II 

Calendar No. 526 

114TH CONGRESS 

2D SESSION H. R. 5447 

IN THE SENATE OF THE UNITED STATES 

JUNE 22, 2016 

Received; read the first time 

JUNE 23, 2016 

Read the second time and placed on the calendar 

AN ACT 

To provide an exception from certain group health plan requirements for qualified small employer health reimbursement arrangements. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Small Business Health 

5 Care Relief Act of 2016’’. 


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1 SEC. 2. EXCEPTION FROM GROUP HEALTH PLAN REQUIRE2 MENTS FOR QUALIFIED SMALL EMPLOYER 

3 HEALTH REIMBURSEMENT ARRANGEMENTS. 

4 (a) AMENDMENTS TO THE INTERNAL REVENUE

5 CODE OF 1986 AND THE PATIENT PROTECTION AND AF6 FORDABLE CARE ACT.— 

7 (1) IN GENERAL.—Section 9831 of the Internal 

8 Revenue Code of 1986 is amended by adding at the 

9 end the following new subsection: 

10 ‘‘(d) EXCEPTION FOR QUALIFIED SMALL EMPLOYER

11 HEALTH REIMBURSEMENT ARRANGEMENTS.— 

12 ‘‘(1) IN GENERAL.—For purposes of this title 

13 (except as provided in section 4980I(f)(4) and not14 withstanding any other provision of this title), the 

15 term ‘group health plan’ shall not include any quali16 fied small employer health reimbursement arrange17 ment. 

18 ‘‘(2) QUALIFIED SMALL EMPLOYER HEALTH

19 REIMBURSEMENT ARRANGEMENT.—For purposes of 

20 this subsection— 

21 ‘‘(A) IN GENERAL.—The term ‘qualified 

22 small employer health reimbursement arrange23 ment’ means an arrangement which— 

24 ‘‘(i) is described in subparagraph (B), 

25 and 


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1 ‘‘(ii) is provided on the same terms to 

2 all eligible employees of the eligible em3 ployer. 

4 ‘‘(B) ARRANGEMENT DESCRIBED.—An ar5 rangement is described in this subparagraph 

6 if— 

7 ‘‘(i) such arrangement is funded solely 

8 by an eligible employer and no salary re9 duction contributions may be made under 

10 such arrangement, 

11 ‘‘(ii) such arrangement provides, after 

12 the employee provides proof of coverage, 

13 for the payment of, or reimbursement of, 

14 an eligible employee for expenses for med15 ical care (as defined in section 213(d)) in16 curred by the eligible employee or the eligi17 ble employee’s family members (as deter18 mined under the terms of the arrange19 ment), and 

20 ‘‘(iii) the amount of payments and re21 imbursements described in clause (ii) for 

22 any year do not exceed $5,130 ($10,260 in 

23 the case of an arrangement that also pro24 vides for payments or reimbursements for 

25 family members of the employee). 


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1 ‘‘(C) CERTAIN VARIATION PERMITTED.— 

2 For purposes of subparagraph (A)(ii), an ar3 rangement shall not fail to be treated as pro4 vided on the same terms to each eligible em5 ployee merely because the employee’s permitted 

6 benefits under such arrangement vary in ac7 cordance with the variation in the price of an 

8 insurance policy in the relevant individual 

9 health insurance market based on— 

10 ‘‘(i) the age of the eligible employee 

11 (and, in the case of an arrangement which 

12 covers medical expenses of the eligible em13 ployee’s family members, the age of such 

14 family members), or 

15 ‘‘(ii) the number of family members of 

16 the eligible employee the medical expenses 

17 of which are covered under such arrange18 ment. 

19 The variation permitted under the preceding 

20 sentence shall be determined by reference to the 

21 same insurance policy with respect to all eligible 

22 employees. 

