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Union Calendar No. 493 

114TH CONGRESS 

2D SESSION H. R. 5447 

[Report No. 114–634, Part I] 

To provide an exception from certain group health plan requirements for 

qualified small employer health reimbursement arrangements. 

IN THE HOUSE OF REPRESENTATIVES 

JUNE 10, 2016 

Mr. BOUSTANY (for himself and Mr. THOMPSON of California) introduced the 

following bill; which was referred to the Committee on Ways and Means, 

and in addition to the Committees on Education and the Workforce and 

Energy and Commerce, for a period to be subsequently determined by the 

Speaker, in each case for consideration of such provisions as fall within 

the jurisdiction of the committee concerned 

JUNE 21, 2016 

Additional sponsors: Mrs. NOEM, Mr. MEEHAN, Mr. DOLD, Mr. TIBERI, Mr. 

ROSKAM, Mr. PAULSEN, Mr. HOLDING, Mr. KELLY of Pennsylvania, Mr. 

NUNES, Mr. TOM PRICE of Georgia, Mr. MARCHANT, Mr. BUCHANAN, 

Mr. RENACCI, Ms. LINDA T. SA ́NCHEZ of California, Mr. PASCRELL, Mr. 

BLUMENAUER, Mr. ASHFORD, Mr. SCHRADER, Ms. ESHOO, Mr. PETERSON, Mr. KIND, Mr. LARSON of Connecticut, Mrs. TORRES, Ms. SINEMA, 

Ms. BONAMICI, Mr. HECK of Washington, Mr. BLUM, Mrs. MCMORRIS

RODGERS, Ms. MCSALLY, Mr. FLORES, Mr. COOPER, Mr. LOWENTHAL, 

Mr. SWALWELL of California, Miss RICE of New York, Mr. KILMER, Mr. 

MULLIN, Mr. HUDSON, Mr. CRAMER, Mr. JOHNSON of Ohio, Mr. COSTELLO of Pennsylvania, Mr. BARLETTA, Mr. TURNER, Mr. RIBBLE, Mr. 

CULBERSON, Mr. FORTENBERRY, Mr. ALLEN, Mrs. WALORSKI, Mr. TIPTON, Mr. POMPEO, Mr. BISHOP of Michigan, Mr. ROKITA, Mrs. BLACK, 

Mr. STIVERS, Mr. REICHERT, Mr. LIPINSKI, Mr. SMITH of Missouri, Ms. 

DUCKWORTH, and Mr. COURTNEY


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JUNE 21, 2016 

Reported from the Committee on Ways and Means with an amendment 

[Strike out all after the enacting clause and insert the part printed in italic] 

JUNE 21, 2016 

The Committees on Education and the Workforce and Energy and Commerce 

discharged; committed to the Committee of the Whole House on the State 

of the Union and ordered to be printed 

[For text of introduced bill, see copy of bill as introduced on June 10, 2016] 

A BILL 

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


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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’’. 

6 SEC. 2. EXCEPTION FROM GROUP HEALTH PLAN REQUIRE7 MENTS FOR QUALIFIED SMALL EMPLOYER 

8 HEALTH REIMBURSEMENT ARRANGEMENTS. 

9 (a) AMENDMENTS TO THE INTERNAL REVENUE CODE

10 OF 1986 AND THE PATIENT PROTECTION AND AFFORDABLE

11 CARE ACT.— 

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

13 Revenue Code of 1986 is amended by adding at the 

14 end the following new subsection: 

15 ‘‘(d) EXCEPTION FOR QUALIFIED SMALL EMPLOYER

16 HEALTH REIMBURSEMENT ARRANGEMENTS.— 

17 ‘‘(1) IN GENERAL.—For purposes of this title (ex18 cept as provided in section 4980I(f)(4) and notwith19 standing any other provision of this title), the term 

20 ‘group health plan’ shall not include any qualified 

21 small employer health reimbursement arrangement. 

22 ‘‘(2) QUALIFIED SMALL EMPLOYER HEALTH RE23 IMBURSEMENT ARRANGEMENT.—For purposes of this 

24 subsection— 


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

2 small employer health reimbursement arrange3 ment’ means an arrangement which— 

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

5 and 

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

7 all eligible employees of the eligible em8 ployer. 

9 ‘‘(B) ARRANGEMENT DESCRIBED.—An ar10 rangement is described in this subparagraph if— 

11 ‘‘(i) such arrangement is funded solely 

12 by an eligible employer and no salary re13 duction contributions may be made under 

14 such arrangement, 

15 ‘‘(ii) such arrangement provides, after 

16 the employee provides proof of coverage, for 

17 the payment of, or reimbursement of, an eli18 gible employee for expenses for medical care 

19 (as defined in section 213(d)) incurred by 

20 the eligible employee or the eligible employ21 ee’s family members (as determined under 

22 the terms of the arrangement), and 

23 ‘‘(iii) the amount of payments and re24 imbursements described in clause (ii) for 

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


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1 the case of an arrangement that also pro2 vides for payments or reimbursements for 

3 family members of the employee). 

