance coverage. 

807. Requirements for application and related requirements. 

808. Notice requirements for voluntary termination. 

809. Corrective actions and mandatory termination. 

810. Trusteeship by the Secretary of insolvent association health plans providing 

health benefits in addition to health insurance coverage. 

811. State assessment authority. 

812. Definitions and rules of construction. 

* * * * * * * 

TITLE I—PROTECTION OF EMPLOYEE BENEFIT RIGHTS 

SUBTITLE A—GENERAL PROVISIONS

* * * * * * * 

DEFINITIONS

SEC. 3. For purposes of this title: 

(1) The terms ‘‘employee welfare benefit plan’’ and ‘‘welfare plan’’ 

mean any plan, fund, or program which was heretofore or is hereafter established or maintained by an employer or by an employee 

organization, or by both, to the extent that such plan, fund, or program was established or is maintained for the purpose of providing 

for its participants or their beneficiaries, through the purchase of 

insurance or otherwise, (A) medical, surgical, or hospital care or 

benefits, or benefits in the event of sickness, accident, disability, 

death or unemployment, or vacation benefits, apprenticeship or 


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other training programs, or day care centers, scholarship funds, or 

prepaid legal services, or (B) any benefit described in section 302(c) 

of the Labor Management Relations Act, 1947 (other than pensions 

on retirement or death, and insurance to provide such pensions). 

(2)(A) Except as provided in subparagraph (B), the terms ‘‘employee pension benefit plan’’ and ‘‘pension plan’’ mean any plan, 

fund, or program which was heretofore or is hereafter established 

or maintained by an employer or by an employee organization, or 

by both, to the extent that by its express terms or as a result of 

surrounding circumstances such plan, fund, or program— 

(i) provides retirement income to employees, or 

(ii) results in a deferral of income by employees for periods 

extending to the termination of covered employment or beyond, 

regardless of the method of calculating the contributions made to 

the plan, the method of calculating the benefits under the plan or 

the method of distributing benefits from the plan. A distribution 

from a plan, fund, or program shall not be treated as made in a 

form other than retirement income or as a distribution prior to termination of covered employment solely because such distribution is 

made to an employee who has attained age 62 and who is not separated from employment at the time of such distribution. 

(B) The Secretary may by regulation prescribe rules consistent 

with the standards and purposes of this Act providing one or more 

exempt categories under which— 

(i) severance pay arrangements, and 

(ii) supplemental retirement income payments, under which 

the pension benefits of retirees or their beneficiaries are supplemented to take into account some portion or all of the increases in the cost of living (as determined by the Secretary of 

Labor) since retirement, 

shall, for purposes of this title, be treated as welfare plans rather 

than pension plans. In the case of any arrangement or payment a 

principal effect of which is the evasion of the standards or purposes 

of this Act applicable to pension plans, such arrangement or payment shall be treated as a pension plan. An applicable voluntary 

early retirement incentive plan (as defined in section 

457(e)(11)(D)(ii) of the Internal Revenue Code of 1986) making payments or supplements described in section 457(e)(11)(D)(i) of such 

Code, and an applicable employment retention plan (as defined in 

section 457(f)(4)(C) of such Code) making payments of benefits described in section 457(f)(4)(A) of such Code, shall, for purposes of 

this title, be treated as a welfare plan (and not a pension plan) 

with respect to such payments and supplements. 

(3) The term ‘‘employee benefit plan’’ or ‘‘plan’’ means an employee welfare benefit plan or an employee pension benefit plan or 

a plan which is both an employee welfare benefit plan and an employee pension benefit plan. 

(4) The term ‘‘employee organization’’ means any labor union or 

any organization of any kind, or any agency or employee representation committee, association, group, or plan, in which employees 

participate and which exists for the purpose, in whole or in part, 

of dealing with employers concerning an employee benefit plan, or 

other matters incidental to employment relationships; or any employees’ beneficiary association organized for the purpose in whole 

or in part, of establishing such a plan. 


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(5) The term ‘‘employer’’ means any person acting directly as an 

employer, or indirectly in the interest of an employer, in relation 

to an employee benefit plan; and includes a group or association of 

employers acting for an employer in such capacity. 

(6) The term ‘‘employee’’ means any individual employed by an 

employer. 

(7) The term ‘‘participant’’ means any employee or former employee of an employer, or any member or former member of an employee organization, who is or may become eligible to receive a benefit of any type from an employee benefit plan which covers employees of such employer or members of such organization, or 

whose beneficiaries may be eligible to receive any such benefit. 

(8) The term ‘‘beneficiary’’ means a person designated by a participant, or by the terms of an employee benefit plan, who is or 

may become entitled to a benefit thereunder. 

(9) The term ‘‘person’’ means an individual, partnership, joint 

venture, corporation, mutual company, joint-stock company, trust, 

estate, unincorporated organization, association, or employee organization. 

(10) The term ‘‘State’’ includes any State of the United States, 

the District of Columbia, Puerto Rico, the Virgin Islands, American 

Samoa, Guam, Wake Island, and the Canal Zone. The term ‘‘United 

States’’ when used in the geographic sense means the States and 

the Outer Continental Shelf lands defined in the Outer Continental 

Shelf Lands Act (43 U.S.C. 1331–1343). 

(11) The term ‘‘commerce’’ means trade, traffic, commerce, transportation, or communication between any State and any place outside thereof. 

(12) The term ‘‘industry or activity affecting commerce’’ means 

any activity, business, or industry in commerce or in which a labor 

dispute would hinder or obstruct commerce or the free flow of commerce, and includes any activity or industry ‘‘affecting commerce’’ 

within the meaning of the Labor Management Relations Act, 1947, 

or the Railway Labor Act. 

(13) The term ‘‘Secretary’’ means the Secretary of Labor. 

(14) The term ‘‘party in interest’’ means, as to an employee benefit plan— 

(A) any fiduciary (including, but not limited to, any administrator, officer, trustee, or custodian), counsel, or employee of 

such employee benefit plan; 

(B) a person providing services to such plan; 

(C) an employer any of whose employees are covered by such 

plan; 

(D) an employee organization any of whose members are covered by such plan; 

(E) an owner, direct or indirect, of 50 percent or more of— 

(i) the combined voting power of all classes of stock entitled to vote or the total value of shares of all classes of 

stock of a corporation, 

(ii) the capital interest or the profits interest of a partnership, or 

(iii) the beneficial interest of a trust or unincorporated 

enterprise, 

which is an employer or an employee organization described in 

subparagraph (C) or (D); 


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(F) a relative (as defined in paragraph (15)) of any individual 

described in subparagraph (A), (B), (C), or (E); 

(G) a corporation, partnership, or trust or estate of which (or 

in which) 50 percent or more of— 

(i) the combined voting power of all classes of stock entitled to vote or the total value of shares of all classes of 

stock of such corporation, 

(ii) the capital interest or profits interest of such partnership, or 

(iii) the beneficial interest of such trust or estate, 

is owned directly or indirectly, or held by persons described in 

subparagraph (A), (B), (C), (D), or (E); 

(H) an employee, officer, director (or an individual having 

powers or responsibilities similar to those of officers or directors), or a 10 percent or more shareholder directly or indirectly, 

of a person described in subparagraph (B), (C), (D), (E), or (G), 

or of the employee benefit plan; or 

(I) a 10 percent or more (directly or indirectly in capital or 

profits) partner or joint venturer of a person described in subparagraph (B), (C), (D), (E), or (G). 

The Secretary, after consultation and coordination with the Secretary of the Treasury, may by regulation prescribe a percentage 

lower than 50 percent for subparagraph (E) and (G) and lower than 

10 percent for subparagraph (H) or (I). The Secretary may prescribe regulations for determining the ownership (direct or indirect) 

of profits and beneficial interests, and the manner in which indirect stockholdings are taken into account. Any person who is a 

party in interest with respect to a plan to which a trust described 

in section 501(c)(22) of the Internal Revenue Code of 1986 is permitted to make payments under section 4223 shall be treated as 

a party in interest with respect to such trust. 

(15) The term ‘‘relative’’ means a spouse, ancestor, lineal descendant, or spouse of a lineal descendant. 

(16)(A) The term ‘‘administrator’’ means— 

(i) the person specifically so designated by the terms of the 

instrument under which the plan is operated; 

(ii) if an administrator is not so designated, the plan sponsor; 

or 

(iii) in the case of a plan for which an administrator is not 

designated and a plan sponsor cannot be identified, such other 

person as the Secretary may by regulation prescribe. 

(B) The term ‘‘plan sponsor’’ means (i) the employer in the case 

of an employee benefit plan established or maintained by a single 

employer, (ii) the employee organization in the case of a plan established or maintained by an employee organization, or (iii) in the 

case of a plan established or maintained by two or more employers 

or jointly by one or more employers and one or more employee organizations, the association, committee, joint board of trustees, or 

other similar group of representatives of the parties who establish 

or maintain the plan. Such term also includes a person serving as 

the sponsor of an association health plan under part 8. 

(17) The term ‘‘separate account’’ means an account established 

or maintained by an insurance company under which income, 

gains, and losses, whether or not realized, from assets allocated to 

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ited to or charged against such account without regard to other income, gains, or losses of the insurance company. 

(18) The term ‘‘adequate consideration’’ when used in part 4 of 

subtitle B means (A) in the case of a security for which there is 

a generally recognized market, either (i) the price of the security 

prevailing on a national securities exchange which is registered 

under section 6 of the Securities Exchange Act of 1934, or (ii) if the 

security is not traded on such a national securities exchange, a 

price not less favorable to the plan than the offering price for the 

security as established by the current bid and asked prices quoted 

by persons independent of the issuer and of any party in interest; 

and (B) in the case of an asset other than a security for which 

there is a generally recognized market, the fair market value of the 

asset as determined in good faith by the trustee or named fiduciary 

pursuant to the terms of the plan and in accordance with regulations promulgated by the Secretary. 

(19) The term ‘‘nonforfeitable’’ when used with respect to a pension benefit or right means a claim obtained by a participant or his 

beneficiary to that part of an immediate or deferred benefit under 

a pension plan which arises from the participant’s service, which 

is unconditional, and which is legally enforceable against the plan. 

For purposes of this paragraph, a right to an accrued benefit derived from employer contributions shall not be treated as forfeitable merely because the plan contains a provision described in section 203(a)(3). 

(20) The term ‘‘security’’ has the same meaning as such term has 

under section 2(1) of the Securities Act of 1933 (15 U.S.C. 77b(1)). 

(21)(A) Except as otherwise provided in subparagraph (B), a person is a fiduciary with respect to a plan to the extent (i) he exercises any discretionary authority or discretionary control respecting 

management of such plan or exercises any authority or control respecting management or disposition of its assets, (ii) he renders investment advice for a fee or other compensation, direct or indirect, 

with respect to any moneys or other property of such plan, or has 

any authority or responsibility to do so, or (iii) he has any discretionary authority or discretionary responsibility in the administration of such plan. Such term includes any person designated under 

section 405(c)(1)(B). 

(B) If any money or other property of an employee benefit plan 

is invested in securities issued by an investment company registered under the Investment Company Act of 1940, such investment shall not by itself cause such investment company or such investment company’s investment adviser or principal underwriter to 

be deemed to be a fiduciary or a party in interest as those terms 

are defined in this title, except insofar as such investment company 

or its investment adviser or principal underwriter acts in connection with an employee benefit plan covering employees of the investment company, the investment adviser, or its principal underwriter. Nothing contained in this subparagraph shall limit the duties imposed on such investment company, investment adviser, or 

principal underwriter by any other law. 

(22) The term ‘‘normal retirement benefit’’ means the greater of 

the early retirement benefit under the plan, or the benefit under 

the plan commencing at normal retirement age. The normal retirement benefit shall be determined without regard to— 


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(A) medical benefits, and 

(B) disability benefits not in excess of the qualified disability 

benefit. 

For purposes of this paragraph, a qualified disability benefit is a 

disability benefit provided by a plan which does not exceed the benefit which would be provided for the participant if he separated 

from the service at normal retirement age. For purposes of this 

paragraph, the early retirement benefit under a plan shall be determined without regard to any benefit under the plan which the 

Secretary of the Treasury finds to be a benefit described in section 

204(b)(1)(G). 

(23) The term ‘‘accrued benefit’’ means— 

(A) in the case of a defined benefit plan, the individual’s accrued benefit determined under the plan and, except as provided in section 204(c)(3), expressed in the form of an annual 

benefit commencing at normal retirement age, or 

(B) in the case of a plan which is an individual account plan, 

the balance of the individual’s account. 

The accrued benefit of an employee shall not be less than the 

amount determined under section 204(c)(2)(B) with respect to the 

employee’s accumulated contribution. 

(24) The term ‘‘normal retirement age’’ means the earlier of— 

(A) the time a plan participant attains normal retirement 

age under the plan, or 

(B) the later of— 

(i) the time a plan participant attains age 65, or 

(ii) the 5th anniversary of the time a plan participant 

commenced participation in the plan. 

(25) The term ‘‘vested liabilities’’ means the present value of the 

immediate or deferred benefits available at normal retirement age 

for participants and their beneficiaries which are nonforfeitable. 

(26) The term ‘‘current value’’ means fair market value where 

available and otherwise the fair value as determined in good faith 

by a trustee or a named fiduciary (as defined in section 402(a)(2)) 

pursuant to the terms of the plan and in accordance with regulations of the Secretary, assuming an orderly liquidation at the time 

of such determination. 

(27) The term ‘‘present value’’, with respect to a liability, means 

the value adjusted to reflect anticipated events. Such adjustments 

shall conform to such regulations as the Secretary of the Treasury 

may prescribe. 

(28) The term ‘‘normal service cost’’ or ‘‘normal cost’’ means the 

annual cost of future pension benefits and administrative expenses 

assigned, under an actuarial cost method, to years subsequent to 

a particular valuation date of a pension plan. The Secretary of the 

Treasury may prescribe regulations to carry out this paragraph. 

(29) The term ‘‘accrued liability’’ means the excess of the present 

value, as of a particular valuation date of a pension plan, of the 

projected future benefit costs and administrative expenses for all 

plan participants and beneficiaries over the present value of future 

contributions for the normal cost of all applicable plan participants 

and beneficiaries. The Secretary of the Treasury may prescribe regulations to carry out this paragraph. 

(30) The term ‘‘unfunded accrued liability’’ means the excess of 

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vides, over the present value of the assets of a pension plan. The 

Secretary of the Treasury may prescribe regulations to carry out 

this paragraph. 

(31) The term ‘‘advance funding actuarial cost method’’ or ‘‘actuarial cost method’’ means a recognized actuarial technique utilized 

for establishing the amount and incidence of the annual actuarial 

cost of pension plan benefits and expenses. Acceptable actuarial 

cost methods shall include the accrued benefit cost method (unit 

credit method), the entry age normal cost method, the individual 

level premium cost method, the aggregate cost method, the attained age normal cost method, and the frozen initial liability cost 

method. The terminal funding cost method and the current funding 

(pay-as-you-go) cost method are not acceptable actuarial cost methods. The Secretary of the Treasury shall issue regulations to further define acceptable actuarial cost methods. 

(32) The term ‘‘governmental plan’’ means a plan established or 

maintained for its employees by the Government of the United 

States, by the government of any State or political subdivision 

thereof, or by any agency or instrumentality of any of the foregoing. The term ‘‘governmental plan’’ also includes any plan to 

which the Railroad Retirement Act of 1935 or 1937 applies, and 

which is financed by contributions required under that Act and any 

plan of an international organization which is exempt from taxation under the provisions of the International Organizations Immunities Act (59 Stat. 669). The term ‘‘governmental plan’’ includes 

a plan which is established and maintained by an Indian tribal 

government (as defined in section 7701(a)(40) of the Internal Revenue Code of 1986), a subdivision of an Indian tribal government 

(determined in accordance with section 7871(d) of such Code), or an 

agency or instrumentality of either, and all of the participants of 

which are employees of such entity substantially all of whose services as such an employee are in the performance of essential governmental functions but not in the performance of commercial activities (whether or not an essential government function) 

(33)(A) The term ‘‘church plan’’ means a plan established and 

maintained (to the extent required in clause (ii) of subparagraph 

(B)) for its employees (or their beneficiaries) by a church or by a 

convention or association of churches which is exempt from tax 

under section 501 of the Internal Revenue Code of 1986. 

(B) The term ‘‘church plan’’ does not include a plan— 

(i) which is established and maintained primarily for the 

benefit of employees (or their beneficiaries) of such church or 

convention or association of churches who are employed in connection with one or more unrelated trades or businesses (within the meaning of section 513 of the Internal Revenue Code of 

1986), or 

(ii) if less than substantially all of the individuals included 

in the plan are individuals described in subparagraph (A) or in 

clause (ii) of subparagraph (C) (or their beneficiaries). 

(C) For purposes of this paragraph— 

(i) A plan established and maintained for its employees (or 

their beneficiaries) by a church or by a convention or association of churches includes a plan maintained by an organization, whether a civil law corporation or otherwise, the principal 

purpose or function of which is the administration or funding 


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42 

of a plan or program for the provision of retirement benefits or 

welfare benefits, or both, for the employees of a church or a 

convention or association of churches, if such organization is 

controlled by or associated with a church or a convention or association of churches. 

(ii) The term employee of a church or a convention or association of churches includes— 

(I) a duly ordained, commissioned, or licensed minister 

of a church in the exercise of his ministry, regardless of 

the source of his compensation; 

(II) an employee of an organization, whether a civil law 

corporation or otherwise, which is exempt from tax under 

section 501 of the Internal Revenue Code of 1986 and 

which is controlled by or associated with a church or a convention or association of churches; and 

(III) an individual described in clause (v). 