23 ‘‘(D) RULES RELATING TO MAXIMUM DOL24 LAR LIMITATION.— 


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1 ‘‘(i) AMOUNT PRORATED IN CERTAIN

2 CASES.—In the case of an individual who 

3 is not covered by an arrangement for the 

4 entire year, the limitation under subpara5 graph (A)(iii) for such year shall be an 

6 amount which bears the same ratio to the 

7 amount which would (but for this clause) 

8 be in effect for such individual for such 

9 year under subparagraph (A)(iii) as the 

10 number of months for which such indi11 vidual is covered by the arrangement for 

12 such year bears to 12. 

13 ‘‘(ii) INFLATION ADJUSTMENT.—In 

14 the case of any year beginning after 2016, 

15 each of the dollar amounts in subpara16 graph (A)(iii) shall be increased by an 

17 amount equal to— 

18 ‘‘(I) such dollar amount, multi19 plied by 

20 ‘‘(II) the cost-of-living adjust21 ment determined under section 1(f)(3) 

22 for the calendar year in which the tax23 able year begins, determined by sub24 stituting ‘calendar year 2015’ for ‘calVerDate Sep 11 2014 23:40 Jun 23, 2016 Jkt 059200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H5447.PCS H5447

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1 endar year 1992’ in subparagraph (B) 

2 thereof. 

3 If any dollar amount increased under the 

4 preceding sentence is not a multiple of 

5 $100, such dollar amount shall be rounded 

6 to the next lowest multiple of $100. 

7 ‘‘(3) OTHER DEFINITIONS.—For purposes of 

8 this subsection— 

9 ‘‘(A) ELIGIBLE EMPLOYEE.—The term ‘eli10 gible employee’ means any employee of an eligi11 ble employer, except that the terms of the ar12 rangement may exclude from consideration em13 ployees described in any clause of section 

14 105(h)(3)(B) (applied by substituting ‘90 days’ 

15 for ‘3 years’ in clause (i) thereof). 

16 ‘‘(B) ELIGIBLE EMPLOYER.—The term ‘el17 igible employer’ means an employer that— 

18 ‘‘(i) is not an applicable large em19 ployer as defined in section 4980H(c)(2), 

20 and 

21 ‘‘(ii) does not offer a group health 

22 plan to any of its employees. 

23 ‘‘(C) PERMITTED BENEFIT.—The term 

24 ‘permitted benefit’ means, with respect to any 

25 eligible employee, the maximum dollar amount 


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1 of payments and reimbursements which may be 

2 made under the terms of the qualified small 

3 employer health reimbursement arrangement 

4 for the year with respect to such employee. 

5 ‘‘(4) NOTICE.— 

6 ‘‘(A) IN GENERAL.—An employer funding 

7 a qualified small employer health reimburse8 ment arrangement for any year shall, not later 

9 than 90 days before the beginning of such year 

10 (or, in the case of an employee who is not eligi11 ble to participate in the arrangement as of the 

12 beginning of such year, the date on which such 

13 employee is first so eligible), provide a written 

14 notice to each eligible employee which includes 

15 the information described in subparagraph (B). 

16 ‘‘(B) CONTENTS OF NOTICE.—The notice 

17 required under subparagraph (A) shall include 

18 each of the following: 

19 ‘‘(i) A statement of the amount which 

20 would be such eligible employee’s permitted 

21 benefits under the arrangement for the 

22 year. 

23 ‘‘(ii) A statement that the eligible em24 ployee should provide the information de25 scribed in clause (i) to any health insurVerDate Sep 11 2014 23:40 Jun 23, 2016 Jkt 059200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H5447.PCS H5447

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1 ance exchange to which the employee ap2 plies for advance payment of the premium 

3 assistance tax credit. 

4 ‘‘(iii) A statement that if the employee 

5 is not covered under minimum essential 

6 coverage for any month the employee may 

7 be subject to tax under section 5000A for 

8 such month and reimbursements under the 

9 arrangement may be includible in gross in10 come.’’. 