4 ‘‘(C) CERTAIN VARIATION PERMITTED.—For 

5 purposes of subparagraph (A)(ii), an arrange6 ment shall not fail to be treated as provided on 

7 the same terms to each eligible employee merely 

8 because the employee’s permitted benefits under 

9 such arrangement vary in accordance with the 

10 variation in the price of an insurance policy in 

11 the relevant individual health insurance market 

12 based on— 

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

14 (and, in the case of an arrangement which 

15 covers medical expenses of the eligible em16 ployee’s family members, the age of such 

17 family members), or 

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

19 the eligible employee the medical expenses of 

20 which are covered under such arrangement. 

21 The variation permitted under the preceding sen22 tence 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 is 

5 not covered by an arrangement for the en6 tire 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) be 

10 in effect for such individual for such year 

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

12 of months for which such individual is cov13 ered by the arrangement for such year bears 

14 to 12. 

15 ‘‘(ii) INFLATION ADJUSTMENT.—In the 

16 case of any year beginning after 2016, each 

17 of the dollar amounts in subparagraph 

18 (A)(iii) shall be increased by an amount 

19 equal to— 

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

22 ‘‘(II) the cost-of-living adjustment 

23 determined under section 1(f)(3) for 

24 the calendar year in which the taxable 

25 year begins, determined by substituting 


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1 ‘calendar year 2015’ for ‘calendar year 

2 1992’ in subparagraph (B) 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 this 

8 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 ‘eli17 gible 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 plan 

22 to any of its employees. 

23 ‘‘(C) PERMITTED BENEFIT.—The term ‘per24 mitted benefit’ means, with respect to any eligi25 ble employee, the maximum dollar amount of 


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1 payments and reimbursements which may be 

2 made under the terms of the qualified small em3 ployer health reimbursement arrangement for the 

4 year with respect to such employee. 

5 ‘‘(4) NOTICE.— 

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

7 qualified small employer health reimbursement 

8 arrangement for any year shall, not later than 

9 90 days before the beginning of such year (or, in 

10 the case of an employee who is not eligible to 

11 participate in the arrangement as of the begin12 ning of such year, the date on which such em13 ployee is first so eligible), provide a written no14 tice to each eligible employee which includes the 

15 information described in subparagraph (B). 

16 ‘‘(B) CONTENTS OF NOTICE.—The notice re17 quired 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 year. 

22 ‘‘(ii) A statement that the eligible em23 ployee should provide the information de24 scribed in clause (i) to any health insurance 

25 exchange to which the employee applies for 


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1 advance payment of the premium assistance 

2 tax credit. 

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

4 is not covered under minimum essential 

5 coverage for any month the employee may 

6 be subject to tax under section 5000A for 

7 such month and reimbursements under the 

8 arrangement may be includible in gross in9 come.’’. 

10 (2) LIMITATION ON EXCLUSION FROM GROSS IN11 COME.—Section 106 of such Code is amended by add12 ing at the end the following: 

13 ‘‘(g) QUALIFIED SMALL EMPLOYER HEALTH REIM14 BURSEMENT ARRANGEMENT.—For purposes of this section 

15 and section 105, payments or reimbursements from a quali16 fied small employer health reimbursement arrangement (as 

17 defined in section 9831(d)) of an individual for medical 

18 care (as defined in section 213(d)) shall not be treated as 

19 paid or reimbursed under employer-provided coverage for 

20 medical expenses under an accident or health plan if for 

21 the month in which such medical care is provided the indi22 vidual does not have minimum essential coverage (within 

23 the meaning of section 5000A(f)).’’. 

24 (3) COORDINATION WITH HEALTH INSURANCE

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


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1 amended by adding at the end the following new 

2 paragraph: 

3 ‘‘(4) SPECIAL RULES FOR QUALIFIED SMALL EM4 PLOYER HEALTH REIMBURSEMENT ARRANGEMENTS.— 

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

6 month’ shall not include any month with respect 

7 to an employee (or any spouse or dependent of 

8 such employee) if for such month the employee is 

9 provided a qualified small employer health reim10 bursement arrangement which constitutes afford11 able coverage. 

12 ‘‘(B) DENIAL OF DOUBLE BENEFIT.—In the 

13 case of any employee who is provided a qualified 

14 small employer health reimbursement arrange15 ment for any coverage month (determined with16 out regard to subparagraph (A)), the credit oth17 erwise allowable under subsection (a) to the tax18 payer for such month shall be reduced (but not 

19 below zero) by the amount described in subpara20 graph (C)(i)(II) for such month. 