(iii) A church or a convention or association of churches 

which is exempt from tax under section 501 of the Internal 

Revenue Code of 1986 shall be deemed the employer of any individual included as an employee under clause (ii). 

(iv) An organization, whether a civil law corporation or otherwise, is associated with a church or a convention or association of churches if it shares common religious bonds and convictions with that church or convention or association of 

churches. 

(v) If an employee who is included in a church plan separates from the service of a church or a convention or association of churches or an organization, whether a civil law corporation or otherwise, which is exempt from tax under section 

501 of the Internal Revenue Code of 1986 and which is controlled by or associated with a church or a convention or association of churches, the church plan shall not fail to meet the 

requirements of this paragraph merely because the plan— 

(I) retains the employee’s accrued benefit or account for 

the payment of benefits to the employee or his beneficiaries pursuant to the terms of the plan; or 

(II) receives contributions on the employee’s behalf after 

the employee’s separation from such service, but only for 

a period of 5 years after such separation, unless the employee is disabled (within the meaning of the disability 

provisions of the church plan or, if there are no such provisions in the church plan, within the meaning of section 

72(m)(7) of the Internal Revenue Code of 1986) at the time 

of such separation from service. 

(D)(i) If a plan established and maintained for its employees (or 

their beneficiaries) by a church or by a convention or association 

of churches which is exempt from tax under section 501 of the Internal Revenue Code of 1986 fails to meet one or more of the requirements of this paragraph and corrects its failure to meet such 

requirements within the correction period, the plan shall be 

deemed to meet the requirements of this paragraph for the year in 

which the correction was made and for all prior years. 

(ii) If a correction is not made within the correction period, the 

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graph beginning with the date on which the earliest failure to meet 

one or more of such requirements occurred. 

(iii) For purposes of this subparagraph, the term ‘‘correction period’’ means— 

(I) the period ending 270 days after the date of mailing by 

the Secretary of the Treasury of a notice of default with respect 

to the plan’s failure to meet one or more of the requirements 

of this paragraph; or 

(II) any period set by a court of competent jurisdiction after 

a final determination that the plan fails to meet such requirements, or, if the court does not specify such period, any reasonable period determined by the Secretary of the Treasury on the 

basis of all the facts and circumstances, but in any event not 

less than 270 days after the determination has become final; 

or 

(III) any additional period which the Secretary of the Treasury determines is reasonable or necessary for the correction of 

the default, 

whichever has the latest ending date. 

(34) The term ‘‘individual account plan’’ or ‘‘defined contribution 

plan’’ means a pension plan which provides for an individual account for each participant and for benefits based solely upon the 

amount contributed to the participant’s account, and any income, 

expenses, gains and losses, and any forfeitures of accounts of other 

participants which may be allocated to such participant’s account. 

(35) The term ‘‘defined benefit plan’’ means a pension plan other 

than an individual account plan; except that a pension plan which 

is not an individual account plan and which provides a benefit derived from employer contributions which is based partly on the balance of the separate account of a participant— 

(A) for the purposes of section 202, shall be treated as an individual account plan, and 

(B) for the purposes of paragraph (23) of this section and section 204, shall be treated as an individual account plan to the 

extent benefits are based upon the separate account of a participant and as a defined benefit plan with respect to the remaining portion of benefits under the plan. 

(36) The term ‘‘excess benefit plan’’ means a plan maintained by 

an employer solely for the purpose of providing benefits for certain 

employees in excess of the limitations on contributions and benefits 

imposed by section 415 of the Internal Revenue Code of 1986 on 

plans to which that section applies, without regard to whether the 

plan is funded. To the extent that a separable part of a plan (as 

determined by the Secretary of Labor) maintained by an employer 

is maintained for such purpose, that part shall be treated as a separate plan which is an excess benefit plan. 

(37)(A) The term ‘‘multiemployer plan’’ means a plan— 

(i) to which more than one employer is required to contribute, 

(ii) which is maintained pursuant to one or more collective 

bargaining agreements between one or more employee organizations and more than one employer, and 

(iii) which satisfies such other requirements as the Secretary 

may prescribe by regulation. 


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44 

(B) For purposes of this paragraph, all trades or businesses 

(whether or not incorporated) which are under common control 

within the meaning of section 4001(b)(1) are considered a single 

employer. 

(C) Notwithstanding subparagraph (A), a plan is a multiemployer 

plan on and after its termination date if the plan was a multiemployer plan under this paragraph for the plan year preceding its 

termination date. 

(D) For purposes of this title, notwithstanding the preceding provisions of this paragraph, for any plan year which began before the 

date of the enactment of the Multiemployer Pension Plan Amendments Act of 1980, the term ‘‘multiemployer plan’’ means a plan described in section 3(37) of this Act as in effect immediately before 

such date. 

(E) Within one year after the date of the enactment of the Multiemployer Pension Plan Amendments Act of 1980, a multiemployer 

plan may irrevocably elect, pursuant to procedures established by 

the corporation and subject to the provisions of sections 4403(b) 

and (c), that the plan shall not be treated as a multiemployer plan 

for all purposes under this Act or the Internal Revenue Code of 

1954 if for each of the last 3 plan years ending prior to the effective 

date of the Multiemployer Pension Plan Amendments Act of 1980— 

(i) the plan was not a multiemployer plan because the plan 

was not a plan described in section 3(37)(A)(iii) of this Act and 

section 414(f)(1)(C) of the Internal Revenue Code of 1954 (as 

such provisions were in effect on the day before the date of the 

enactment of the Multiemployer Pension Plan Amendments 

Act of 1980 ); and 

(ii) the plan had been identified as a plan that was not a 

multiemployer plan in substantially all its filings with the corporation, the Secretary of Labor and the Secretary of the 

Treasury. 

(F)(i) For purposes of this title a qualified football coaches plan— 

(I) shall be treated as a multiemployer plan to the extent not 

inconsistent with the purposes of this subparagraph; and 

(II) notwithstanding section 401(k)(4)(B) of the Internal Revenue Code of 1986, may include a qualified cash and deferred 

arrangement. 

(ii) For purposes of this subparagraph, the term ‘‘qualified football coaches plan’’ means any defined contribution plan which is established and maintained by an organization— 

(I) which is described in section 501(c) of such Code; 

(II) the membership of which consists entirely of individuals 

who primarily coach football as full-time employees of 4-year 

colleges or universities described in section 170(b)(1)(A)(ii) of 

such Code; and 

(III) which was in existence on September 18, 1986. 

(G)(i) Within 1 year after the enactment of the Pension Protection Act of 2006— 

(I) an election under subparagraph (E) may be revoked, 

pursuant to procedures prescribed by the Pension Benefit 

Guaranty Corporation, if, for each of the 3 plan years prior 

to the date of the enactment of that Act, the plan would 

have been a multiemployer plan but for the election under 

subparagraph (E), and 


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45 

(II) a plan that meets the criteria in clauses (i) and (ii) 

of subparagraph (A) of this paragraph or that is described 

in clause (vi) may, pursuant to procedures prescribed by 

the Pension Benefit Guaranty Corporation, elect to be a 

multiemployer plan, if— 

(aa) for each of the 3 plan years immediately preceding the first plan year for which the election under 

this paragraph is effective with respect to the plan, 

the plan has met those criteria or is so described, 

(bb) substantially all of the plan’s employer contributions for each of those plan years were made or 

required to be made by organizations that were exempt from tax under section 501 of the Internal Revenue Code of 1986, and 

(cc) the plan was established prior to September 2, 

1974. 

(ii) An election under this subparagraph shall be effective for 

all purposes under this Act and under the Internal Revenue 

Code of 1986, starting with any plan year beginning on or after 

January 1, 1999, and ending before January 1, 2008, as designated by the plan in the election made under clause (i)(II). 

(iii) Once made, an election under this subparagraph shall be 

irrevocable, except that a plan described in clause (i)(II) shall 

cease to be a multiemployer plan as of the plan year beginning 

immediately after the first plan year for which the majority of 

its employer contributions were made or required to be made 

by organizations that were not exempt from tax under section 

501 of the Internal Revenue Code of 1986. 

(iv) The fact that a plan makes an election under clause 

(i)(II) does not imply that the plan was not a multiemployer 

plan prior to the date of the election or would not be a multiemployer plan without regard to the election. 

(v)(I) No later than 30 days before an election is made under 

this subparagraph, the plan administrator shall provide notice 

of the pending election to each plan participant and beneficiary, each labor organization representing such participants 

or beneficiaries, and each employer that has an obligation to 

contribute to the plan, describing the principal differences between the guarantee programs under title IV and the benefit 

restrictions under this title for single employer and multiemployer plans, along with such other information as the plan administrator chooses to include. 

(II) Within 180 days after the date of enactment of the Pension Protection Act of 2006, the Secretary shall prescribe a 

model notice under this clause. 

(III) A plan administrator’s failure to provide the notice required under this subparagraph shall be treated for purposes 

of section 502(c)(2) as a failure or refusal by the plan administrator to file the annual report required to be filed with the 

Secretary under section 101(b)(1). 

(vi) A plan is described in this clause if it is a plan sponsored 

by an organization which is described in section 501(c)(5) of the 

Internal Revenue Code of 1986 and exempt from tax under section 501(a) of such Code and which was established in Chicago, 

Illinois, on August 12, 1881. 


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(vii) For purposes of this Act and the Internal Revenue Code of 

1986, a plan making an election under this subparagraph shall be 

treated as maintained pursuant to a collective bargaining agreement if a collective bargaining agreement, expressly or otherwise, 

provides for or permits employer contributions to the plan by one 

or more employers that are signatory to such agreement, or participation in the plan by one or more employees of an employer that 

is signatory to such agreement, regardless of whether the plan was 

created, established, or maintained for such employees by virtue of 

another document that is not a collective bargaining agreement. 

(38) The term ‘‘investment manager’’ means any fiduciary (other 

than a trustee or named fiduciary, as defined in section 

402(a)(2))— 

(A) who has the power to manage, acquire, or dispose of any 

asset of a plan; 

(B) who (i) is registered as an investment adviser under the 

Investment Advisers Act of 1940; (ii) is not registered as an investment adviser under such Act by reason of paragraph (1) of 

section 203A(a) of such Act, is registered as an investment adviser under the laws of the State (referred to in such paragraph (1)) in which it maintains its principal office and place 

of business, and, at the time the fiduciary last filed the registration form most recently filed by the fiduciary with such 

State in order to maintain the fiduciary’s registration under 

the laws of such State, also filed a copy of such form with the 

Secretary; (iii) is a bank, as defined in that Act; or (iv) is an 

insurance company qualified to perform services described in 

subparagraph (A) under the laws of more than one State; and 

(C) has acknowledged in writing that he is a fiduciary with 

respect to the plan. 

(39) The terms ‘‘plan year’’ and ‘‘fiscal year of the plan’’ mean, 

with respect to a plan, the calendar, policy, or fiscal year on which 

the records of the plan are kept. 

(40)(A) The term ‘‘multiple employer welfare arrangement’’ 

means an employee welfare benefit plan, or any other arrangement 

(other than an employee welfare benefit plan), which is established 

or maintained for the purpose of offering or providing any benefit 

described in paragraph (1) to the employees of two or more employers (including one or more self-employed individuals), or to their 

beneficiaries, except that such term does not include any such plan 

or other arrangement which is established or maintained— 

(i) under or pursuant to one or more agreements which the 

Secretary finds to be collective bargaining agreements, 

(ii) by a rural electric cooperative, or 

(iii) by a rural telephone cooperative association. 

(B) For purposes of this paragraph— 

(i) two or more trades or businesses, whether or not incorporated, shall be deemed a single employer if such trades or 

businesses are within the same control group, except that, in 

any case in which the benefit referred to in subparagraph (A) 

consists of medical care (as defined in section 812(a)(2)), two or 

more trades or businesses, whether or not incorporated, shall be 

deemed a single employer for any plan year of such plan, or any 

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nesses are within the same control group during such year or 

at any time during the preceding 1-year period, 

(ii) the term ‘‘control group’’ means a group of trades or businesses under common control, 

ø(iii) the determination¿ 

(iii)(I) in any case in which the benefit referred to in subparagraph (A) consists of medical care (as defined in section 

812(a)(2)), the determination of whether a trade or business is 

under ‘‘common control’’ with another trade or business shall be 

determined under regulations of the Secretary applying principles consistent and coextensive with the principles applied in 

determining whether employees of two or more trades or businesses are treated as employed by a single employer under section 4001(b), except that, for purposes of this paragraph, an interest of greater than 25 percent may not be required as the 

minimum interest necessary for common control, or 

(II) in any other case, the determination of whether a trade 

or business is under ‘‘common control’’ with another trade or 

business shall be determined under regulations of the Secretary applying principles similar to the principles applied in 

determining whether employees of two or more trades or businesses are treated as employed by a single employer under section 4001(b), except that, for purposes of this paragraph, common control shall not be based on an interest of less than 25 

percent, 

(iv) in any case in which the benefit referred to in subparagraph (A) consists of medical care (as defined in section 

812(a)(2)), in determining, after the application of clause (i), 

whether benefits are provided to employees of two or more employers, the arrangement shall be treated as having only one 

participating employer if, after the application of clause (i), the 

number of individuals who are employees and former employees 

of any one participating employer and who are covered under 

the arrangement is greater than 75 percent of the aggregate 

number of all individuals who are employees or former employees of participating employers and who are covered under the 

arrangement, 

ø(iv)¿ (v) the term ‘‘rural electric cooperative’’ means— 

(I) any organization which is exempt from tax under section 501(a) of the Internal Revenue Code of 1986 and 

which is engaged primarily in providing electric service on 

a mutual or cooperative basis, and 

(II) any organization described in paragraph (4) or (6) of 

section 501(c) of the Internal Revenue Code of 1986 which 

is exempt from tax under section 501(a) of such Code and 

at least 80 percent of the members of which are organizations described in subclause (I), and 

ø(v)¿ (vi) the term ‘‘rural telephone cooperative association’’ 

means an organization described in paragraph (4) or (6) of section 501(c) of the Internal Revenue Code of 1986 which is exempt from tax under section 501(a) of such Code and at least 

80 percent of the members of which are organizations engaged 

primarily in providing telephone service to rural areas of the 

United States on a mutual, cooperative, or other basis. 


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48 

(41) SINGLE-EMPLOYER PLAN.—The term ‘‘single-employer plan’’ 

means an employee benefit plan other than a multiemployer plan. 

(41) The term ‘‘single-employer plan’’ means a plan which is not 

a multiemployer plan. 

(42) the term ‘‘plan assets’’ means plan assets as defined by such 

regulations as the Secretary may prescribe, except that under such 

regulations the assets of any entity shall not be treated as plan assets if, immediately after the most recent acquisition of any equity 

interest in the entity, less than 25 percent of the total value of each 

class of equity interest in the entity is held by benefit plan investors. For purposes of determinations pursuant to this paragraph, 

the value of any equity interest held by a person (other than such 

a benefit plan investor) who has discretionary authority or control 

with respect to the assets of the entity or any person who provides 

investment advice for a fee (direct or indirect) with respect to such 

assets, or any affiliate of such a person, shall be disregarded for 

purposes of calculating the 25 percent threshold. An entity shall be 

considered to hold plan assets only to the extent of the percentage 

of the equity interest held by benefit plan investors. For purposes 

of this paragraph, the term ‘‘benefit plan investor’’ means an employee benefit plan subject to part 4, any plan to which section 

4975 of the Internal Revenue Code of 1986 applies, and any entity 

whose underlying assets include plan assets by reason of a plan’s 

investment in such entity. 

* * * * * * * 

SUBTITLE B—REGULATORY PROVISIONS

PART 1—REPORTING AND DISCLOSURE

* * * * * * * 

SUMMARY PLAN DESCRIPTION

SEC. 102. (a) A summary plan description of any employee benefit plan shall be furnished to participants and beneficiaries as provided in section 104(b). The summary plan description shall include 

the information described in subsection (b), shall be written in a 

manner calculated to be understood by the average plan participant, and shall be sufficiently accurate and comprehensive to reasonably apprise such participants and beneficiaries of their rights 

and obligations under the plan. A summary of any material modification in the terms of the plan and any change in the information 

required under subsection (b) shall be written in a manner calculated to be understood by the average plan participant and shall 

be furnished in accordance with section 104(b)(1). 

(b) The summary plan description shall contain the following information: The name and type of administration of the plan; in the 

case of a group health plan (as defined in section 733(a)(1)), whether a health insurance issuer (as defined in section 733(b)(2)) is responsible for the financing or administration (including payment of 

claims) of the plan and (if so) the name and address of such issuer; 

the name and address of the person designated as agent for the 

service of legal process, if such person is not the administrator; the 

name and address of the administrator; names, titles, and addresses of any trustee or trustees (if they are persons different from the 


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49 

administrator); a description of the relevant provisions of any applicable collective bargaining agreement; the plan’s requirements 

respecting eligibility for participation and benefits; a description of 

the provisions providing for nonforfeitable pension benefits; circumstances which may result in disqualification, ineligibility, or 

denial or loss of benefits; the source of financing of the plan and 

the identity of any organization through which benefits are provided; the date of the end of the plan year and whether the records 

of the plan are kept on a calendar, policy, or fiscal year basis; the 

procedures to be followed in presenting claims for benefits under 

the plan including the office at the Department of Labor through 

which participants and beneficiaries may seek assistance or information regarding their rights under this Act and the Health Insurance Portability and Accountability Act of 1996 with respect to 

health benefits that are offered through a group health plan (as defined in section 733(a)(1)), the remedies available under the plan 

for the redress of claims which are denied in whole or in part (including procedures required under section 503 of this Act), and if 

the employer so elects for purposes of complying with section 

701(f)(3)(B)(i), the model notice applicable to the State in which the 

participants and beneficiaries reside. An association health plan 

shall include in its summary plan description, in connection with 

each benefit option, a description of the form of solvency or guarantee fund protection secured pursuant to this Act or applicable 

State law, if any. 

