114TH CONGRESS 

2D SESSION H. R. 5447 

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, 
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1 SECTION 1. SHORT TITLE. 

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

3 Care Relief Act of 2016’’. 

4 SEC. 2. EXCEPTION FROM GROUP HEALTH PLAN REQUIRE5 MENTS FOR QUALIFIED SMALL EMPLOYER 

6 HEALTH REIMBURSEMENT ARRANGEMENTS. 

7 (a) AMENDMENTS TO THE INTERNAL REVENUE

8 CODE OF 1986 AND THE PATIENT PROTECTION AND AF9 FORDABLE CARE ACT.— 

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

11 Revenue Code of 1986 is amended by adding at the 

12 end the following new subsection: 

13 ‘‘(d) EXCEPTION FOR QUALIFIED SMALL EMPLOYER

14 HEALTH REIMBURSEMENT ARRANGEMENTS.— 

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

16 (except as provided in section 4980I(f)(4) and not17 withstanding any other provision of this title), the 

18 term ‘group health plan’ shall not include any quali19 fied small employer health reimbursement arrange20 ment. 

21 ‘‘(2) QUALIFIED SMALL EMPLOYER HEALTH

22 REIMBURSEMENT ARRANGEMENT.—For purposes of 

23 this subsection— 

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

25 small employer health reimbursement arrange26 ment’ means an arrangement which— 
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1 ‘‘(i) is described in subparagraph (B), 

2 and 

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

4 all eligible employees of the eligible em5 ployer. 

6 ‘‘(B) ARRANGEMENT DESCRIBED.—An ar7 rangement is described in this subparagraph 

8 if— 

9 ‘‘(i) such arrangement is funded solely 

10 by an eligible employer and no salary re11 duction contributions may be made under 

12 such arrangement, 

13 ‘‘(ii) such arrangement provides, after 

14 the employee provides proof of coverage, 

15 for the payment of, or reimbursement of, 

16 an eligible employee for expenses for med17 ical care (as defined in section 213(d)) in18 curred by the eligible employee or the eligi19 ble employee’s family members (as deter20 mined under the terms of the arrange21 ment), and 

22 ‘‘(iii) the amount of payments and re23 imbursements described in clause (ii) for 

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

25 the case of an arrangement that also pro-
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1 vides for payments or reimbursements for 

2 family members of the employee). 

3 ‘‘(C) CERTAIN VARIATION PERMITTED.— 

4 For purposes of subparagraph (A)(ii), an ar5 rangement shall not fail to be treated as pro6 vided on the same terms to each eligible em7 ployee merely because the employee’s permitted 

8 benefits under such arrangement vary in ac9 cordance with the variation in the price of an 

10 insurance policy in the relevant individual 

11 health insurance market based on— 

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

13 (and, in the case of an arrangement which 

14 covers medical expenses of the eligible em15 ployee’s family members, the age of such 

16 family members), or 

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

18 the eligible employee the medical expenses 

19 of which are covered under such arrange20 ment. 

21 The variation permitted under the preceding 

22 sentence shall be determined by reference to the 

23 same insurance policy with respect to all eligible 

24 employees. 
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1 ‘‘(D) RULES RELATING TO MAXIMUM DOL2 LAR LIMITATION.— 

3 ‘‘(i) AMOUNT PRORATED IN CERTAIN

4 CASES.—In the case of an individual who 

5 is not covered by an arrangement for the 

6 entire year, the limitation under subpara7 graph (A)(iii) for such year shall be an 

8 amount which bears the same ratio to the 

9 amount which would (but for this clause) 

10 be in effect for such individual for such 

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

12 number of months for which such indi13 vidual is covered by the arrangement for 

14 such year bears to 12. 

15 ‘‘(ii) INFLATION ADJUSTMENT.—In 

16 the case of any year beginning after 2016, 

17 each of the dollar amounts in subpara18 graph (A)(iii) shall be increased by an 

19 amount equal to— 

20 ‘‘(I) such dollar amount, multi21 plied by 

22 ‘‘(II) the cost-of-living adjust23 ment determined under section 1(f)(3) 

24 for the calendar year in which the tax25 able year begins, determined by sub-
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1 stituting ‘calendar year 2015’ for ‘cal2 endar year 1992’ in subparagraph (B) 

3 thereof. 

4 If any dollar amount increased under the 

5 preceding sentence is not a multiple of 

6 $100, such dollar amount shall be rounded 

7 to the next lowest multiple of $100. 

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

9 this subsection— 

10 ‘‘(A) ELIGIBLE EMPLOYEE.—The term ‘eli11 gible employee’ means any employee of an eligi12 ble employer, except that the terms of the ar13 rangement may exclude from consideration em14 ployees described in any clause of section 

15 105(h)(3)(B) (applied by substituting ‘90 days’ 

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

17 ‘‘(B) ELIGIBLE EMPLOYER.—The term ‘el18 igible employer’ means an employer that— 

19 ‘‘(i) is not an applicable large em20 ployer as defined in section 4980H(c)(2), 

21 and 

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

23 plan to any of its employees. 

24 ‘‘(C) PERMITTED BENEFIT.—The term 

25 ‘permitted benefit’ means, with respect to any 
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1 eligible employee, the maximum dollar amount 

2 of payments and reimbursements which may be 

3 made under the terms of the qualified small 

4 employer health reimbursement arrangement 

5 for the year with respect to such employee. 

6 ‘‘(4) NOTICE.— 

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

8 a qualified small employer health reimburse9 ment arrangement for any year shall, not later 

10 than 90 days before the beginning of such year 

11 (or, in the case of an employee who is not eligi12 ble to participate in the arrangement as of the 

13 beginning of such year, the date on which such 

14 employee is first so eligible), provide a written 

15 notice to each eligible employee which includes 

16 the information described in subparagraph (B). 

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

18 required under subparagraph (A) shall include 

19 each of the following: 

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

21 would be such eligible employee’s permitted 

22 benefits under the arrangement for the 

23 year. 

24 ‘‘(ii) A statement that the eligible em25 ployee should provide the information de-
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1 scribed in clause (i) to any health insur2 ance exchange to which the employee ap3 plies for advance payment of the premium 

4 assistance tax credit. 

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

6 is not covered under minimum essential 

7 coverage for any month the employee may 

8 be subject to tax under section 5000A for 

9 such month and reimbursements under the 

10 arrangement may be includible in gross in11 come.’’. 

12 (2) LIMITATION ON EXCLUSION FROM GROSS

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

14 adding at the end the following: 

15 ‘‘(g) QUALIFIED SMALL EMPLOYER HEALTH REIM16 BURSEMENT ARRANGEMENT.—For purposes of this sec17 tion and section 105, payments or reimbursements from 

18 a qualified small employer health reimbursement arrange19 ment (as defined in section 9831(d)) of an individual for 

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

21 treated as paid or reimbursed under employer-provided 

22 coverage for medical expenses under an accident or health 

23 plan if for the month in which such medical care is pro24 vided the individual does not have minimum essential cov25 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 reim-
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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: 

Clerk. 
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