11 (2) LIMITATION ON EXCLUSION FROM GROSS

12 INCOME.—Section 106 of such Code is amended by 

13 adding at the end the following: 

14 ‘‘(g) QUALIFIED SMALL EMPLOYER HEALTH REIM15 BURSEMENT ARRANGEMENT.—For purposes of this sec16 tion and section 105, payments or reimbursements from 

17 a qualified small employer health reimbursement arrange18 ment (as defined in section 9831(d)) of an individual for 

19 medical care (as defined in section 213(d)) shall not be 

20 treated as paid or reimbursed under employer-provided 

21 coverage for medical expenses under an accident or health 

22 plan if for the month in which such medical care is pro23 vided the individual does not have minimum essential cov24 erage (within the meaning of section 5000A(f)).’’. 


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1 (3) COORDINATION WITH HEALTH INSURANCE

2 PREMIUM CREDIT.—Section 36B(c) of such Code is 

3 amended by adding at the end the following new 

4 paragraph: 

5 ‘‘(4) SPECIAL RULES FOR QUALIFIED SMALL

6 EMPLOYER HEALTH REIMBURSEMENT ARRANGE7 MENTS.— 

8 ‘‘(A) IN GENERAL.—The term ‘coverage 

9 month’ shall not include any month with re10 spect to an employee (or any spouse or depend11 ent of such employee) if for such month the em12 ployee is provided a qualified small employer 

13 health reimbursement arrangement which con14 stitutes affordable coverage. 

15 ‘‘(B) DENIAL OF DOUBLE BENEFIT.—In 

16 the case of any employee who is provided a 

17 qualified small employer health reimbursement 

18 arrangement for any coverage month (deter19 mined without regard to subparagraph (A)), the 

20 credit otherwise allowable under subsection (a) 

21 to the taxpayer for such month shall be reduced 

22 (but not below zero) by the amount described in 

23 subparagraph (C)(i)(II) for such month. 

24 ‘‘(C) AFFORDABLE COVERAGE.—For pur25 poses of subparagraph (A), a qualified small 


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1 employer health reimbursement arrangement 

2 shall be treated as constituting affordable cov3 erage for a month if— 

4 ‘‘(i) the excess of— 

5 ‘‘(I) the amount that would be 

6 paid by the employee as the premium 

7 for such month for self-only coverage 

8 under the second lowest cost silver 

9 plan offered in the relevant individual 

10 health insurance market, over 

‘‘(II) 1 11 ⁄12 of the employee’s per12 mitted benefit (as defined in section 

13 9831(d)(3)(C)) under such arrange14 ment, does not exceed— 

‘‘(ii) 1 15 ⁄12 of 9.5 percent of the employ16 ee’s household income. 

17 ‘‘(D) QUALIFIED SMALL EMPLOYER

18 HEALTH REIMBURSEMENT ARRANGEMENT.— 

19 For purposes of this paragraph, the term 

20 ‘qualified small employer health reimbursement 

21 arrangement’ has the meaning given such term 

22 by section 9831(d)(2). 

23 ‘‘(E) COVERAGE FOR LESS THAN ENTIRE

24 YEAR.—In the case of an employee who is pro25 vided a qualified small employer health reimVerDate Sep 11 2014 23:40 Jun 23, 2016 Jkt 059200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H5447.PCS H5447

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1 bursement arrangement for less than an entire 

2 year, subparagraph (C)(i)(II) shall be applied 

3 by substituting ‘the number of months during 

4 the year for which such arrangement was pro5 vided’ for ‘12’. 

6 ‘‘(F) INDEXING.—In the case of plan years 

7 beginning in any calendar year after 2014, the 

8 Secretary shall adjust the 9.5 percent amount 

9 under subparagraph (C)(ii) in the same manner 

10 as the percentages are adjusted under sub11 section (b)(3)(A)(ii).’’. 

12 (4) APPLICATION OF EXCISE TAX ON HIGH

13 COST EMPLOYER-SPONSORED HEALTH COVERAGE.— 

14 (A) IN GENERAL.—Section 4980I(f)(4) of 

15 such Code is amended by adding at the end the 

16 following: ‘‘Section 9831(d)(1) shall not apply 

17 for purposes of this section.’’. 