* * * * * * * 

PART 5—ADMINISTRATION AND ENFORCEMENT

CRIMINAL PENALTIES

SEC. 501. (a) Any person who willfully violates any provision of 

part 1 of this subtitle, or any regulation or order issued under any 

such provision, shall upon conviction be fined not more than 

$100,000 or imprisoned not more than 10 years, or both; except 

that in the case of such violation by a person not an individual, the 

fine imposed upon such person shall be a fine not exceeding 

$500,000. 

(b) Any person that violates section 519 shall upon conviction be 

imprisoned not more than 10 years or fined under title 18, United 

States Code, or both. 

(c) Any person who willfully falsely represents, to any employee, 

any employee’s beneficiary, any employer, the Secretary, or any 

State, a plan or other arrangement established or maintained for 

the purpose of offering or providing any benefit described in section 

3(1) to employees or their beneficiaries as— 

(1) being an association health plan which has been certified 

under part 8; 

(2) having been established or maintained under or pursuant 

to one or more collective bargaining agreements which are 

reached pursuant to collective bargaining described in section 

8(d) of the National Labor Relations Act (29 U.S.C. 158(d)) or 

paragraph Fourth of section 2 of the Railway Labor Act (45 

U.S.C. 152, paragraph Fourth) or which are reached pursuant 


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to labor-management negotiations under similar provisions of 

State public employee relations laws; or 

(3) being a plan or arrangement described in section 

3(40)(A)(i), 

shall, upon conviction, be imprisoned not more than 5 years, be 

fined under title 18, United States Code, or both. 

CIVIL ENFORCEMENT

SEC. 502. (a) A civil action may be brought— 

(1) by a participant or beneficiary— 

(A) for the relief provided for in subsection (c) of this section, or 

(B) to recover benefits due to him under the terms of his 

plan, to enforce his rights under the terms of the plan, or 

to clarify his rights to future benefits under the terms of 

the plan; 

(2) by the Secretary, or by a participant, beneficiary or fiduciary for appropriate relief under section 409; 

(3) by a participant, beneficiary, or fiduciary (A) to enjoin 

any act or practice which violates any provision of this title or 

the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any 

provisions of this title or the terms of the plan; 

(4) by the Secretary, or by a participant, or beneficiary for 

appropriate relief in the case of a violation of 105(c); 

(5) except as otherwise provided in subsection (b), by the Secretary (A) to enjoin any act or practice which violates any provision of this title, or (B) to obtain other appropriate equitable 

relief (i) to redress such violation or (ii) to enforce any provision of this title; 

(6) by the Secretary to collect any civil penalty under paragraph (2), (4), (5), (6), (7), (8), or (9) of subsection (c) or under 

subsection (i) or (l); 

(7) by a State to enforce compliance with a qualified medical 

child support order (as defined in section 609(a)(2)(A)); 

(8) by the Secretary, or by an employer or other person referred to in section 101(f)(1), (A) to enjoin any act or practice 

which violates subsection (f) of section 101, or (B) to obtain appropriate equitable relief (i) to redress such violation or (ii) to 

enforce such subsection; 

(9) in the event that the purchase of an insurance contract 

or insurance annuity in connection with termination of an individual’s status as a participant covered under a pension plan 

with respect to all or any portion of the participant’s pension 

benefit under such plan constitutes a violation of part 4 of this 

title or the terms of the plan, by the Secretary, by any individual who was a participant or beneficiary at the time of the 

alleged violation, or by a fiduciary, to obtain appropriate relief, 

including the posting of security if necessary, to assure receipt 

by the participant or beneficiary of the amounts provided or to 

be provided by such insurance contract or annuity, plus reasonable prejudgment interest on such amounts; 

(10) in the case of a multiemployer plan that has been certified by the actuary to be in endangered or critical status 

under section 305, if the plan sponsor— 


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(A) has not adopted a funding improvement or rehabilitation plan under that section by the deadline established 

in such section, or 

(B) fails to update or comply with the terms of the funding improvement or rehabilitation plan in accordance with 

the requirements of such section, 

by an employer that has an obligation to contribute with respect to the multiemployer plan or an employee organization 

that represents active participants in the multiemployer plan, 

for an order compelling the plan sponsor to adopt a funding 

improvement or rehabilitation plan or to update or comply 

with the terms of the funding improvement or rehabilitation 

plan in accordance with the requirements of such section and 

the funding improvement or rehabilitation plan; or 

(11) in the case of a multiemployer plan, by an employee representative, or any employer that has an obligation to contribute to the plan, (A) to enjoin any act or practice which violates subsection (k) of section 101 (or, in the case of an employer, subsection (l) of such section), or (B) to obtain appropriate equitable relief (i) to redress such violation or (ii) to enforce such subsection. 

(b)(1) In the case of a plan which is qualified under section 

401(a), 403(a), or 405(a) of the Internal Revenue Code of 1986 (or 

with respect to which an application to so qualify has been filed 

and has not been finally determined) the Secretary may exercise 

his authority under subsection (a)(5) with respect to a violation of, 

or the enforcement of, parts 2 and 3 of this subtitle (relating to participation, vesting, and funding), only if— 

(A) requested by the Secretary of the Treasury, or 

(B) one or more participants, beneficiaries, or fiduciaries, of 

such plan request in writing (in such manner as the Secretary 

shall prescribe by regulation) that he exercise such authority 

on their behalf. In the case of such a request under this paragraph he may exercise such authority only if he determines 

that such violation affects, or such enforcement is necessary to 

protect, claims of participants or beneficiaries to benefits under 

the plan. 

(2) The Secretary shall not initiate an action to enforce section 

515. 

(3) Except as provided in subsections (c)(9) and (a)(6) (with respect to collecting civil penalties under subsection (c)(9)), the Secretary is not authorized to enforce under this part any requirement 

of part 7 against a health insurance issuer offering health insurance coverage in connection with a group health plan (as defined 

in section 706(a)(1)). Nothing in this paragraph shall affect the authority of the Secretary to issue regulations to carry out such part. 

(c)(1) Any administrator (A) who fails to meet the requirements 

of paragraph (1) or (4) of section 606, section 101(e)(1), section 

101(f), or section 105(a) with respect to a participant or beneficiary, 

or (B) who fails or refuses to comply with a request for any information which such administrator is required by this title to furnish 

to a participant or beneficiary (unless such failure or refusal results from matters reasonably beyond the control of the administrator) by mailing the material requested to the last known address 

of the requesting participant or beneficiary within 30 days after 


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such request may in the court’s discretion be personally liable to 

such participant or beneficiary in the amount of up to $100 a day 

from the date of such failure or refusal, and the court may in its 

discretion order such other relief as it deems proper. For purposes 

of this paragraph, each violation described in subparagraph (A) 

with respect to any single participant, and each violation described 

in subparagraph (B) with respect to any single participant or beneficiary, shall be treated as a separate violation. 

(2) The Secretary may assess a civil penalty against any plan ad- ministrator of up to $1,000 a day from the date of such plan administrator’s failure or refusal to file the annual report required to be 

filed with the Secretary under section 101(b)(1). For purposes of 

this paragraph, an annual report that has been rejected under section 104(a)(4) for failure to provide material information shall not 

be treated as having been filed with the Secretary. 

(3) Any employer maintaining a plan who fails to meet the notice 

requirement of section 101(d) with respect to any participant or 

beneficiary or who fails to meet the requirements of section 

101(e)(2) with respect to any person or who fails to meet the requirements of section 302(d)(12)(E) with respect to any person may 

in the court’s discretion be liable to such participant or beneficiary 

or to such person in the amount of up to $100 a day from the date 

of such failure, and the court may in its discretion order such other 

relief as it deems proper. 

(4) The Secretary may assess a civil penalty of not more than $1,000 a day for each violation by any person of subsection (j), (k), 

or (l) of section 101 or section 514(e)(3). 

(5) The Secretary may assess a civil penalty against any person of up to $1,000 a day from the date of the person’s failure or refusal to file the information required to be filed by such person 

with the Secretary under regulations prescribed pursuant to section 101(g). 

(6) If, within 30 days of a request by the Secretary to a plan administrator for documents under section 104(a)(6), the plan administrator fails to furnish the material requested to the Secretary, the 

Secretary may assess a civil penalty against the plan administrator 

of up to $100 a day from the date of such failure (but in no event 

in excess of $1,000 per request). No penalty shall be imposed under 

this paragraph for any failure resulting from matters reasonably 

beyond the control of the plan administrator. 

(7) The Secretary may assess a civil penalty against a plan administrator of up to $100 a day from the date of the plan administrator’s failure or refusal to provide notice to participants and beneficiaries in accordance with subsection (i) or (m) of section 101. For 

purposes of this paragraph, each violation with respect to any single participant or beneficiary shall be treated as a separate violation. 

(8) The Secretary may assess against any plan sponsor of a 

multiemployer plan a civil penalty of not more than $1,100 per 

day— 

(A) for each violation by such sponsor of the requirement 

under section 305 to adopt by the deadline established in 

that section a funding improvement plan or rehabilitation 

plan with respect to a multiemployer plan which is in endangered or critical status, or 


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53 

(B) in the case of a plan in endangered status which is 

not in seriously endangered status, for failure by the plan 

to meet the applicable benchmarks under section 305 by 

the end of the funding improvement period with respect to 

the plan. 

(9)(A) The Secretary may assess a civil penalty against any em- ployer of up to $100 a day from the date of the employer’s failure 

to meet the notice requirement of section 701(f)(3)(B)(i)(I). For purposes of this subparagraph, each violation with respect to any single employee shall be treated as a separate violation. 

(B) The Secretary may assess a civil penalty against any plan ad- ministrator of up to $100 a day from the date of the plan administrator’s failure to timely provide to any State the information required to be disclosed under section 701(f)(3)(B)(ii). For purposes of 

this subparagraph, each violation with respect to any single participant or beneficiary shall be treated as a separate violation. 

(10) SECRETARIAL ENFORCEMENT AUTHORITY RELATING TO

USE OF GENETIC INFORMATION.— (A) GENERAL RULE.—The Secretary may impose a penalty against any plan sponsor of a group health plan, or 

any health insurance issuer offering health insurance coverage in connection with the plan, for any failure by such 

sponsor or issuer to meet the requirements of subsection 

(a)(1)(F), (b)(3), (c), or (d) of section 702 or section 701 or 

702(b)(1) with respect to genetic information, in connection 

with the plan. 

(B) AMOUNT.— (i) IN GENERAL.—The amount of the penalty imposed by subparagraph (A) shall be $100 for each day in the 

noncompliance period with respect to each participant 

or beneficiary to whom such failure relates. 

(ii) NONCOMPLIANCE PERIOD.—For purposes of this 

paragraph, the term ‘‘noncompliance period’’ means, 

with respect to any failure, the period— 

(I) beginning on the date such failure first occurs; and 

(II) ending on the date the failure is corrected. 

(C) MINIMUM PENALTIES WHERE FAILURE DISCOVERED.— Notwithstanding clauses (i) and (ii) of subparagraph (D): 

(i) IN GENERAL.—In the case of 1 or more failures 

with respect to a participant or beneficiary— 

(I) which are not corrected before the date on 

which the plan receives a notice from the Secretary of such violation; and 

(II) which occurred or continued during the period involved; 

the amount of penalty imposed by subparagraph (A) 

by reason of such failures with respect to such participant or beneficiary shall not be less than $2,500. 

(ii) HIGHER MINIMUM PENALTY WHERE VIOLATIONS

ARE MORE THAN DE MINIMIS.—To the extent violations 

for which any person is liable under this paragraph for 

any year are more than de minimis, clause (i) shall be 

applied by substituting ‘‘$15,000’’ for ‘‘$2,500’’ with respect to such person. 


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(D) LIMITATIONS.— (i) PENALTY NOT TO APPLY WHERE FAILURE NOT DIS- COVERED EXERCISING REASONABLE DILIGENCE.—No 

penalty shall be imposed by subparagraph (A) on any 

failure during any period for which it is established to 

the satisfaction of the Secretary that the person otherwise liable for such penalty did not know, and exercising reasonable diligence would not have known, 

that such failure existed. 

(ii) PENALTY NOT TO APPLY TO FAILURES CORRECTED

WITHIN CERTAIN PERIODS.—No penalty shall be imposed by subparagraph (A) on any failure if— 

(I) such failure was due to reasonable cause and 

not to willful neglect; and 

(II) such failure is corrected during the 30-day 

period beginning on the first date the person otherwise liable for such penalty knew, or exercising 

reasonable diligence would have known, that such 

failure existed. 

(iii) OVERALL LIMITATION FOR UNINTENTIONAL FAIL- URES.—In the case of failures which are due to reasonable cause and not to willful neglect, the penalty imposed by subparagraph (A) for failures shall not exceed the amount equal to the lesser of— 

(I) 10 percent of the aggregate amount paid or 

incurred by the plan sponsor (or predecessor plan 

sponsor) during the preceding taxable year for 

group health plans; or (II) $500,000. 

(E) WAIVER BY SECRETARY.—In the case of a failure 

which is due to reasonable cause and not to willful neglect, 

the Secretary may waive part or all of the penalty imposed 

by subparagraph (A) to the extent that the payment of 

such penalty would be excessive relative to the failure involved. 

(F) DEFINITIONS.—Terms used in this paragraph which 

are defined in section 733 shall have the meanings provided such terms in such section. 

(11) The Secretary and the Secretary of Health and Human Services shall maintain such ongoing consultation as may be necessary 

and appropriate to coordinate enforcement under this subsection 

with enforcement under section 1144(c)(8) of the Social Security 

Act. 

(12) The Secretary may assess a civil penalty against any sponsor of a CSEC plan of up to $100 a day from the date of 

the plan sponsor’s failure to comply with the requirements of 

section 306(j)(3) to establish or update a funding restoration 

plan. 

(d)(1) An employee benefit plan may sue or be sued under this 

title as an entity. Service of summons, subpena, or other legal process of a court upon a trustee or an administrator of an employee 

benefit plan in his capacity as such shall constitute service upon 

the employee benefit plan. In a case where a plan has not designated in the summary plan description of the plan an individual 

as agent for the service of legal process, service upon the Secretary 


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shall constitute such service. The Secretary, not later than 15 days 

after receipt of service under the preceding sentence, shall notify 

the administrator or any trustee of the plan of receipt of such service. 

(2) Any money judgment under this title against an employee 

benefit plan shall be enforceable only against the plan as an entity 

and shall not be enforceable against any other person unless liability against such person is established in his individual capacity 

under this title. 

(e)(1) Except for actions under subsection (a)(1)(B) of this section, 

the district courts of the United States shall have exclusive jurisdiction of civil actions under this title brought by the Secretary or 

by a participant, beneficiary, fiduciary, or any person referred to in 

section 101(f)(1). State courts of competent jurisdiction and district 

courts of the United States shall have concurrent jurisdiction of actions under paragraphs (1)(B) and (7) of subsection (a) of this section. 

(2) Where an action under this title is brought in a district court 

of the United States, it may be brought in the district where the 

plan is administered, where the breach took place, or where a defendant resides or may be found, and process may be served in any 

other district where a defendant resides or may be found. 

(f) The district courts of the United States shall have jurisdiction, 

without respect to the amount in controversy or the citizenship of 

the parties, to grant the relief provided for in subsection (a) of this 

section in any action. 

(g)(1) In any action under this title (other than an action described in paragraph (2)) by a participant, beneficiary, or fiduciary, 

the court in its discretion may allow a reasonable attorney’s fee 

and costs of action to either party. 

(2) In any action under this title by a fiduciary for or on behalf 

of a plan to enforce section 515 in which a judgment in favor of the 

plan is awarded, the court shall award the plan— 

(A) the unpaid contributions, 

(B) interest on the unpaid contributions, 

(C) an amount equal to the greater of— 

(i) interest on the unpaid contributions, or 

(ii) liquidated damages provided for under the plan in an 

amount not in excess of 20 percent (or such higher percentage as may be permitted under Federal or State law) 

of the amount determined by the court under subparagraph (A), 

(D) reasonable attorney’s fees and costs of the action, to be 

paid by the defendant, and 

(E) such other legal or equitable relief as the court deems appropriate. 

For purposes of this paragraph, interest on unpaid contributions 

shall be determined by using the rate provided under the plan, or, 

if none, the rate prescribed under section 6621 of the Internal Revenue Code of 1986. 

(h) A copy of the complaint in any action under this title by a 

participant, beneficiary, or fiduciary (other than an action brought 

by one or more participants or beneficiaries under subsection 

(a)(1)(B) which is solely for the purpose of recovering benefits due 

such participants under the terms of the plan) shall be served upon 


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56 

the Secretary and the Secretary of the Treasury by certified mail. 

Either Secretary shall have the right in his discretion to intervene 

in any action, except that the Secretary of the Treasury may not 

intervene in any action under part 4 of this subtitle. If the Secretary brings an action under subsection (a) on behalf of a participant or beneficiary, he shall notify the Secretary of the Treasury. 