21 ‘‘(C) AFFORDABLE COVERAGE.—For pur22 poses of subparagraph (A), a qualified small em23 ployer health reimbursement arrangement shall 

24 be treated as constituting affordable coverage for 

25 a month if— 


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1 ‘‘(i) the excess of— 

2 ‘‘(I) the amount that would be 

3 paid by the employee as the premium 

4 for such month for self-only coverage 

5 under the second lowest cost silver plan 

6 offered in the relevant individual 

7 health insurance market, over 

‘‘(II) 1 8 ⁄12 of the employee’s per9 mitted benefit (as defined in section 

10 9831(d)(3)(C)) under such arrange11 ment, does not exceed— 

‘‘(ii) 1 12 ⁄12 of 9.5 percent of the employ13 ee’s household income. 

14 ‘‘(D) QUALIFIED SMALL EMPLOYER HEALTH

15 REIMBURSEMENT ARRANGEMENT.—For purposes 

16 of this paragraph, the term ‘qualified small em17 ployer health reimbursement arrangement’ has 

18 the meaning given such term by section 

19 9831(d)(2). 

20 ‘‘(E) COVERAGE FOR LESS THAN ENTIRE

21 YEAR.—In the case of an employee who is pro22 vided a qualified small employer health reim23 bursement arrangement for less than an entire 

24 year, subparagraph (C)(i)(II) shall be applied by 

25 substituting ‘the number of months during the 


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1 year for which such arrangement was provided’ 

2 for ‘12’. 

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

4 beginning in any calendar year after 2014, the 

5 Secretary shall adjust the 9.5 percent amount 

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

7 as the percentages are adjusted under subsection 

8 (b)(3)(A)(ii).’’. 

9 (4) APPLICATION OF EXCISE TAX ON HIGH COST

10 EMPLOYER-SPONSORED HEALTH COVERAGE.— 

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

12 such Code is amended by adding at the end the 

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

14 for purposes of this section.’’. 

15 (B) DETERMINATION OF COST OF COV16 ERAGE.—Section 4980I(d)(2) of such Code is 

17 amended by redesignating subparagraph (D) as 

18 subparagraph (E) and by inserting after sub19 paragraph (C) the following new subparagraph: 

20 ‘‘(D) QUALIFIED SMALL EMPLOYER HEALTH

21 REIMBURSEMENT ARRANGEMENTS.—In the case 

22 of applicable employer-sponsored coverage con23 sisting of coverage under any qualified small em24 ployer health reimbursement arrangement (as de25 fined in section 9831(d)(2)), the cost of coverage 


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1 shall be equal to the amount described in section 

2 6051(a)(15).’’. 

3 (5) ENFORCEMENT OF NOTICE REQUIREMENT.— 

4 Section 6652 of such Code is amended by adding at 

5 the end the following new subsection: 

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

7 TO QUALIFIED SMALL EMPLOYER HEALTH REIMBURSE8 MENT ARRANGEMENTS.—In the case of each failure to pro9 vide a written notice as required by section 9831(d)(4), un10 less it is shown that such failure is due to reasonable cause 

11 and not willful neglect, there shall be paid, on notice and 

12 demand of the Secretary and in the same manner as tax, 

13 by the person failing to provide such written notice, an 

14 amount equal to $50 per employee per incident of failure 

15 to provide such notice, but the total amount imposed on 

16 such person for all such failures during any calendar year 

17 shall not exceed $2,500.’’. 

18 (6) REPORTING.— 

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

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

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

22 the end of paragraph (14) and inserting ‘‘, and’’, 

23 and by inserting after paragraph (14) the fol24 lowing new paragraph: 


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

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

3 a qualified small employer health reimbursement ar4 rangement (as defined in section 9831(d)(2)) with re5 spect to the employee.’’. 

6 (B) INFORMATION REQUIRED TO BE PRO7 VIDED BY EXCHANGE SUBSIDY APPLICANTS.— 

8 Section 1411(b)(3) of the Patient Protection and 

9 Affordable Care Act is amended by redesignating 

10 subparagraph (B) as subparagraph (C) and by 

11 inserting after subparagraph (A) the following 

12 new subparagraph: 

13 ‘‘(B) CERTAIN INDIVIDUAL HEALTH INSUR14 ANCE POLICIES OBTAINED THROUGH SMALL EM15 PLOYERS.—The amount of the enrollee’s per16 mitted benefit (as defined in section 

17 9831(d)(3)(C) of the Internal Revenue Code of 

18 1986) under a qualified small employer health 

19 reimbursement arrangement (as defined in sec20 tion 9831(d)(2) of such Code).’’. 