18 (B) DETERMINATION OF COST OF COV19 ERAGE.—Section 4980I(d)(2) of such Code is 

20 amended by redesignating subparagraph (D) as 

21 subparagraph (E) and by inserting after sub22 paragraph (C) the following new subparagraph: 

23 ‘‘(D) QUALIFIED SMALL EMPLOYER

24 HEALTH REIMBURSEMENT ARRANGEMENTS.— 

25 In the case of applicable employer-sponsored 


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1 coverage consisting of coverage under any quali2 fied small employer health reimbursement ar3 rangement (as defined in section 9831(d)(2)), 

4 the cost of coverage shall be equal to the 

5 amount described in section 6051(a)(15).’’. 

6 (5) ENFORCEMENT OF NOTICE REQUIRE7 MENT.—Section 6652 of such Code is amended by 

8 adding at the end the following new subsection: 

9 ‘‘(o) FAILURE TO PROVIDE NOTICES WITH RESPECT

10 TO QUALIFIED SMALL EMPLOYER HEALTH REIMBURSE11 MENT ARRANGEMENTS.—In the case of each failure to 

12 provide a written notice as required by section 9831(d)(4), 

13 unless it is shown that such failure is due to reasonable 

14 cause and not willful neglect, there shall be paid, on notice 

15 and demand of the Secretary and in the same manner as 

16 tax, by the person failing to provide such written notice, 

17 an amount equal to $50 per employee per incident of fail18 ure to provide such notice, but the total amount imposed 

19 on such person for all such failures during any calendar 

20 year shall not exceed $2,500.’’. 

21 (6) REPORTING.— 

22 (A) W–2 REPORTING.—Section 6051(a) of 

23 such Code is amended by striking ‘‘and’’ at the 

24 end of paragraph (13), by striking the period at 

25 the end of paragraph (14) and inserting ‘‘, 


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1 and’’, and by inserting after paragraph (14) the 

2 following new paragraph: 

3 ‘‘(15) the total amount of permitted benefit (as 

4 defined in section 9831(d)(3)(C)) for the year under 

5 a qualified small employer health reimbursement ar6 rangement (as defined in section 9831(d)(2)) with 

7 respect to the employee.’’. 

8 (B) INFORMATION REQUIRED TO BE PRO9 VIDED BY EXCHANGE SUBSIDY APPLICANTS.— 

10 Section 1411(b)(3) of the Patient Protection 

11 and Affordable Care Act is amended by redesig12 nating subparagraph (B) as subparagraph (C) 

13 and by inserting after subparagraph (A) the fol14 lowing new subparagraph: 

15 ‘‘(B) CERTAIN INDIVIDUAL HEALTH IN16 SURANCE POLICIES OBTAINED THROUGH SMALL

17 EMPLOYERS.—The amount of the enrollee’s 

18 permitted benefit (as defined in section 

19 9831(d)(3)(C) of the Internal Revenue Code of 

20 1986) under a qualified small employer health 

21 reimbursement arrangement (as defined in sec22 tion 9831(d)(2) of such Code).’’. 

23 (7) EFFECTIVE DATES.— 

24 (A) IN GENERAL.—Except as otherwise 

25 provided in this paragraph, the amendments 


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1 made by this subsection shall apply to years be2 ginning after the earlier of— 

3 (i) the date that is 90 days after the 

4 date of the enactment of this Act, or 

5 (ii) December 31, 2016. 

6 (B) TRANSITION RELIEF.—The relief 

7 under Treasury Notice 2015–17 shall be treat8 ed as applying to any plan year beginning on or 

9 before the date described in subparagraph (A). 

10 (C) COORDINATION WITH HEALTH INSUR11 ANCE PREMIUM CREDIT.—The amendments 

12 made by paragraph (3) shall apply to taxable 

13 years beginning after the date described in sub14 paragraph (A). 