(i) In the case of a transaction prohibited by section 406 by a 

party in interest with respect to a plan to which this part applies, 

the Secretary may assess a civil penalty against such party in interest. The amount of such penalty may not exceed 5 percent of the 

amount involved in each such transaction (as defined in section 

4975(f)(4) of the Internal Revenue Code of 1986) for each year or 

part thereof during which the prohibited transaction continues, except that, if the transaction is not corrected (in such manner as the 

Secretary shall prescribe in regulations which shall be consistent 

with section 4975(f)(5) of such Code) within 90 days after notice 

from the Secretary (or such longer period as the Secretary may permit), such penalty may be in an amount not more than 100 percent 

of the amount involved. This subsection shall not apply to a transaction with respect to a plan described in section 4975(e)(1) of such 

Code. 

(j) In all civil actions under this title, attorneys appointed by the 

Secretary may represent the Secretary (except as provided in section 518(a) of title 28, United States Code), but all such litigation 

shall be subject to the direction and control of the Attorney General. 

(k) Suits by an administrator, fiduciary, participant, or beneficiary of an employee benefit plan to review a final order of the 

Secretary, to restrain the Secretary from taking any action contrary to the provisions of this Act, or to compel him to take action 

required under this title, may be brought in the district court of the 

United States for the district where the plan has its principal office, or in the United States District Court for the District of Columbia. 

(l)(1) In the case of— 

(A) any breach of fiduciary responsibility under (or other violation of) part 4 by a fiduciary, or 

(B) any knowing participation in such a breach or violation 

by any other person, 

the Secretary shall assess a civil penalty against such fiduciary or 

other person in an amount equal to 20 percent of the applicable recovery amount. 

(2) For purposes of paragraph (1), the term ‘‘applicable recovery 

amount’’ means any amount which is recovered from a fiduciary or 

other person with respect to a breach or violation described in 

paragraph (1)— 

(A) pursuant to any settlement agreement with the Secretary, or 

(B) ordered by a court to be paid by such fiduciary or other 

person to a plan or its participants and beneficiaries in a judicial proceeding instituted by the Secretary under subsection 

(a)(2) or (a)(5). 

(3) The Secretary may, in the Secretary’s sole discretion, waive 

or reduce the penalty under paragraph (1) if the Secretary determines in writing that— 


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57 

(A) the fiduciary or other person acted reasonably and in 

good faith, or 

(B) it is reasonable to expect that the fiduciary or other person will not be able to restore all losses to the plan (or to provide the relief ordered pursuant to subsection (a)(9)) without 

severe financial hardship unless such waiver or reduction is 

granted. 

(4) The penalty imposed on a fiduciary or other person under this 

subsection with respect to any transaction shall be reduced by the 

amount of any penalty or tax imposed on such fiduciary or other 

person with respect to such transaction under subsection (i) of this 

section and section 4975 of the Internal Revenue Code of 1986. 

(m) In the case of a distribution to a pension plan participant or 

beneficiary in violation of section 206(e) by a plan fiduciary, the 

Secretary shall assess a penalty against such fiduciary in an 

amount equal to the value of the distribution. Such penalty shall 

not exceed $10,000 for each such distribution. 

(n) ASSOCIATION HEALTH PLAN CEASE AND DESIST ORDERS.— 

(1) IN GENERAL.—Subject to paragraph (2), upon application 

by the Secretary showing the operation, promotion, or marketing of an association health plan (or similar arrangement 

providing benefits consisting of medical care (as defined in section 733(a)(2))) that— 

(A) is not certified under part 8, is subject under section 

514(b)(6) to the insurance laws of any State in which the 

plan or arrangement offers or provides benefits, and is not 

licensed, registered, or otherwise approved under the insurance laws of such State; or 

(B) is an association health plan certified under part 8 

and is not operating in accordance with the requirements 

under part 8 for such certification, 

a district court of the United States shall enter an order requiring that the plan or arrangement cease activities. 

(2) EXCEPTION.—Paragraph (1) shall not apply in the case of 

an association health plan or other arrangement if the plan or 

arrangement shows that— 

(A) all benefits under it referred to in paragraph (1) consist of health insurance coverage; and 

(B) with respect to each State in which the plan or arrangement offers or provides benefits, the plan or arrangement is operating in accordance with applicable State laws 

that are not superseded under section 514. 

(3) ADDITIONAL EQUITABLE RELIEF.—The court may grant 

such additional equitable relief, including any relief available 

under this title, as it deems necessary to protect the interests of 

the public and of persons having claims for benefits against the 

plan. 

CLAIMS PROCEDURE

SEC. 503. (a) IN GENERAL.—In accordance with regulations of the 

Secretary, every employee benefit plan shall— 

(1) provide adequate notice in writing to any participant or 

beneficiary whose claim for benefits under the plan has been 

denied, setting forth the specific reasons for such denial, writVerDate Sep 11 2014 05:16 Mar 18, 2017 Jkt 069006 PO 00000 Frm 00057 Fmt 6659 Sfmt 6602 E:\HR\OC\HR043.XXX HR043

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58 

ten in a manner calculated to be understood by the participant, 

and 

(2) afford a reasonable opportunity to any participant whose 

claim for benefits has been denied for a full and fair review by 

the appropriate named fiduciary of the decision denying the 

claim. 

(b) ASSOCIATION HEALTH PLANS.—The terms of each association 

health plan which is or has been certified under part 8 shall require 

the board of trustees or the named fiduciary (as applicable) to ensure that the requirements of this section are met in connection with 

claims filed under the plan. 

* * * * * * * 

COORDINATION AND RESPONSIBILITY OF AGENCIES ENFORCING EMPLOYEE RETIREMENT INCOME SECURITY ACT AND RELATED FEDERAL

LAWS

SEC. 506. (a) COORDINATION WITH OTHER AGENCIES AND DEPARTMENTS.—In order to avoid unnecessary expense and duplication of 

functions among Government agencies, the Secretary may make 

such arrangements or agreements for cooperation or mutual assistance in the performance of his functions under this title and the 

functions of any such agency as he may find to be practicable and 

consistent with law. The Secretary may utilize, on a reimbursable 

or other basis, the facilities or services of any department, agency, 

or establishment of the United States or of any State or political 

subdivision of a State, including the services of any of its employees, with the lawful consent of such department, agency, or establishment; and each department, agency, or establishment of the 

United States is authorized and directed to cooperate with the Secretary and, to the extent permitted by law, to provide such information and facilities as he may request for his assistance in the 

performance of his functions under this title. The Attorney General 

or his representative shall receive from the Secretary for appropriate action such evidence developed in the performance of his 

functions under this title as may be found to warrant consideration 

for criminal prosecution under the provisions of this title or other 

Federal law. 

(b) RESPONSIBILITY FOR DETECTING AND INVESTIGATING CIVIL

AND CRIMINAL VIOLATIONS OF EMPLOYEE RETIREMENT INCOME SECURITY ACT AND RELATED FEDERAL LAWS.—The Secretary shall 

have the responsibility and authority to detect and investigate and 

refer, where appropriate, civil and criminal violations related to the 

provisions of this title and other related Federal laws, including the 

detection, investigation, and appropriate referrals of related violations of title 18 of the United States Code. Nothing in this subsection shall be construed to preclude other appropriate Federal 

agencies from detecting and investigating civil and criminal violations of this title and other related Federal laws. 

(c) COORDINATION OF ENFORCEMENT WITH STATES WITH RESPECT

TO CERTAIN ARRANGEMENTS.—A State may enter into an agreement with the Secretary for delegation to the State of some or all 

of the Secretary’s authority under sections 502 and 504 to enforce 

the requirements under part 7 in connection with multiple emVerDate Sep 11 2014 05:16 Mar 18, 2017 Jkt 069006 PO 00000 Frm 00058 Fmt 6659 Sfmt 6602 E:\HR\OC\HR043.XXX HR043

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59 

ployer welfare arrangements, providing medical care (within the 

meaning of section 733(a)(2)), which are not group health plans. 

(d) CONSULTATION WITH STATES WITH RESPECT TO ASSOCIATION

HEALTH PLANS.— (1) AGREEMENTS WITH STATES.—The Secretary shall consult 

with the State recognized under paragraph (2) with respect to 

an association health plan regarding the exercise of— 

(A) the Secretary’s authority under sections 502 and 504 

to enforce the requirements for certification under part 8; 

and 

(B) the Secretary’s authority to certify association health 

plans under part 8 in accordance with regulations of the 

Secretary applicable to certification under part 8. 

(2) RECOGNITION OF PRIMARY DOMICILE STATE.—In carrying 

out paragraph (1), the Secretary shall ensure that only one 

State will be recognized, with respect to any particular association health plan, as the State with which consultation is required. In carrying out this paragraph— 

(A) in the case of a plan which provides health insurance 

coverage (as defined in section 812(a)(3)), such State shall 

be the State with which filing and approval of a policy type 

offered by the plan was initially obtained, and 

(B) in any other case, the Secretary shall take into account the places of residence of the participants and beneficiaries under the plan and the State in which the trust is 

maintained. 

* * * * * * * 

EFFECT ON OTHER LAWS

SEC. 514. (a) Except as provided in subsection (b) of this section, 

the provisions of this title and title IV shall supersede any and all 

State laws insofar as they may now or hereafter relate to any employee benefit plan described in section 4(a) and not exempt under 

section 4(b). This section shall take effect on January 1, 1975. 

(b)(1) This section shall not apply with respect to any cause of 

action which arose, or any act or omission which occurred, before 

January 1, 1975. 

(2)(A) Except as provided in subparagraph (B), nothing in this 

title shall be construed to exempt or relieve any person from any 

law of any State which regulates insurance, banking, or securities. 

(B) Neither an employee benefit plan described in section 4(a), 

which is not exempt under section 4(b) (other than a plan established primarily for the purpose of providing death benefits), nor 

any trust established under such a plan, shall be deemed to be an 

insurance company or other insurer, bank, trust company, or investment company or to be engaged in the business of insurance 

or banking for purposes of any law of any State purporting to regulate insurance companies, insurance contracts, banks, trust companies, or investment companies. 

(3) Nothing in this section shall be construed to prohibit use by 

the Secretary of services or facilities of a State agency as permitted 

under section 506 of this Act. 

(4) øSubsection (a)¿ Subsections (a) and (f) shall not apply to any 

generally applicable criminal law of a State. 


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(5)(A) Except as provided in subparagraph (B), øsubsection (a)¿ 

subsection (a) of this section and subsections (a)(2)(B) and (b) of section 805 shall not apply to the Hawaii Prepaid Health Care Act 

(Haw. Rev. Stat. §§ 393–1 through 393–51). 

(B) Nothing in subparagraph (A) shall be construed to exempt 

from øsubsection (a)¿ subsection (a) of this section or subsection 

(a)(2)(B) or (b) of section 805— (i) any State tax law relating to employee benefit plans, or 

(ii) any amendment of the Hawaii Prepaid Health Care Act 

enacted after September 2, 1974, to the extent it provides for 

more than the effective administration of such Act as in effect 

on such date. 

(C) Notwithstanding subparagraph (A), parts 1 and 4 of this subtitle, and the preceding sections of this part to the extent they govern matters which are governed by the provisions of such parts 1 

and 4, shall supersede the Hawaii Prepaid Health Care Act (as in 

effect on or after the date of the enactment of this paragraph ), but 

the Secretary may enter into cooperative arrangements under this 

paragraph and section 506 with officials of the State of Hawaii to 

assist them in effectuating the policies of provisions of such Act 

which are superseded by such parts 1 and 4 and the preceding sections of this part. 

(6)(A) Notwithstanding any other provision of this section— 

(i) in the case of an employee welfare benefit plan which is 

a multiple employer welfare arrangement and is fully insured 

(or which is a multiple employer welfare arrangement subject 

to an exemption under subparagraph (B)), any law of any State 

which regulates insurance may apply to such arrangement to 

the extent that such law provides— 

(I) standards, requiring the maintenance of specified levels of reserves and specified levels of contributions, which 

any such plan, or any trust established under such a plan, 

must meet in order to be considered under such law able 

to pay benefits in full when due, and 

(II) provisions to enforce such standards, øand¿ 

(ii) in the case of any other employee welfare benefit plan 

which is a multiple employer welfare arrangement, and which 

does not provide medical care (within the meaning of section 

733(a)(2)), in addition to this title, any law of any State which 

regulates insurance may apply to the extent not inconsistent 

with the preceding sections of this øtitle.¿ title, and 

(iii) subject to subparagraph (E), in the case of any other employee welfare benefit plan which is a multiple employer welfare 

arrangement and which provides medical care (within the 

meaning of section 733(a)(2)), any law of any State which regulates insurance may apply. 

(B) The Secretary may, under regulations which may be prescribed by the Secretary, exempt from subparagraph (A)(ii), individually or by class, multiple employer welfare arrangements 

which are not fully insured. Any such exemption may be granted 

with respect to any arrangement or class of arrangements only if 

such arrangement or each arrangement which is a member of such 

class meets the requirements of section 3(1) and section 4 necessary to be considered an employee welfare benefit plan to which 

this title applies. 


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61 

(C) Nothing in subparagraph (A) shall affect the manner or extent to which the provisions of this title apply to an employee welfare benefit plan which is not a multiple employer welfare arrangement and which is a plan, fund, or program participating in, subscribing to, or otherwise using a multiple employer welfare arrangement to fund or administer benefits to such plan’s participants and beneficiaries. 

(D) For purposes of this paragraph, a multiple employer welfare 

arrangement shall be considered fully insured only if the terms of 

the arrangement provide for benefits the amount of all of which the 

Secretary determines are guaranteed under a contract, or policy of 

insurance, issued by an insurance company, insurance service, or 

insurance organization, qualified to conduct business in a State. 

(E) The preceding subparagraphs of this paragraph do not apply 

with respect to any State law in the case of an association health 

plan which is certified under part 8. 

(7) Subsection (a) shall not apply to qualified domestic relations 

orders (within the meaning of section 206(d)(3)(B)(i)), qualified 

medical child support orders (within the meaning of section 

609(a)(2)(A)), and the provisions of law referred to in section 

609(a)(2)(B)(ii) to the extent they apply to qualified medical child 

support orders. 

(8) Subsection (a) of this section shall not be construed to preclude any State cause of action— 

(A) with respect to which the State exercises its acquired 

rights under section 609(b)(3) with respect to a group health 

plan (as defined in section 607(1)), or 

(B) for recoupment of payment with respect to items or services pursuant to a State plan for medical assistance approved 

under title XIX of the Social Security Act which would not 

have been payable if such acquired rights had been executed 

before payment with respect to such items or services by the 

group health plan. 

(9) For additional provisions relating to group health plans, see 

section 731. 

(c) For purposes of this section: 

(1) The term ‘‘State law’’ includes all laws, decisions, rules, 

regulations, or other State action having the effect of law, of 

any State. A law of the United States applicable only to the 

District of Columbia shall be treated as a State law rather 

than a law of the United States. 

(2) The term ‘‘State’’ includes a State, any political subdivisions thereof, or any agency or instrumentality of either, which 

purports to regulate, directly or indirectly, the terms and conditions of employee benefit plans covered by this title. 

(d) øNothing¿ (1) Except as provided in paragraph (2), nothing in 

this title shall be construed to alter, amend, modify, invalidate, impair, or supersede any law of the United States (except as provided 

in sections 111 and 507(b)) or any rule or regulation issued under 

any such law. 

(2) Nothing in any other provision of law enacted on or after the 

date of the enactment of the Small Business Health Fairness Act of 

2017 shall be construed to alter, amend, modify, invalidate, impair, 

or supersede any provision of this title, except by specific cross-reference to the affected section. 


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(e)(1) Notwithstanding any other provision of this section, this 

title shall supersede any law of a State which would directly or indirectly prohibit or restrict the inclusion in any plan of an automatic contribution arrangement. The Secretary may prescribe regulations which would establish minimum standards that such an arrangement would be required to satisfy in order for this subsection 

to apply in the case of such arrangement. 

(2) For purposes of this subsection, the term ‘‘automatic contribution arrangement’’ means an arrangement— 

(A) under which a participant may elect to have the plan 

sponsor make payments as contributions under the plan on behalf of the participant, or to the participant directly in cash, 

(B) under which a participant is treated as having elected to 

have the plan sponsor make such contributions in an amount 

equal to a uniform percentage of compensation provided under 

the plan until the participant specifically elects not to have 

such contributions made (or specifically elects to have such 

contributions made at a different percentage), and 

(C) under which such contributions are invested in accordance with regulations prescribed by the Secretary under section 404(c)(5). 

(3)(A) The plan administrator of an automatic contribution arrangement shall, within a reasonable period before such plan year, 

provide to each participant to whom the arrangement applies for 

such plan year notice of the participant’s rights and obligations 

under the arrangement which— 

(i) is sufficiently accurate and comprehensive to apprise the 

participant of such rights and obligations, and 

(ii) is written in a manner calculated to be understood by the 

average participant to whom the arrangement applies. 

(B) A notice shall not be treated as meeting the requirements of 

subparagraph (A) with respect to a participant unless— 

(i) the notice includes an explanation of the participant’s 

right under the arrangement not to have elective contributions 

made on the participant’s behalf (or to elect to have such contributions made at a different percentage), 

(ii) the participant has a reasonable period of time, after receipt of the notice described in clause (i) and before the first 

elective contribution is made, to make such election, and 

(iii) the notice explains how contributions made under the 

arrangement will be invested in the absence of any investment 

election by the participant. 