21 (7) EFFECTIVE DATES.— 

22 (A) IN GENERAL.—Except as otherwise pro23 vided in this paragraph, the amendments made 

24 by this subsection shall apply to years beginning 

25 after the earlier of— 


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

2 date of the enactment of this Act, or 

3 (ii) December 31, 2016. 

4 (B) TRANSITION RELIEF.—The relief under 

5 Treasury Notice 2015–17 shall be treated as ap6 plying to any plan year beginning on or before 

7 the date described in subparagraph (A). 

8 (C) COORDINATION WITH HEALTH INSUR9 ANCE PREMIUM CREDIT.—The amendments made 

10 by paragraph (3) shall apply to taxable years be11 ginning after the date described in subparagraph 

12 (A). 

13 (D) EMPLOYEE NOTICE.—The amendments 

14 made by paragraph (5) shall apply to notices 

15 with respect to years beginning after the date de16 scribed in subparagraph (A). 

17 (E) W–2 REPORTING.—The amendments 

18 made by paragraph (6)(A) shall apply to cal19 endar years beginning after December 31, 2016. 

20 (F) INFORMATION PROVIDED BY EXCHANGE

21 SUBSIDY APPLICANTS.— 

22 (i) IN GENERAL.—The amendments 

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

24 applications for enrollment made after the 

25 date described in subparagraph (A). 


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1 (ii) VERIFICATION.—Verification under 

2 section 1411 of the Patient Protection and 

3 Affordable Care Act of information provided 

4 under section 1411(b)(3)(B) of such Act 

5 shall apply with respect to months begin6 ning after October 2016. 

7 (8) SUBSTANTIATION REQUIREMENTS.—The Sec8 retary of the Treasury (or his designee) may issue 

9 substantiation requirements as necessary to carry out 

10 this subsection. 

11 (b) AMENDMENTS TO THE EMPLOYEE RETIREMENT

12 INCOME SECURITY ACT OF 1974.— 

13 (1) IN GENERAL.—Section 733(a)(1) of the Em14 ployee Retirement Income Security Act of 1974 (29 

15 U.S.C. 1191b(a)(1)) is amended by adding at the end 

16 the following: ‘‘Such term shall not include any quali17 fied small employer health reimbursement arrange18 ment (as defined in section 9831(d)(2) of the Internal 

19 Revenue Code of 1986).’’. 

20 (2) EXCEPTION FROM CONTINUATION COVERAGE

21 REQUIREMENTS, ETC.—Section 607(1) of such Act (29 

22 U.S.C. 1167(1)) is amended by adding at the end the 

23 following: ‘‘Such term shall not include any qualified 

24 small employer health reimbursement arrangement 


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1 (as defined in section 9831(d)(2) of the Internal Rev2 enue Code of 1986).’’. 

3 (3) EFFECTIVE DATE.—The amendments made 

4 by this subsection shall apply to plan years beginning 

5 after the date described in subsection (a)(7)(A). 

6 (c) AMENDMENTS TO THE PUBLIC HEALTH SERVICE

7 ACT.— 

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

9 Public Health Service Act (42 U.S.C. 300gg–91(a)(1)) 

10 is amended by adding at the end the following: ‘‘Ex11 cept for purposes of part C of title XI of the Social 

12 Security Act (42 U.S.C. 1320d et seq.), such term 

13 shall not include any qualified small employer health 

14 reimbursement arrangement (as defined in section 

15 9831(d)(2) of the Internal Revenue Code of 1986).’’. 

16 (2) EXCEPTION FROM CONTINUATION COVERAGE

17 REQUIREMENTS.—Section 2208(1) of the Public 

18 Health Service Act (42 U.S.C. 300bb–8(1)) is amend19 ed by adding at the end the following: ‘‘Such term 

20 shall not include any qualified small employer health 

21 reimbursement arrangement (as defined in section 

22 9831(d)(2) of the Internal Revenue Code of 1986).’’. 

23 (3) EFFECTIVE DATE.—The amendments made 

24 by this subsection shall apply to plan years beginning 

25 after the date described in subsection (a)(7)(A). 


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Union Calendar No. 493 

114TH CONGRESS 

2D SESSION H. R. 5447 

[Report No. 114–634, Part I] 

A BILL 

To provide an exception from certain group health 

health reimbursement arrangements. plan requirements for qualified small employer 

JUNE 21, 2016 

Reported from the Committee on Ways and Means with 

J

an amendment 

UNE 21, 2016 

The Committees on Education and the Workforce and 

Union and ordered to be printed Committee of the Whole House on the State of the Energy and Commerce discharged; committed to the 


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