15 (D) EMPLOYEE NOTICE.—The amend16 ments made by paragraph (5) shall apply to no17 tices with respect to years beginning after the 

18 date described in subparagraph (A). 

19 (E) W–2 REPORTING.—The amendments 

20 made by paragraph (6)(A) shall apply to cal21 endar years beginning after December 31, 

22 2016. 

23 (F) INFORMATION PROVIDED BY EX24 CHANGE SUBSIDY APPLICANTS.— 


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1 (i) IN GENERAL.—The amendments 

2 made by paragraph (6)(B) shall apply to 

3 applications for enrollment made after the 

4 date described in subparagraph (A). 

5 (ii) VERIFICATION.—Verification 

6 under section 1411 of the Patient Protec7 tion and Affordable Care Act of informa8 tion provided under section 1411(b)(3)(B) 

9 of such Act shall apply with respect to 

10 months beginning after October 2016. 

11 (8) SUBSTANTIATION REQUIREMENTS.—The 

12 Secretary of the Treasury (or his designee) may 

13 issue substantiation requirements as necessary to 

14 carry out this subsection. 

15 (b) AMENDMENTS TO THE EMPLOYEE RETIREMENT

16 INCOME SECURITY ACT OF 1974.— 

17 (1) IN GENERAL.—Section 733(a)(1) of the 

18 Employee Retirement Income Security Act of 1974 

19 (29 U.S.C. 1191b(a)(1)) is amended by adding at 

20 the end the following: ‘‘Such term shall not include 

21 any qualified small employer health reimbursement 

22 arrangement (as defined in section 9831(d)(2) of the 

23 Internal Revenue Code of 1986).’’. 

24 (2) EXCEPTION FROM CONTINUATION COV25 ERAGE REQUIREMENTS, ETC.—Section 607(1) of 


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1 such Act (29 U.S.C. 1167(1)) is amended by adding 

2 at the end the following: ‘‘Such term shall not in3 clude any qualified small employer health reimburse4 ment arrangement (as defined in section 9831(d)(2) 

5 of the Internal Revenue Code of 1986).’’. 

6 (3) EFFECTIVE DATE.—The amendments made 

7 by this subsection shall apply to plan years begin8 ning after the date described in subsection (a)(7)(A). 

9 (c) AMENDMENTS TO THE PUBLIC HEALTH SERVICE

10 ACT.— 

11 (1) IN GENERAL.—Section 2791(a)(1) of the 

12 Public Health Service Act (42 U.S.C. 300gg– 

13 91(a)(1)) is amended by adding at the end the fol14 lowing: ‘‘Except for purposes of part C of title XI 

15 of the Social Security Act (42 U.S.C. 1320d et seq.), 

16 such term shall not include any qualified small em17 ployer health reimbursement arrangement (as de18 fined in section 9831(d)(2) of the Internal Revenue 

19 Code of 1986).’’. 

20 (2) EXCEPTION FROM CONTINUATION COV21 ERAGE REQUIREMENTS.—Section 2208(1) of the 

22 Public Health Service Act (42 U.S.C. 300bb–8(1)) is 

23 amended by adding at the end the following: ‘‘Such 

24 term shall not include any qualified small employer 

25 health reimbursement arrangement (as defined in 


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1 section 9831(d)(2) of the Internal Revenue Code of 

2 1986).’’. 

3 (3) EFFECTIVE DATE.—The amendments made 

4 by this subsection shall apply to plan years begin5 ning after the date described in subsection (a)(7)(A). 

Passed the House of Representatives June 21, 2016. 

Attest: KAREN L. HAAS, 

Clerk. 


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Calendar No. 526 

114TH CONGRESS 

2D SESSION H. R. 5447 

AN ACT 

To provide an exception from certain group health 

health reimbursement arrangements. plan requirements for qualified small employer 

JUNE 23, 2016 

Read the second time and placed on the calendar 


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