(f)(1) Except as provided in subsection (b)(4), the provisions of this 

title shall supersede any and all State laws insofar as they may now 

or hereafter preclude, or have the effect of precluding, a health insurance issuer from offering health insurance coverage in connection 

with an association health plan which is certified under part 8. 

(2) Except as provided in paragraphs (4) and (5) of subsection (b) 

of this section— 

(A) In any case in which health insurance coverage of any 

policy type is offered under an association health plan certified 

under part 8 to a participating employer operating in such 

State, the provisions of this title shall supersede any and all 

laws of such State insofar as they may preclude a health insurance issuer from offering health insurance coverage of the same 


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policy type to other employers operating in the State which are 

eligible for coverage under such association health plan, whether or not such other employers are participating employers in 

such plan. 

(B) In any case in which health insurance coverage of any 

policy type is offered in a State under an association health 

plan certified under part 8 and the filing, with the applicable 

State authority (as defined in section 812(a)(9)), of the policy 

form in connection with such policy type is approved by such 

State authority, the provisions of this title shall supersede any 

and all laws of any other State in which health insurance coverage of such type is offered, insofar as they may preclude, upon 

the filing in the same form and manner of such policy form 

with the applicable State authority in such other State, the approval of the filing in such other State. 

(3) Nothing in subsection (b)(6)(E) or the preceding provisions of 

this subsection shall be construed, with respect to health insurance 

issuers or health insurance coverage, to supersede or impair the law 

of any State— 

(A) providing solvency standards or similar standards regarding the adequacy of insurer capital, surplus, reserves, or 

contributions, or 

(B) relating to prompt payment of claims. 

(4) For additional provisions relating to association health plans, 

see subsections (a)(2)(B) and (b) of section 805. 

(5) For purposes of this subsection, the term ‘‘association health 

plan’’ has the meaning provided in section 801(a), and the terms 

‘‘health insurance coverage’’, ‘‘participating employer’’, and ‘‘health 

insurance issuer’’ have the meanings provided such terms in section 

812, respectively. 

* * * * * * * 

PART 7—GROUP HEALTH PLAN REQUIREMENTS

* * * * * * * 

SUBPART C—GENERAL PROVISIONS

SEC. 731. PREEMPTION; STATE FLEXIBILITY; CONSTRUCTION. 

(a) CONTINUED APPLICABILITY OF STATE LAW WITH RESPECT TO

HEALTH INSURANCE ISSUERS.— 

(1) IN GENERAL.—Subject to paragraph (2) and except as provided in subsection (b), this part shall not be construed to supersede any provision of State law which establishes, implements, or continues in effect any standard or requirement solely relating to health insurance issuers in connection with group 

health insurance coverage except to the extent that such standard or requirement prevents the application of a requirement 

of this part. 

(2) CONTINUED PREEMPTION WITH RESPECT TO GROUP HEALTH

PLANS.—Nothing in this part shall be construed to affect or 

modify the provisions of section 514 with respect to group 

health plans. 

(b) SPECIAL RULES IN CASE OF PORTABILITY REQUIREMENTS.— 

(1) IN GENERAL.—Subject to paragraph (2), the provisions of 

this part relating to health insurance coverage offered by a 


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health insurance issuer supersede any provision of State law 

which establishes, implements, or continues in effect a standard or requirement applicable to imposition of a preexisting 

condition exclusion specifically governed by section 701 which 

differs from the standards or requirements specified in such 

section. 

(2) EXCEPTIONS.—Only in relation to health insurance coverage offered by a health insurance issuer, the provisions of 

this part do not supersede any provision of State law to the extent that such provision— 

(A) substitutes for the reference to ‘‘6-month period’’ in 

section 701(a)(1) a reference to any shorter period of time; 

(B) substitutes for the reference to ‘‘12 months’’ and ‘‘18 

months’’ in section 701(a)(2) a reference to any shorter period of time; 

(C) substitutes for the references to ‘‘63 days’’ in sections 

701 (c)(2)(A) and (d)(4)(A) a reference to any greater number of days; 

(D) substitutes for the reference to ‘‘30-day period’’ in 

sections 701 (b)(2) and (d)(1) a reference to any greater period; 

(E) prohibits the imposition of any preexisting condition 

exclusion in cases not described in section 701(d) or expands the exceptions described in such section; 

(F) requires special enrollment periods in addition to 

those required under section 701(f); or 

(G) reduces the maximum period permitted in an affiliation period under section 701(g)(1)(B). 

(c) RULES OF CONSTRUCTION.—Except as provided in section 711, 

nothing in this part or part 8 shall be construed as requiring a 

group health plan or health insurance coverage to provide specific 

benefits under the terms of such plan or coverage. 

(d) DEFINITIONS.—For purposes of this section— 

(1) STATE LAW.—The term ‘‘State law’’ includes all laws, decisions, rules, regulations, or other State action having the effect 

of law, of any State. A law of the United States applicable only 

to the District of Columbia shall be treated as a State law 

rather than a law of the United States. 

(2) STATE.—The term ‘‘State’’ includes a State, the Northern 

Mariana Islands, any political subdivisions of a State or such 

Islands, or any agency or instrumentality of either. 

* * * * * * * 

PART 8—RULES GOVERNING ASSOCIATION 

HEALTH PLANS 

SEC. 801. ASSOCIATION HEALTH PLANS. 

(a) IN GENERAL.—For purposes of this part, the term ‘‘association 

health plan’’ means a group health plan whose sponsor is (or is 

deemed under this part to be) described in subsection (b). 

(b) SPONSORSHIP.—The sponsor of a group health plan is described in this subsection if such sponsor— 

(1) is organized and maintained in good faith, with a constitution and bylaws specifically stating its purpose and proVerDate Sep 11 2014 05:16 Mar 18, 2017 Jkt 069006 PO 00000 Frm 00064 Fmt 6659 Sfmt 6603 E:\HR\OC\HR043.XXX HR043

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viding for periodic meetings on at least an annual basis, as a 

bona fide trade association, a bona fide industry association 

(including a rural electric cooperative association or a rural 

telephone cooperative association), a bona fide professional association, or a bona fide chamber of commerce (or similar bona 

fide business association, including a corporation or similar organization that operates on a cooperative basis (within the 

meaning of section 1381 of the Internal Revenue Code of 1986)), 

for substantial purposes other than that of obtaining or providing medical care; 

(2) is established as a permanent entity which receives the active support of its members and requires for membership payment on a periodic basis of dues or payments necessary to 

maintain eligibility for membership in the sponsor; and 

(3) does not condition membership, such dues or payments, or 

coverage under the plan on the basis of health status-related 

factors with respect to the employees of its members (or affiliated members), or the dependents of such employees, and does 

not condition such dues or payments on the basis of group 

health plan participation. 

Any sponsor consisting of an association of entities which meet the 

requirements of paragraphs (1), (2), and (3) shall be deemed to be 

a sponsor described in this subsection. 

SEC. 802. CERTIFICATION OF ASSOCIATION HEALTH PLANS. 

(a) IN GENERAL.—The applicable authority shall prescribe by regulation a procedure under which, subject to subsection (b), the applicable authority shall certify association health plans which apply 

for certification as meeting the requirements of this part. 

(b) STANDARDS.—Under the procedure prescribed pursuant to subsection (a), in the case of an association health plan that provides 

at least one benefit option which does not consist of health insurance coverage, the applicable authority shall certify such plan as 

meeting the requirements of this part only if the applicable authority is satisfied that the applicable requirements of this part are met 

(or, upon the date on which the plan is to commence operations, will 

be met) with respect to the plan. 

(c) REQUIREMENTS APPLICABLE TO CERTIFIED PLANS.—An association health plan with respect to which certification under this 

part is in effect shall meet the applicable requirements of this part, 

effective on the date of certification (or, if later, on the date on which 

the plan is to commence operations). 

(d) REQUIREMENTS FOR CONTINUED CERTIFICATION.—The applicable authority may provide by regulation for continued certification 

of association health plans under this part. 

(e) CLASS CERTIFICATION FOR FULLY INSURED PLANS.—The applicable authority shall establish a class certification procedure for association health plans under which all benefits consist of health insurance coverage. Under such procedure, the applicable authority 

shall provide for the granting of certification under this part to the 

plans in each class of such association health plans upon appropriate filing under such procedure in connection with plans in such 

class and payment of the prescribed fee under section 807(a). 

(f) CERTIFICATION OF SELF-INSURED ASSOCIATION HEALTH

PLANS.—An association health plan which offers one or more benefit 

options which do not consist of health insurance coverage may be 


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certified under this part only if such plan consists of any of the following: 

(1) A plan which offered such coverage on the date of the enactment of the Small Business Health Fairness Act of 2017. 

(2) A plan under which the sponsor does not restrict membership to one or more trades and businesses or industries and 

whose eligible participating employers represent a broad crosssection of trades and businesses or industries. 

(3) A plan whose eligible participating employers represent 

one or more trades or businesses, or one or more industries, consisting of any of the following: agriculture; equipment and automobile dealerships; barbering and cosmetology; certified public 

accounting practices; child care; construction; dance, theatrical 

and orchestra productions; disinfecting and pest control; financial services; fishing; food service establishments; hospitals; 

labor organizations; logging; manufacturing (metals); mining; 

medical and dental practices; medical laboratories; professional 

consulting services; sanitary services; transportation (local and 

freight); warehousing; wholesaling/distributing; or any other 

trade or business or industry which has been indicated as having average or above-average risk or health claims experience by 

reason of State rate filings, denials of coverage, proposed premium rate levels, or other means demonstrated by such plan in 

accordance with regulations. 

SEC. 803. REQUIREMENTS RELATING TO SPONSORS AND BOARDS OF 

TRUSTEES. 

(a) SPONSOR.—The requirements of this subsection are met with 

respect to an association health plan if the sponsor has met (or is 

deemed under this part to have met) the requirements of section 

801(b) for a continuous period of not less than 3 years ending with 

the date of the application for certification under this part. 

(b) BOARD OF TRUSTEES.—The requirements of this subsection are 

met with respect to an association health plan if the following requirements are met: 

(1) FISCAL CONTROL.—The plan is operated, pursuant to a 

trust agreement, by a board of trustees which has complete fiscal control over the plan and which is responsible for all operations of the plan. 

(2) RULES OF OPERATION AND FINANCIAL CONTROLS.—The 

board of trustees has in effect rules of operation and financial 

controls, based on a 3-year plan of operation, adequate to carry 

out the terms of the plan and to meet all requirements of this 

title applicable to the plan. 

(3) RULES GOVERNING RELATIONSHIP TO PARTICIPATING EMPLOYERS AND TO CONTRACTORS.— 

(A) BOARD MEMBERSHIP.— 

(i) IN GENERAL.—Except as provided in clauses (ii) 

and (iii), the members of the board of trustees are individuals selected from individuals who are the owners, 

officers, directors, or employees of the participating employers or who are partners in the participating employers and actively participate in the business. 

(ii) LIMITATION.— 

(I) GENERAL RULE.—Except as provided in subclauses (II) and (III), no such member is an owner, 


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officer, director, or employee of, or partner in, a 

contract administrator or other service provider to 

the plan. 

(II) LIMITED EXCEPTION FOR PROVIDERS OF SERV- ICES SOLELY ON BEHALF OF THE SPONSOR.—Officers or employees of a sponsor which is a service 

provider (other than a contract administrator) to 

the plan may be members of the board if they constitute not more than 25 percent of the membership 

of the board and they do not provide services to the 

plan other than on behalf of the sponsor. 

(III) TREATMENT OF PROVIDERS OF MEDICAL

CARE.—In the case of a sponsor which is an association whose membership consists primarily of 

providers of medical care, subclause (I) shall not 

apply in the case of any service provider described 

in subclause (I) who is a provider of medical care 

under the plan. 

(iii) CERTAIN PLANS EXCLUDED.—Clause (i) shall not 

apply to an association health plan which is in existence on the date of the enactment of the Small Business 

Health Fairness Act of 2017. 

(B) SOLE AUTHORITY.—The board has sole authority 

under the plan to approve applications for participation in 

the plan and to contract with a service provider to administer the day-to-day affairs of the plan. 

(c) TREATMENT OF FRANCHISE NETWORKS.—In the case of a group 

health plan which is established and maintained by a franchiser for 

a franchise network consisting of its franchisees— 

(1) the requirements of subsection (a) and section 801(a) shall 

be deemed met if such requirements would otherwise be met if 

the franchiser were deemed to be the sponsor referred to in section 801(b), such network were deemed to be an association described in section 801(b), and each franchisee were deemed to 

be a member (of the association and the sponsor) referred to in 

section 801(b); and 

(2) the requirements of section 804(a)(1) shall be deemed met. 

The Secretary may by regulation define for purposes of this subsection the terms ‘‘franchiser’’, ‘‘franchise network’’, and ‘‘franchisee’’. 

SEC. 804. PARTICIPATION AND COVERAGE REQUIREMENTS. 

(a) COVERED EMPLOYERS AND INDIVIDUALS.—The requirements of 

this subsection are met with respect to an association health plan 

if, under the terms of the plan— 

(1) each participating employer must be— 

(A) a member of the sponsor, 

(B) the sponsor, or 

(C) an affiliated member of the sponsor with respect to 

which the requirements of subsection (b) are met, 

except that, in the case of a sponsor which is a professional association or other individual-based association, if at least one 

of the officers, directors, or employees of an employer, or at least 

one of the individuals who are partners in an employer and 

who actively participates in the business, is a member or such 

an affiliated member of the sponsor, participating employers 

may also include such employer; and 


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(2) all individuals commencing coverage under the plan after 

certification under this part must be— 

(A) active or retired owners (including self-employed individuals), officers, directors, or employees of, or partners in, 

participating employers; or 

(B) the beneficiaries of individuals described in subparagraph (A). 

(b) COVERAGE OF PREVIOUSLY UNINSURED EMPLOYEES.—In the 

case of an association health plan in existence on the date of the enactment of the Small Business Health Fairness Act of 2017, an affiliated member of the sponsor of the plan may be offered coverage 

under the plan as a participating employer only if— 

(1) the affiliated member was an affiliated member on the 

date of certification under this part; or 

(2) during the 12-month period preceding the date of the offering of such coverage, the affiliated member has not maintained or contributed to a group health plan with respect to any 

of its employees who would otherwise be eligible to participate 

in such association health plan. 

(c) INDIVIDUAL MARKET UNAFFECTED.—The requirements of this 

subsection are met with respect to an association health plan if, 

under the terms of the plan, no participating employer may provide 

health insurance coverage in the individual market for any employee not covered under the plan which is similar to the coverage 

contemporaneously provided to employees of the employer under the 

plan, if such exclusion of the employee from coverage under the plan 

is based on a health status-related factor with respect to the employee and such employee would, but for such exclusion on such 

basis, be eligible for coverage under the plan. 

(d) PROHIBITION OF DISCRIMINATION AGAINST EMPLOYERS AND

EMPLOYEES ELIGIBLE TO PARTICIPATE.—The requirements of this 

subsection are met with respect to an association health plan if— 

(1) under the terms of the plan, all employers meeting the preceding requirements of this section are eligible to qualify as 

participating employers for all geographically available coverage options, unless, in the case of any such employer, participation or contribution requirements of the type referred to in 

section 2711 of the Public Health Service Act are not met; 

(2) upon request, any employer eligible to participate is furnished information regarding all coverage options available 

under the plan; and 

(3) the applicable requirements of sections 701, 702, and 703 

are met with respect to the plan. 

SEC. 805. OTHER REQUIREMENTS RELATING TO PLAN DOCUMENTS, 

CONTRIBUTION RATES, AND BENEFIT OPTIONS. 

(a) IN GENERAL.—The requirements of this section are met with 

respect to an association health plan if the following requirements 

are met: 

(1) CONTENTS OF GOVERNING INSTRUMENTS.—The instruments governing the plan include a written instrument, meeting 

the requirements of an instrument required under section 

402(a)(1), which— 

(A) provides that the board of trustees serves as the 

named fiduciary required for plans under section 402(a)(1) 


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and serves in the capacity of a plan administrator (referred 

to in section 3(16)(A)); 

(B) provides that the sponsor of the plan is to serve as 

plan sponsor (referred to in section 3(16)(B)); and 

(C) incorporates the requirements of section 806. 

(2) CONTRIBUTION RATES MUST BE NONDISCRIMINATORY.— (A) The contribution rates for any participating small 

employer do not vary on the basis of any health status-related factor in relation to employees of such employer or 

their beneficiaries and do not vary on the basis of the type 

of business or industry in which such employer is engaged. 

(B) Nothing in this title or any other provision of law 

shall be construed to preclude an association health plan, 

or a health insurance issuer offering health insurance coverage in connection with an association health plan, from— 

(i) setting contribution rates based on the claims experience of the plan; or 

(ii) varying contribution rates for small employers in 

a State to the extent that such rates could vary using 

the same methodology employed in such State for regulating premium rates in the small group market with 

respect to health insurance coverage offered in connection with bona fide associations (within the meaning of 

section 2791(d)(3) of the Public Health Service Act), 

subject to the requirements of section 702(b) relating to contribution rates. 

(3) FLOOR FOR NUMBER OF COVERED INDIVIDUALS WITH RE- SPECT TO CERTAIN PLANS.—If any benefit option under the plan 

does not consist of health insurance coverage, the plan has as 

of the beginning of the plan year not fewer than 1,000 participants and beneficiaries. 

(4) MARKETING REQUIREMENTS.— 

(A) IN GENERAL.—If a benefit option which consists of 

health insurance coverage is offered under the plan, Statelicensed insurance agents shall be used to distribute to 

small employers coverage which does not consist of health 

insurance coverage in a manner comparable to the manner 

in which such agents are used to distribute health insurance coverage. 

(B) STATE-LICENSED INSURANCE AGENTS.—For purposes 

of subparagraph (A), the term ‘‘State-licensed insurance 

agents’’ means one or more agents who are licensed in a 

State and are subject to the laws of such State relating to 

licensure, qualification, testing, examination, and continuing education of persons authorized to offer, sell, or solicit health insurance coverage in such State. 

(5) REGULATORY REQUIREMENTS.—Such other requirements 

as the applicable authority determines are necessary to carry 

out the purposes of this part, which shall be prescribed by the 

applicable authority by regulation. 

(b) ABILITY OF ASSOCIATION HEALTH PLANS TO DESIGN BENEFIT

OPTIONS.—Subject to section 514(d), nothing in this part or any 

provision of State law (as defined in section 514(c)(1)) shall be construed to preclude an association health plan, or a health insurance 

issuer offering health insurance coverage in connection with an asVerDate Sep 11 2014 05:16 Mar 18, 2017 Jkt 069006 PO 00000 Frm 00069 Fmt 6659 Sfmt 6603 E:\HR\OC\HR043.XXX HR043

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sociation health plan, from exercising its sole discretion in selecting 

the specific items and services consisting of medical care to be included as benefits under such plan or coverage, except (subject to 

section 514) in the case of (1) any law to the extent that it is not 

preempted under section 731(a)(1) with respect to matters governed 

by section 711, 712, or 713, or (2) any law of the State with which 

filing and approval of a policy type offered by the plan was initially 

obtained to the extent that such law prohibits an exclusion of a specific disease from such coverage. 

SEC. 806. MAINTENANCE OF RESERVES AND PROVISIONS FOR SOLVENCY FOR PLANS PROVIDING HEALTH BENEFITS IN ADDITION TO HEALTH INSURANCE COVERAGE. 

(a) IN GENERAL.—The requirements of this section are met with 

respect to an association health plan if— 

(1) the benefits under the plan consist solely of health insurance coverage; or 

(2) if the plan provides any additional benefit options which 

do not consist of health insurance coverage, the plan— 

(A) establishes and maintains reserves with respect to 

such additional benefit options, in amounts recommended 

by the qualified actuary, consisting of— 

(i) a reserve sufficient for unearned contributions; 

(ii) a reserve sufficient for benefit liabilities which 

have been incurred, which have not been satisfied, and 

for which risk of loss has not yet been transferred, and 

for expected administrative costs with respect to such 

benefit liabilities; 

(iii) a reserve sufficient for any other obligations of 

the plan; and 

(iv) a reserve sufficient for a margin of error and 

other fluctuations, taking into account the specific circumstances of the plan; and 

(B) establishes and maintains aggregate and specific excess/stop loss insurance and solvency indemnification, with 

respect to such additional benefit options for which risk of 

loss has not yet been transferred, as follows: 

(i) The plan shall secure aggregate excess/stop loss 

insurance for the plan with an attachment point which 

is not greater than 125 percent of expected gross annual claims. The applicable authority may by regulation provide for upward adjustments in the amount of 

such percentage in specified circumstances in which the 

plan specifically provides for and maintains reserves in 

excess of the amounts required under subparagraph 

(A). 

(ii) The plan shall secure specific excess/stop loss insurance for the plan with an attachment point which 

is at least equal to an amount recommended by the 

plan’s qualified actuary. The applicable authority may 

by regulation provide for adjustments in the amount of 

such insurance in specified circumstances in which the 

plan specifically provides for and maintains reserves in 

excess of the amounts required under subparagraph 

(A). 


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(iii) The plan shall secure indemnification insurance 

for any claims which the plan is unable to satisfy by 

reason of a plan termination. 

Any person issuing to a plan insurance described in clause (i), (ii), 

or (iii) of subparagraph (B) shall notify the Secretary of any failure 

of premium payment meriting cancellation of the policy prior to undertaking such a cancellation. Any regulations prescribed by the applicable authority pursuant to clause (i) or (ii) of subparagraph (B) 

may allow for such adjustments in the required levels of excess/stop 

loss insurance as the qualified actuary may recommend, taking into 

account the specific circumstances of the plan. 

(b) MINIMUM SURPLUS IN ADDITION TO CLAIMS RESERVES.—In 

the case of any association health plan described in subsection 

(a)(2), the requirements of this subsection are met if the plan establishes and maintains surplus in an amount at least equal to— 

(1) $500,000, or 

(2) such greater amount (but not greater than $2,000,000) as 

may be set forth in regulations prescribed by the applicable authority, considering the level of aggregate and specific excess/ 

stop loss insurance provided with respect to such plan and 

other factors related to solvency risk, such as the plan’s projected levels of participation or claims, the nature of the plan’s 

liabilities, and the types of assets available to assure that such 

liabilities are met. 

(c) ADDITIONAL REQUIREMENTS.—In the case of any association 

health plan described in subsection (a)(2), the applicable authority 

may provide such additional requirements relating to reserves, excess/stop loss insurance, and indemnification insurance as the applicable authority considers appropriate. Such requirements may be 

provided by regulation with respect to any such plan or any class 

of such plans. 

(d) ADJUSTMENTS FOR EXCESS/STOP LOSS INSURANCE.—The applicable authority may provide for adjustments to the levels of reserves otherwise required under subsections (a) and (b) with respect 

to any plan or class of plans to take into account excess/stop loss 

insurance provided with respect to such plan or plans. 

(e) ALTERNATIVE MEANS OF COMPLIANCE.—The applicable authority may permit an association health plan described in subsection 

(a)(2) to substitute, for all or part of the requirements of this section 

(except subsection (a)(2)(B)(iii)), such security, guarantee, holdharmless arrangement, or other financial arrangement as the applicable authority determines to be adequate to enable the plan to fully 

meet all its financial obligations on a timely basis and is otherwise 

no less protective of the interests of participants and beneficiaries 

than the requirements for which it is substituted. The applicable authority may take into account, for purposes of this subsection, evidence provided by the plan or sponsor which demonstrates an assumption of liability with respect to the plan. Such evidence may be 

in the form of a contract of indemnification, lien, bonding, insurance, letter of credit, recourse under applicable terms of the plan in 

the form of assessments of participating employers, security, or other 

financial arrangement. 

(f) MEASURES TO ENSURE CONTINUED PAYMENT OF BENEFITS BY

CERTAIN PLANS IN DISTRESS.— 


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(1) PAYMENTS BY CERTAIN PLANS TO ASSOCIATION HEALTH

PLAN FUND.— (A) IN GENERAL.—In the case of an association health 

plan described in subsection (a)(2), the requirements of this 

subsection are met if the plan makes payments into the Association Health Plan Fund under this subparagraph when 

they are due. Such payments shall consist of annual payments in the amount of $5,000, and, in addition to such 

annual payments, such supplemental payments as the Secretary may determine to be necessary under paragraph (2). 

Payments under this paragraph are payable to the Fund at 

the time determined by the Secretary. Initial payments are 

due in advance of certification under this part. Payments 

shall continue to accrue until a plan’s assets are distributed 

pursuant to a termination procedure. 

(B) PENALTIES FOR FAILURE TO MAKE PAYMENTS.—If any 

payment is not made by a plan when it is due, a late payment charge of not more than 100 percent of the payment 

which was not timely paid shall be payable by the plan to 

the Fund. 

(C) CONTINUED DUTY OF THE SECRETARY.—The Secretary 

shall not cease to carry out the provisions of paragraph (2) 

on account of the failure of a plan to pay any payment 

when due. 

(2) PAYMENTS BY SECRETARY TO CONTINUE EXCESS/STOP

LOSS INSURANCE COVERAGE AND INDEMNIFICATION INSURANCE

COVERAGE FOR CERTAIN PLANS.—In any case in which the applicable authority determines that there is, or that there is reason 

to believe that there will be: (A) A failure to take necessary corrective actions under section 809(a) with respect to an association health plan described in subsection (a)(2); or (B) a termination of such a plan under section 809(b) or 810(b)(8) (and, if 

the applicable authority is not the Secretary, certifies such determination to the Secretary), the Secretary shall determine the 

amounts necessary to make payments to an insurer (designated 

by the Secretary) to maintain in force excess/stop loss insurance 

coverage or indemnification insurance coverage for such plan, if 

the Secretary determines that there is a reasonable expectation 

that, without such payments, claims would not be satisfied by 

reason of termination of such coverage. The Secretary shall, to 

the extent provided in advance in appropriation Acts, pay such 

amounts so determined to the insurer designated by the Secretary. 

(3) ASSOCIATION HEALTH PLAN FUND.— 

(A) IN GENERAL.—There is established on the books of the 

Treasury a fund to be known as the ‘‘Association Health 

Plan Fund’’. The Fund shall be available for making payments pursuant to paragraph (2). The Fund shall be credited with payments received pursuant to paragraph (1)(A), 

penalties received pursuant to paragraph (1)(B); and earnings on investments of amounts of the Fund under subparagraph (B). 

(B) INVESTMENT.—Whenever the Secretary determines 

that the moneys of the fund are in excess of current needs, 

the Secretary may request the investment of such amounts 


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as the Secretary determines advisable by the Secretary of 

the Treasury in obligations issued or guaranteed by the 

United States. 

(g) EXCESS/STOP LOSS INSURANCE.—For purposes of this section— 

(1) AGGREGATE EXCESS/STOP LOSS INSURANCE.—The term 

‘‘aggregate excess/stop loss insurance’’ means, in connection 

with an association health plan, a contract— 

(A) under which an insurer (meeting such minimum 

standards as the applicable authority may prescribe by regulation) provides for payment to the plan with respect to 

aggregate claims under the plan in excess of an amount or 

amounts specified in such contract; 

(B) which is guaranteed renewable; and 

(C) which allows for payment of premiums by any third 

party on behalf of the insured plan. 

(2) SPECIFIC EXCESS/STOP LOSS INSURANCE.—The term ‘‘specific excess/stop loss insurance’’ means, in connection with an 

association health plan, a contract— 

(A) under which an insurer (meeting such minimum 

standards as the applicable authority may prescribe by regulation) provides for payment to the plan with respect to 

claims under the plan in connection with a covered individual in excess of an amount or amounts specified in such 

contract in connection with such covered individual; 

(B) which is guaranteed renewable; and 

(C) which allows for payment of premiums by any third 

party on behalf of the insured plan. 

(h) INDEMNIFICATION INSURANCE.—For purposes of this section, 

the term ‘‘indemnification insurance’’ means, in connection with an 

association health plan, a contract— 

(1) under which an insurer (meeting such minimum standards as the applicable authority may prescribe by regulation) 

provides for payment to the plan with respect to claims under 

the plan which the plan is unable to satisfy by reason of a termination pursuant to section 809(b) (relating to mandatory termination); 

(2) which is guaranteed renewable and noncancellable for 

any reason (except as the applicable authority may prescribe by 

regulation); and 

(3) which allows for payment of premiums by any third party 

on behalf of the insured plan. 

(i) RESERVES.—For purposes of this section, the term ‘‘reserves’’ 

means, in connection with an association health plan, plan assets 

which meet the fiduciary standards under part 4 and such additional requirements regarding liquidity as the applicable authority 

may prescribe by regulation. 

(j) SOLVENCY STANDARDS WORKING GROUP.— 

(1) IN GENERAL.—Within 90 days after the date of the enactment of the Small Business Health Fairness Act of 2017, the 

applicable authority shall establish a Solvency Standards 

Working Group. In prescribing the initial regulations under 

this section, the applicable authority shall take into account the 

recommendations of such Working Group. 


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(2) MEMBERSHIP.—The Working Group shall consist of not 

more than 15 members appointed by the applicable authority. 

The applicable authority shall include among persons invited to 

membership on the Working Group at least one of each of the 

following: 

(A) A representative of the National Association of Insurance Commissioners. 

(B) A representative of the American Academy of Actuaries. 

(C) A representative of the State governments, or their interests. 

(D) A representative of existing self-insured arrangements, or their interests. 

(E) A representative of associations of the type referred to 

in section 801(b)(1), or their interests. 

(F) A representative of multiemployer plans that are 

group health plans, or their interests. 

SEC. 807. REQUIREMENTS FOR APPLICATION AND RELATED REQUIREMENTS. 

(a) FILING FEE.—Under the procedure prescribed pursuant to section 802(a), an association health plan shall pay to the applicable 

authority at the time of filing an application for certification under 

this part a filing fee in the amount of $5,000, which shall be available in the case of the Secretary, to the extent provided in appropriation Acts, for the sole purpose of administering the certification 

procedures applicable with respect to association health plans. 

(b) INFORMATION TO BE INCLUDED IN APPLICATION FOR CERTIFI- CATION.—An application for certification under this part meets the 

requirements of this section only if it includes, in a manner and 

form which shall be prescribed by the applicable authority by regulation, at least the following information: 

(1) IDENTIFYING INFORMATION.—The names and addresses 

of— 

(A) the sponsor; and 

(B) the members of the board of trustees of the plan. 

(2) STATES IN WHICH PLAN INTENDS TO DO BUSINESS.—The 

States in which participants and beneficiaries under the plan 

are to be located and the number of them expected to be located 

in each such State. 

(3) BONDING REQUIREMENTS.—Evidence provided by the 

board of trustees that the bonding requirements of section 412 

will be met as of the date of the application or (if later) commencement of operations. 

(4) PLAN DOCUMENTS.—A copy of the documents governing 

the plan (including any bylaws and trust agreements), the summary plan description, and other material describing the benefits that will be provided to participants and beneficiaries 

under the plan. 

(5) AGREEMENTS WITH SERVICE PROVIDERS.—A copy of any 

agreements between the plan and contract administrators and 

other service providers. 

(6) FUNDING REPORT.—In the case of association health plans 

providing benefits options in addition to health insurance coverage, a report setting forth information with respect to such 

additional benefit options determined as of a date within the 


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120-day period ending with the date of the application, including the following: 

(A) RESERVES.—A statement, certified by the board of 

trustees of the plan, and a statement of actuarial opinion, 

signed by a qualified actuary, that all applicable requirements of section 806 are or will be met in accordance with 

regulations which the applicable authority shall prescribe. 

(B) ADEQUACY OF CONTRIBUTION RATES.—A statement of 

actuarial opinion, signed by a qualified actuary, which sets 

forth a description of the extent to which contribution rates 

are adequate to provide for the payment of all obligations 

and the maintenance of required reserves under the plan 

for the 12-month period beginning with such date within 

such 120-day period, taking into account the expected coverage and experience of the plan. If the contribution rates 

are not fully adequate, the statement of actuarial opinion 

shall indicate the extent to which the rates are inadequate 

and the changes needed to ensure adequacy. 

(C) CURRENT AND PROJECTED VALUE OF ASSETS AND LIABILITIES.—A statement of actuarial opinion signed by a 

qualified actuary, which sets forth the current value of the 

assets and liabilities accumulated under the plan and a 

projection of the assets, liabilities, income, and expenses of 

the plan for the 12-month period referred to in subparagraph (B). The income statement shall identify separately 

the plan’s administrative expenses and claims. 

(D) COSTS OF COVERAGE TO BE CHARGED AND OTHER EX- PENSES.—A statement of the costs of coverage to be charged, 

including an itemization of amounts for administration, reserves, and other expenses associated with the operation of 

the plan. 

(E) OTHER INFORMATION.—Any other information as may 

be determined by the applicable authority, by regulation, as 

necessary to carry out the purposes of this part. 

(c) FILING NOTICE OF CERTIFICATION WITH STATES.—A certification granted under this part to an association health plan shall 

not be effective unless written notice of such certification is filed 

with the applicable State authority of each State in which at least 

25 percent of the participants and beneficiaries under the plan are 

located. For purposes of this subsection, an individual shall be considered to be located in the State in which a known address of such 

individual is located or in which such individual is employed. 

(d) NOTICE OF MATERIAL CHANGES.—In the case of any association health plan certified under this part, descriptions of material 

changes in any information which was required to be submitted 

with the application for the certification under this part shall be 

filed in such form and manner as shall be prescribed by the applicable authority by regulation. The applicable authority may require 

by regulation prior notice of material changes with respect to specified matters which might serve as the basis for suspension or revocation of the certification. 

(e) REPORTING REQUIREMENTS FOR CERTAIN ASSOCIATION

HEALTH PLANS.—An association health plan certified under this 

part which provides benefit options in addition to health insurance 

coverage for such plan year shall meet the requirements of section 


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103 by filing an annual report under such section which shall include information described in subsection (b)(6) with respect to the 

plan year and, notwithstanding section 104(a)(1)(A), shall be filed 

with the applicable authority not later than 90 days after the close 

of the plan year (or on such later date as may be prescribed by the 

applicable authority). The applicable authority may require by regulation such interim reports as it considers appropriate. 

(f) ENGAGEMENT OF QUALIFIED ACTUARY.—The board of trustees 

of each association health plan which provides benefits options in 

addition to health insurance coverage and which is applying for certification under this part or is certified under this part shall engage, 

on behalf of all participants and beneficiaries, a qualified actuary 

who shall be responsible for the preparation of the materials comprising information necessary to be submitted by a qualified actuary 

under this part. The qualified actuary shall utilize such assumptions and techniques as are necessary to enable such actuary to form 

an opinion as to whether the contents of the matters reported under 

this part— 

(1) are in the aggregate reasonably related to the experience 

of the plan and to reasonable expectations; and 

(2) represent such actuary’s best estimate of anticipated experience under the plan. 

The opinion by the qualified actuary shall be made with respect to, 

and shall be made a part of, the annual report. 

SEC. 808. NOTICE REQUIREMENTS FOR VOLUNTARY TERMINATION. 

Except as provided in section 809(b), an association health plan 

which is or has been certified under this part may terminate (upon 

or at any time after cessation of accruals in benefit liabilities) only 

if the board of trustees, not less than 60 days before the proposed 

termination date— 

(1) provides to the participants and beneficiaries a written notice of intent to terminate stating that such termination is intended and the proposed termination date; 

(2) develops a plan for winding up the affairs of the plan in 

connection with such termination in a manner which will result 

in timely payment of all benefits for which the plan is obligated; 

and 

(3) submits such plan in writing to the applicable authority. 

Actions required under this section shall be taken in such form and 

manner as may be prescribed by the applicable authority by regulation. 

SEC. 809. CORRECTIVE ACTIONS AND MANDATORY TERMINATION. 

(a) ACTIONS TO AVOID DEPLETION OF RESERVES.—An association 

health plan which is certified under this part and which provides 

benefits other than health insurance coverage shall continue to meet 

the requirements of section 806, irrespective of whether such certification continues in effect. The board of trustees of such plan shall 

determine quarterly whether the requirements of section 806 are 

met. In any case in which the board determines that there is reason 

to believe that there is or will be a failure to meet such requirements, or the applicable authority makes such a determination and 

so notifies the board, the board shall immediately notify the qualified actuary engaged by the plan, and such actuary shall, not later 

than the end of the next following month, make such recommendaVerDate Sep 11 2014 05:16 Mar 18, 2017 Jkt 069006 PO 00000 Frm 00076 Fmt 6659 Sfmt 6603 E:\HR\OC\HR043.XXX HR043

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tions to the board for corrective action as the actuary determines 

necessary to ensure compliance with section 806. Not later than 30 

days after receiving from the actuary recommendations for corrective actions, the board shall notify the applicable authority (in such 

form and manner as the applicable authority may prescribe by regulation) of such recommendations of the actuary for corrective action, 

together with a description of the actions (if any) that the board has 

taken or plans to take in response to such recommendations. The 

board shall thereafter report to the applicable authority, in such 

form and frequency as the applicable authority may specify to the 

board, regarding corrective action taken by the board until the requirements of section 806 are met. 

(b) MANDATORY TERMINATION.—In any case in which— 

(1) the applicable authority has been notified under subsection (a) (or by an issuer of excess/stop loss insurance or indemnity insurance pursuant to section 806(a)) of a failure of an 

association health plan which is or has been certified under this 

part and is described in section 806(a)(2) to meet the requirements of section 806 and has not been notified by the board of 

trustees of the plan that corrective action has restored compliance with such requirements; and 

(2) the applicable authority determines that there is a reasonable expectation that the plan will continue to fail to meet the 

requirements of section 806, 

the board of trustees of the plan shall, at the direction of the applicable authority, terminate the plan and, in the course of the termination, take such actions as the applicable authority may require, 

including satisfying any claims referred to in section 

806(a)(2)(B)(iii) and recovering for the plan any liability under subsection (a)(2)(B)(iii) or (e) of section 806, as necessary to ensure that 

the affairs of the plan will be, to the maximum extent possible, 

wound up in a manner which will result in timely provision of all 

benefits for which the plan is obligated. 

SEC. 810. TRUSTEESHIP BY THE SECRETARY OF INSOLVENT ASSOCIATION HEALTH PLANS PROVIDING HEALTH BENEFITS IN 

ADDITION TO HEALTH INSURANCE COVERAGE. 

(a) APPOINTMENT OF SECRETARY AS TRUSTEE FOR INSOLVENT

PLANS.—Whenever the Secretary determines that an association 

health plan which is or has been certified under this part and 

which is described in section 806(a)(2) will be unable to provide 

benefits when due or is otherwise in a financially hazardous condition, as shall be defined by the Secretary by regulation, the Secretary shall, upon notice to the plan, apply to the appropriate 

United States district court for appointment of the Secretary as 

trustee to administer the plan for the duration of the insolvency. 

The plan may appear as a party and other interested persons may 

intervene in the proceedings at the discretion of the court. The court 

shall appoint such Secretary trustee if the court determines that the 

trusteeship is necessary to protect the interests of the participants 

and beneficiaries or providers of medical care or to avoid any unreasonable deterioration of the financial condition of the plan. The 

trusteeship of such Secretary shall continue until the conditions described in the first sentence of this subsection are remedied or the 

plan is terminated. 


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(b) POWERS AS TRUSTEE.—The Secretary, upon appointment as 

trustee under subsection (a), shall have the power— 

(1) to do any act authorized by the plan, this title, or other 

applicable provisions of law to be done by the plan administrator or any trustee of the plan; 

(2) to require the transfer of all (or any part) of the assets and 

records of the plan to the Secretary as trustee; 

(3) to invest any assets of the plan which the Secretary holds 

in accordance with the provisions of the plan, regulations prescribed by the Secretary, and applicable provisions of law; 

(4) to require the sponsor, the plan administrator, any participating employer, and any employee organization representing plan participants to furnish any information with respect to the plan which the Secretary as trustee may reasonably 

need in order to administer the plan; 

(5) to collect for the plan any amounts due the plan and to 

recover reasonable expenses of the trusteeship; 

(6) to commence, prosecute, or defend on behalf of the plan 

any suit or proceeding involving the plan; 

(7) to issue, publish, or file such notices, statements, and reports as may be required by the Secretary by regulation or required by any order of the court; 

(8) to terminate the plan (or provide for its termination in accordance with section 809(b)) and liquidate the plan assets, to 

restore the plan to the responsibility of the sponsor, or to continue the trusteeship; 

(9) to provide for the enrollment of plan participants and 

beneficiaries under appropriate coverage options; and 

(10) to do such other acts as may be necessary to comply with 

this title or any order of the court and to protect the interests 

of plan participants and beneficiaries and providers of medical 

care. 

(c) NOTICE OF APPOINTMENT.—As soon as practicable after the 

Secretary’s appointment as trustee, the Secretary shall give notice of 

such appointment to— 

(1) the sponsor and plan administrator; 

(2) each participant; 

(3) each participating employer; and 

(4) if applicable, each employee organization which, for purposes of collective bargaining, represents plan participants. 

(d) ADDITIONAL DUTIES.—Except to the extent inconsistent with 

the provisions of this title, or as may be otherwise ordered by the 

court, the Secretary, upon appointment as trustee under this section, 

shall be subject to the same duties as those of a trustee under section 704 of title 11, United States Code, and shall have the duties 

of a fiduciary for purposes of this title. 

(e) OTHER PROCEEDINGS.—An application by the Secretary under 

this subsection may be filed notwithstanding the pendency in the 

same or any other court of any bankruptcy, mortgage foreclosure, or 

equity receivership proceeding, or any proceeding to reorganize, conserve, or liquidate such plan or its property, or any proceeding to 

enforce a lien against property of the plan. 

(f) JURISDICTION OF COURT.— 

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tion, the court to which the application is made shall have exclusive jurisdiction of the plan involved and its property wherever located with the powers, to the extent consistent with the 

purposes of this section, of a court of the United States having 

jurisdiction over cases under chapter 11 of title 11, United 

States Code. Pending an adjudication under this section such 

court shall stay, and upon appointment by it of the Secretary 

as trustee, such court shall continue the stay of, any pending 

mortgage foreclosure, equity receivership, or other proceeding to 

reorganize, conserve, or liquidate the plan, the sponsor, or property of such plan or sponsor, and any other suit against any receiver, conservator, or trustee of the plan, the sponsor, or property of the plan or sponsor. Pending such adjudication and 

upon the appointment by it of the Secretary as trustee, the court 

may stay any proceeding to enforce a lien against property of 

the plan or the sponsor or any other suit against the plan or 

the sponsor. 

(2) VENUE.—An action under this section may be brought in 

the judicial district where the sponsor or the plan administrator 

resides or does business or where any asset of the plan is situated. A district court in which such action is brought may issue 

process with respect to such action in any other judicial district. 

(g) PERSONNEL.—In accordance with regulations which shall be 

prescribed by the Secretary, the Secretary shall appoint, retain, and 

compensate accountants, actuaries, and other professional service 

personnel as may be necessary in connection with the Secretary’s 

service as trustee under this section. 

SEC. 811. STATE ASSESSMENT AUTHORITY. 

(a) IN GENERAL.—Notwithstanding section 514, a State may impose by law a contribution tax on an association health plan described in section 806(a)(2), if the plan commenced operations in 

such State after the date of the enactment of the Small Business 

Health Fairness Act of 2017. 

(b) CONTRIBUTION TAX.—For purposes of this section, the term 

‘‘contribution tax’’ imposed by a State on an association health plan 

means any tax imposed by such State if— 

(1) such tax is computed by applying a rate to the amount of 

premiums or contributions, with respect to individuals covered 

under the plan who are residents of such State, which are received by the plan from participating employers located in such 

State or from such individuals; 

(2) the rate of such tax does not exceed the rate of any tax imposed by such State on premiums or contributions received by 

insurers or health maintenance organizations for health insurance coverage offered in such State in connection with a group 

health plan; 

(3) such tax is otherwise nondiscriminatory; and 

(4) the amount of any such tax assessed on the plan is reduced by the amount of any tax or assessment otherwise imposed by the State on premiums, contributions, or both received 

by insurers or health maintenance organizations for health insurance coverage, aggregate excess/stop loss insurance (as defined in section 806(g)(1)), specific excess/stop loss insurance 

(as defined in section 806(g)(2)), other insurance related to the 

provision of medical care under the plan, or any combination 


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thereof provided by such insurers or health maintenance organizations in such State in connection with such plan. 

SEC. 812. DEFINITIONS AND RULES OF CONSTRUCTION. 

(a) DEFINITIONS.—For purposes of this part— 

(1) GROUP HEALTH PLAN.—The term ‘‘group health plan’’ has 

the meaning provided in section 733(a)(1) (after applying subsection (b) of this section). 

(2) MEDICAL CARE.—The term ‘‘medical care’’ has the meaning provided in section 733(a)(2). 

(3) HEALTH INSURANCE COVERAGE.—The term ‘‘health insurance coverage’’ has the meaning provided in section 733(b)(1). 

(4) HEALTH INSURANCE ISSUER.—The term ‘‘health insurance 

issuer’’ has the meaning provided in section 733(b)(2). 

(5) APPLICABLE AUTHORITY.—The term ‘‘applicable authority’’ 

means the Secretary, except that, in connection with any exercise of the Secretary’s authority regarding which the Secretary 

is required under section 506(d) to consult with a State, such 

term means the Secretary, in consultation with such State. 

(6) HEALTH STATUS-RELATED FACTOR.—The term ‘‘health status-related factor’’ has the meaning provided in section 

733(d)(2). 

(7) INDIVIDUAL MARKET.— 

(A) IN GENERAL.—The term ‘‘individual market’’ means 

the market for health insurance coverage offered to individuals other than in connection with a group health plan. 

(B) TREATMENT OF VERY SMALL GROUPS.— 

(i) IN GENERAL.—Subject to clause (ii), such term includes coverage offered in connection with a group 

health plan that has fewer than 2 participants as current employees or participants described in section 

732(d)(3) on the first day of the plan year. 

(ii) STATE EXCEPTION.—Clause (i) shall not apply in 

the case of health insurance coverage offered in a State 

if such State regulates the coverage described in such 

clause in the same manner and to the same extent as 

coverage in the small group market (as defined in section 2791(e)(5) of the Public Health Service Act ) is regulated by such State. 

(8) PARTICIPATING EMPLOYER.—The term ‘‘participating employer’’ means, in connection with an association health plan, 

any employer, if any individual who is an employee of such employer, a partner in such employer, or a self-employed individual who is such employer (or any dependent, as defined 

under the terms of the plan, of such individual) is or was covered under such plan in connection with the status of such individual as such an employee, partner, or self-employed individual in relation to the plan. 

(9) APPLICABLE STATE AUTHORITY.—The term ‘‘applicable 

State authority’’ means, with respect to a health insurance 

issuer in a State, the State insurance commissioner or official 

or officials designated by the State to enforce the requirements 

of title XXVII of the Public Health Service Act for the State involved with respect to such issuer. 


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(10) QUALIFIED ACTUARY.—The term ‘‘qualified actuary’’ 

means an individual who is a member of the American Academy of Actuaries. 

(11) AFFILIATED MEMBER.—The term ‘‘affiliated member’’ 

means, in connection with a sponsor— 

(A) a person who is otherwise eligible to be a member of 

the sponsor but who elects an affiliated status with the 

sponsor, 

(B) in the case of a sponsor with members which consist 

of associations, a person who is a member of any such association and elects an affiliated status with the sponsor, or 

(C) in the case of an association health plan in existence 

on the date of the enactment of the Small Business Health 

Fairness Act of 2017, a person eligible to be a member of 

the sponsor or one of its member associations. 

(12) LARGE EMPLOYER.—The term ‘‘large employer’’ means, in 

connection with a group health plan with respect to a plan year, 

an employer who employed an average of at least 51 employees 

on business days during the preceding calendar year and who 

employs at least 2 employees on the first day of the plan year. 

(13) SMALL EMPLOYER.—The term ‘‘small employer’’ means, in 

connection with a group health plan with respect to a plan year, 

an employer who is not a large employer. 

(b) RULES OF CONSTRUCTION.— 

(1) EMPLOYERS AND EMPLOYEES.—For purposes of determining whether a plan, fund, or program is an employee welfare benefit plan which is an association health plan, and for 

purposes of applying this title in connection with such plan, 

fund, or program so determined to be such an employee welfare 

benefit plan— 

(A) in the case of a partnership, the term ‘‘employer’’ (as 

defined in section 3(5)) includes the partnership in relation 

to the partners, and the term ‘‘employee’’ (as defined in section 3(6)) includes any partner in relation to the partnership; and 

(B) in the case of a self-employed individual, the term 

‘‘employer’’ (as defined in section 3(5)) and the term ‘‘employee’’ (as defined in section 3(6)) shall include such individual. 

(2) PLANS, FUNDS, AND PROGRAMS TREATED AS EMPLOYEE

WELFARE BENEFIT PLANS.—In the case of any plan, fund, or program which was established or is maintained for the purpose 

of providing medical care (through the purchase of insurance or 

otherwise) for employees (or their dependents) covered thereunder and which demonstrates to the Secretary that all requirements for certification under this part would be met with respect to such plan, fund, or program if such plan, fund, or program were a group health plan, such plan, fund, or program 

shall be treated for purposes of this title as an employee welfare 

benefit plan on and after the date of such demonstration. 

* * * * * * * 


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1Kaiser Family Foundation, Snapshots: Employer Health Insurance Costs and Worker Compensation, (February 27, 2011) available at: http://kff.org/health-costs/issue-brief/snapshotsemployer-health-insurance-costs-and-worker-compensation/. 2Families USA, Hidden Tax: Americans Pay a Premium, (2009) available at: http:// 

familiesusa.org/sites/default/files/product_documents/hidden-health-tax.pdf. 

MINORITY VIEWS 

INTRODUCTION

Committee Democrats oppose H.R. 1101, the Small Business 

Health Fairness Act because it puts comprehensive and affordable 

coverage for small businesses and their employees at risk. Committee Democrats were also concerned about the Majority’s insistence on considering health-related legislation while two other Committees (Energy and Commerce and Ways and Means) simultaneously considered legislation to gut the Affordable Care Act 

(ACA). 

BEFORE THE AFFORDABLE CARE ACT WORKERS HAD FEW OPTIONS

Before the ACA, employer-provided coverage was shrinking and 

costs were increasing dramatically. From 1999 to 2010, the cost of 

premiums for employer-provided health insurance increased by 

138%.1 Additionally, workers often had limited options for affordable health insurance. Those who were employed were often locked 

in to their employment for fear of losing their health insurance, 

even if they wanted to retire, work part-time, or start a new business, due to inadequate coverage options outside the employersponsored system. Workers with pre-existing conditions were particularly disadvantaged, since they could be charged higher rates 

or denied coverage altogether in the individual market. Even those 

with comprehensive and affordable job-based health insurance saw 

higher premiums due to the high number of uninsured. Estimates 

show that every American family with insurance had to pay a hidden tax of roughly $1,000 for the cost of caring for people without 

insurance.2

Businesses were also struggling before the ACA. Historically, 

small businesses were charged more for the same benefits compared to large employers. Small businesses employing women or 

workers with chronic or high-cost illnesses were charged higher insurance rates in many states. Therefore, a single sick or older employee could make health insurance unaffordable. Because small 

employers have fewer employees to spread risk across than larger 

employers, premiums varied dramatically from year to year due to 

changes in workers’ health status. 


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3Department of Health and Human Services, At Risk: Pre-Existing Conditions Could Affect 

1 in 2 Americans: 129 Million People Could be Denied Affordable Coverage Without Health Reform, (November 1, 2011) available at: https://aspe.hhs.gov/sites/default/files/pdf/76376/index.pdf. 

PROGRESS OF THE ACA HELPS SMALL BUSINESSES & WORKING

FAMILIES

The ACA took steps to level the playing field. The ACA added reforms to ensure that one small business with an older or sick employee or owner is not disadvantaged compared to other small businesses. The medical loss ratio provision of the ACA requires insurance, including plans that cover small businesses, to spend at least 

80% of premiums on health care claims and quality improvement, 

ensuring that premium dollars go toward the actual health costs of 

covering the small business and its employees, and not just profits. 

Further, the ACA created more options for employers and workers 

through the creation of the Small Business Health Options Program (SHOP) and included a tax credit to defray the cost of health 

insurance for their employees. 

The ACA also establishes several safeguards for workers and 

families. Thanks to the ACA, most insurance plans must now provide coverage without cost sharing for certain preventive health 

services, including pap smears and mammograms for women, wellchild visits, flu shots, and more. Early estimates after the ACA’s 

passage showed that there were around 129 million Americans 

with a pre-existing condition, 82 million of whom were enrolled in 

employer-based coverage.3 For these millions of American workers, 

the ACA means that losing a job does not mean losing health insurance coverage. ‘‘Job lock’’ has been reduced, allowing workers to 

structure their careers in ways that make sense for them. This is 

particularly important for young workers, who are very often in 

school or making the early career choices that have a long-term impact on their careers. This is also important for entrepreneurs who 

want to start their own business. 

THE REPUBLICAN REPLACEMENT PLAN THREATENS THE HEALTH

INSURANCE SECURITY OF AMERICAN FAMILIES

Two days prior to the Committee’s consideration of the three 

bills, Republicans released their ACA replacement plan, the American Health Care Act. The Ways and Means and Energy and Commerce Committees moved the bill forward through the Committee 

process, despite the fact that the Congressional Budget Office had 

not yet released estimates on the legislation’s impact on coverage 

or cost. Committee Democrats expressed their concern about the 

lack of transparency in moving the bill forward and also further expressed concern that the markup in the Education and the Workforce Committee occurred simultaneous to this process—essentially 

forcing the Committee to consider legislation that represents a 

moving target. 

The American Health Care Act is an inadequate and unacceptable replacement plan. The legislation eliminates the ACA premium tax credits that millions of Americans depend on to pay for 

health coverage, in favor of a completely inadequate flat tax credit 

that leaves working families totally exposed to premium increases. 

The tax credits provided by the Affordable Care Act are based on 


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4 Center on Budget and Policy Priorities, House Republican Health Plan Would Weaken Medi- care, (March 14, 2017) available at: http://www.cbpp.org/blog/house-republican-health-planwould-weaken-medicare. 5 Congressional Budget Office, Cost Estimate of the American Health Care Act, (March 13, 

2017) available at: https://www.cbo.gov/sites/default/files/115th-congress-2017-2018/ 

costestimate/americanhealthcareact_0.pdf. 6 Id. 

7 AARP, Letter to Chairmen and Ranking Members of the Energy and Commerce and Ways 

and Means Committees, (March 7, 2017) available at: http://www.aarp.org/content/dam/aarp/politics/advocacy/2017/03/aarp-letter-to-congress-on-american-healthcare-act-march-07-2017.pdf. 

income and are also tied to the cost of insurance premiums. In general, the lower an individual’s income, the larger the tax credit and 

the more expensive the premium, the larger the credit. Therefore, 

the tax credit adapts to address the situation of the individual. 

However, under the Republican’s plan, the credits range from 

$2,000 to $4,000 depending on age, but do not take into account income or the cost of a typical plan in the area. 

In addition, the bill dismantles Medicaid as we know it, endangering the health of 70 million Americans who rely on Medicaid, 

including seniors with long-term care needs, Americans with disabilities, pregnant women, and vulnerable children. Further, under 

the Republican bill, American workers could see their premiums 

and deductibles skyrocket. Also, the American public will have 

fewer protections—including losing the full protection of the ACA’s 

prohibition against insurers discriminating against people with 

pre-existing conditions under all circumstances. While Republicans 

increase health costs for many working families, they give tax 

breaks to the wealthy. 

Older Americans will be forced to pay premiums five times higher than what others pay for health coverage, undoing the current 

limitation that stipulates that older individuals can only be 

charged three times more than young enrollees are charged. The 

Republican bill also shortens the life of the Medicare Trust Fund.4

Additionally, the bill includes a provision to defund Planned Parenthood for a year, threatening the health care of millions of 

women and men throughout the country. 

The Congressional Budget Office’s analysis of the proposal—released after Committee consideration—verified that 24 million 

more would be uninsured by 2026 under the Republican health 

care plan.5 The report also showed that seven million fewer individuals would be enrolled in employer-sponsored insurance.6 Further, the report demonstrated that millions would be worse off 

under the Republican plan and that millions more will end up paying more for less coverage. 

For these abovementioned reasons, hospitals, providers, consumer groups and advocacy groups are opposing Republicans’ attempts to cause irreparable harm to the health and financial security of Americans. AARP stated that, ‘‘. . . [the] bill would weaken 

Medicare’s fiscal sustainability, dramatically increase health care 

costs for Americans aged 50–64, and put at risk the health care of 

millions of children and adults with disabilities, and poor seniors 

who depend on the Medicaid program for long-term services and 

supports and other benefits.’’ 7 The AFL–CIO maintained that, 

‘‘The reality is, this isn’t a healthcare plan at all. It’s a massive 


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8 AFL–CIO, Press release: GOP Healthcare Plan Taxes Workers and Destroys Care, (March 7, 

2017) available at: http://www.aflcio.org/Press-Room/Press-Releases/GOP-Healthcare-Plan-TaxesWorkers-and-Destroys-Care. 9 Consortium for Citizens with Disabilities, Statement: CCD Responds To American Health 

Care Act, (March 8, 2017) available at: http://www.c-c-d.org/fichiers/House-statement-3-8- 

final.pdf. 10 American Hospital Association, Letter to Congress, (March 7, 2017) available at: http:// 

www.aha.org/advocacy-issues/letter/2017/170307-let-aha-house-ahca.pdf. 11 Congressional Budget Office, Increasing Small-Firm Health Insurance Coverage Through 

Association Health Plans and HealthMarts, (January 2000) available at: https://www.cbo.gov/ 

sites/default/files/106th-congress-1999-2000/reports/healthins.pdf. 12The American Academy of Actuaries, Issue Brief: Association Health Plans, (February 2017) 

available at: http://www.actuary.org/content/association-health-plans-0. 

transfer of wealth from working people to Wall Street.’’ 8 The Consortium for Citizens with Disabilities stated that, ‘‘[it is] simply unconscionable to pay for the repeal of the Affordable Care Act (ACA) 

by cutting services for low income individuals with disabilities, 

adults, older adults, and children.’’ 9 Due to its glaring shortcomings, the American Hospital Association has stated that it, 

‘‘. . . cannot support The American Health Care Act in its current 

form.’’ 10

H.R. 1101 WILL CREATE MARKET FRAGMENTATION AND THREATEN

BENEFITS

Part of the Republican’s repeal and replace effort is centered 

around expanding association health plans (AHPs). Association 

health plans are groups of small employer groups or individuals 

that band together to obtain health insurance. Proponents argue 

that AHPs would expand access and drive down costs, resulting in 

more health coverage options. However, there are likely to be winners and losers under this approach and many workers and employers will be left out in the cold. 

Association health plans are not a new idea. In fact, they have 

been studied at length, including in a 2000 CBO report that found 

that they would have almost no impact in increasing health coverage.11 Instead, they are likely to exacerbate adverse selection and 

shift costs on to workers. Although AHPs would be offered in competition with other small group and individual market plans, they 

would operate under different rules. This would fragment the market as lower-cost groups and individuals would move to establish 

an AHP, and higher-cost groups and individuals would remain 

stuck in traditional insurance plans. Such adverse selection would 

result in higher premiums in non-AHP plans. Ultimately, highercost (sicker or older) groups could find it more difficult to obtain 

coverage.12

With the passage of the ACA, health insurance sold through an 

association to individuals and small employers generally must meet 

the same insurance standards of coverage sold in the individual 

and small group market. The Small Business Fairness Act, introduced by Representatives Johnson and Walberg, essentially 

unravels these protections and allows association health plans to 

play by different rules. For example, they can evade state-mandated benefits and consumer protections. Therefore, those in an 

AHP may lose out on certain benefits and they may not be aware 

of that fact. While AHPs may save money if they do not have to 

bear the costs of these consumer protections, AHP enrollees are 


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13 Id. 14 American Academy of Actuaries, Letter to Chairwoman Foxx and Ranking Member Scott Re: 

Markup of H.R. 1101, the Small Business Health Fairness Act of 2017, (March 8, 2017). 15The Commonwealth Fund, MEWAs: The Threat of Plan Insolvency and Other Challenges, 

(March 2004) available at: http://www.commonwealthfund.org/usr_doc/kofman_mewas.pdf. 16 Id. 17 United States Department of Labor, MEWAs—Multiple Employer Welfare Arrangements 

under the Employee Retirement Income Security Act (ERISA): A Guide to Federal and State Regulation, (August 2013) available at: https://www.dol.gov/sites/default/files/ebsa/about-ebsa/our-activities/enforcement/healthcare-fraud/mewa-under-erisa-a-guide-to-federal-and-state-regulation.pdf; Amendments enacted as part of Public Law 97–473, available at: https://www.gpo.gov/ 

fdsys/pkg/STATUTE-96/pdf/STATUTE-96-Pg2605.pdf. 

likely to incur substantial costs for non-covered services down the 

road when it is too late for recourse.13

Committee Democrats have concerns about the impact that association health plans will have on businesses and workers. The legislation is opposed by a number of consumer and advocacy groups, 

including the Main Street Alliance and the National Association of 

Insurance Commissioners. Further, the American Academy of Actuaries outlined in its comment letter to Chairwoman Foxx and 

Ranking Member Scott that, ‘‘the bill as currently written will likely have unintended consequences . . . 14

H.R. 1101 GAMBLES WITH THE FINANCIAL SECURITY OF BOTH

WORKERS AND EMPLOYERS

There are grave concerns around the solvency of association 

health plans. The history of multiple employer welfare arrangements (MEWAs) offers insight into the financial challenges that 

AHPs could face. In 2001, Sunkist Growers, Inc., a licensed MEWA 

in California covering 23,000 people, became insolvent.15 When 

New Jersey’s Coalition of Automotive Retailers, a longstanding 

MEWA that covered 20,000 people, became insolvent in 2002, it 

had $15 million in outstanding medical bills.16 For years, self-funded MEWAs had no clear regulatory authority and multiple MEWA 

bankruptcies resulted. Recognizing that it was both appropriate 

and necessary for states to be able to establish, apply, and enforce 

state insurance laws with respect to MEWAs, Congress amended 

ERISA in 1983 to provide an exception to ERISA’s broad preemption provisions by specifically allowing for state regulation of 

MEWAs. Unfortunately, HR 1101 prohibits state regulation of 

AHPs, so if the bill is enacted, AHPs will not be covered by state 

regulations which generally govern consumer protections and solvency requirements.17

H.R. 1101 allows AHPs to form under limited regulation and 

oversight, hearkening back to the time when MEWAs also enjoyed 

limited regulation and gambled with the financial security of both 

workers and employers. AHPs threaten both employers and workers and have been soundly dismissed as doing little to actually improve coverage or decrease costs in a sustainable way. 

COMMITTEE CONSIDERATION OF H.R. 1101 

During Committee consideration, Representative Wilson offered 

an amendment that expressed a sense of Congress that any health 

care insurance legislation should build on the current progress of 

the ACA with CBO’s analysis that demonstrates improvements in 

cost and coverage. That amendment was withdrawn. 


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18The Main Street Alliance, Letter to Chairwoman Foxx and Ranking Member Scott, (March 

8, 2017) available at: https://d3n8a8pro7vhmx.cloudfront.net/mainstreetalliance/pages/487/attachments/original/1489503369/letteropposingHR1101.pdf?1489503369. 19 National Association of Insurance Commissioners, Letter to Chairwoman Foxx and Ranking 

Member Scott, (February 28, 2017) available at: http://www.naic.org/documents/ 

health_archive_naic_opposes_small_business_fairness_act.pdf. 

Several Committee Democrats offered amendments to ensure 

that association health plans did not unduly disadvantage certain 

pockets of small businesses and workers. Ranking Member Scott offered an amendment prohibiting the legislation from taking place 

if CBO determined small group market premiums would rise as a 

result of the legislation. In his remarks, Ranking Member Scott underscored the potential impact of AHPs on small group market premiums saying, ‘‘The reason people want to join an association is because they will be in a pool with younger, healthier people whose 

healthcare costs are less than average. Of course, no one would 

form an association for this purpose with people who have above 

average costs because it would be cheaper for them to just stay in 

the insurance pool and pay the average rate. So these association 

plans with healthier people will always work for those lucky 

enough to get in. But if you have all these healthy, cheaper people 

in an association, then that leaves those left behind with higher 

costs in the small group market and then the premiums for the 

small group market go up. It is simple arithmetic.’’ 

Representative Bonamici offered an amendment to require the 

legislation only take effect if CBO determined premiums for older 

workers would not increase. Representative Bonamici remarked, 

‘‘Proponents of the bill argue that association health plans would 

expand the access and drive down costs. Is that the case for the 

young and the healthy? Well, what guarantee would older participants have that their costs will go down as well, that they will not 

be discriminated against? I have concerns that this legislation 

would actually make it more difficult for people who truly need coverage, older Americans, and that they would be losers.’’ 

Representative Norcross offered an amendment to prohibit the 

legislation from taking effect if the CBO determined that premiums 

for the middle class increased under the legislation. In offering his 

amendment, Representative Norcross stated, ‘‘I believe together we 

can make healthcare work better for working families. We can continue to protect those with preexisting conditions, protect women, 

and lower the cost. So let us put this into action, let us put partisanship aside, and focus on solutions we both can agree to. I hope 

you will join me in supporting this amendment, which will give 

Americans peace of mind that their premiums will not go up.’’ 

These amendments were withdrawn due to germaneness concerns, 

but Committee Democrats remain troubled about the impact that 

AHPs would have on the affordability of coverage for certain workers. Underscoring these concerns, the Main Street Alliance asserts 

that, ‘‘H.R. 1101 would result in higher premiums and poorer coverage for the most vulnerable small business owners.’’ 18 The National Association of Insurance Commissioners asserts that AHPs 

create a situation where ‘‘unhealthy groups are disadvantaged.’’ 19

Committee Democrats also recognize that the loss of state mandated benefits and consumer protections threaten comprehensive 

services for workers and small businesses in AHPs. Representative 


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Shea-Porter offered an amendment that was withdrawn, to ensure 

that substance abuse disorder coverage and treatment is not compromised through the expansion of AHPs. Representative SheaPorter stated, ‘‘The fight against the heroin, fentanyl, and prescription opioid epidemic is multipronged, but it rests on a base of widespread access to coverage and care. . . My amendment would defend the gains we have made by ensuring that today’s bill would 

not reduce access to substance use disorder treatment. Let us not 

pull the rug out from under people who are about to turn their 

lives around.’’ 

Representative Davis also offered an amendment to ensure that 

association health plans cover needed health services for women, 

such as maternity care and direct access to OB–GYN services. In 

offering her amendment Representative Davis stated, ‘‘Madame 

Chairwoman, we know from our own hearing the other day that 

these provisions are extremely popular. Both the witnesses from 

Democratic and Republican staffs suggested that these minimum 

essential benefits should continue to be offered. So that is why I 

am so concerned that the bill before us could allow association 

health plans to be offered that do not offer some of these essential 

benefits and protections for women . . . My colleagues insist that 

expanding unregulated association health plans is about choice. I 

can tell you, I am all about expanding choices in health care coverage, but not if it means giving plans the choice to charge women 

more for the services they need . . . [the amendment] says that reductions in coverage for maternity care or women’s preventive 

health services or limits to direct access to OB–GYN care is not basically the intent of this legislation. This really is an opportunity 

for all of us to show our seriousness about women’s health.’’ The 

amendment failed on a party line vote (17–22). 

Representative Polis offered two additional amendments to allow 

prescription drug importation and support hospital pricing transparency. Both amendments were withdrawn. 

H.R. 1101 was favorably reported, as amended, on a party line 

vote (22–17) with all Democratic Members opposing. 

CONCLUSION

After seven years of disparaging the ACA, Republicans released 

a repeal and replacement plan that will leave millions of Americans worse off. Meanwhile, the Small Business Health Fairness Act 

would erode the protections in the ACA and leave small businesses 

and their workers vulnerable to unaffordable health coverage and 

fewer benefits. Association health plans let the fortunate few form 

an association where they are able to pay less than average, but 

everyone else outside of the association will have to pay more. The 

Committee should protect the progress of the ACA and work to improve and expand coverage; the expansion of AHPs will only 

threaten affordable coverage for those outside of the associations. 

Committee Democrats are committed to health care as a right, not 

a privilege for only the healthiest and wealthiest Americans. 

ROBERT C. ‘‘BOBBY’’ SCOTT, 

Ranking Member. 

RAU ́ L M. GRIJALVA. 


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MARCIA L. FUDGE. GREGORIO KILILI CAMACHO

SABLAN. SUZANNE BONAMICI. ALMA S. ADAMS. DONALD NORCROSS. RAJA KRISHNAMOORTHI. ADRIANO ESPAILLAT. SUSAN A. DAVIS. JOE COURTNEY. JARED POLIS. FREDERICA S. WILSON. 

MARK TAKANO. 

MARK DESAULNIER. 

LISA BLUNT-ROCHESTER. 

CAROL SHEA PORTER. 

Æ 


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