I 

114TH CONGRESS 

2D SESSION H. R. 5447 

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 

A BILL 

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’’. 


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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 04:35 Jun 11, 2016 Jkt 059200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H5447.IH 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 04:35 Jun 11, 2016 Jkt 059200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H5447.IH 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 covered under 

17 a qualified small employer health reimburse18 ment arrangement for any month, the credit 

19 otherwise allowed under subsection (a) to the 

20 taxpayer for such month shall be reduced (but 

21 not below zero) by the amount described in sub22 paragraph (C)(i)(II) for such month. 

23 ‘‘(C) AFFORDABLE COVERAGE.—For pur24 poses of subparagraph (A), a qualified small 

25 employer health reimbursement arrangement 


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1 shall be treated as constituting affordable cov2 erage for a month if— 

3 ‘‘(i) the excess of— 

4 ‘‘(I) the amount that would be 

5 paid by the employee as the premium 

6 for such month for self-only coverage 

7 under the second lowest cost silver 

8 plan offered in the relevant individual 

9 health insurance market, over 

‘‘(II) 1 10 ⁄12 of the employee’s per11 mitted benefit (as defined in section 

12 9831(d)(3)(C)) under such arrange13 ment, does not exceed— 

‘‘(ii) 1 14 ⁄12 of 9.5 percent of the employ15 ee’s household income. 

16 ‘‘(D) QUALIFIED SMALL EMPLOYER

17 HEALTH REIMBURSEMENT ARRANGEMENT.— 

18 For purposes of this paragraph, the term 

19 ‘qualified small employer health reimbursement 

20 arrangement’ has the meaning given such term 

21 by section 9831(d)(2). 

22 ‘‘(E) INDEXING.—In the case of plan years 

23 beginning in any calendar year after 2014, the 

24 Secretary shall adjust the 9.5 percent amount 

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


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1 as the percentages are adjusted under sub2 section (b)(3)(A)(ii).’’. 

3 (4) APPLICATION OF EXCISE TAX ON HIGH

4 COST EMPLOYER-SPONSORED HEALTH COVERAGE.— 

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

6 such Code is amended by adding at the end the 

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

8 for purposes of this section.’’. 

9 (B) DETERMINATION OF COST OF COV10 ERAGE.—Section 4980I(d)(2) of such Code is 

11 amended by redesignating subparagraph (D) as 

12 subparagraph (E) and by inserting after sub13 paragraph (C) the following new subparagraph: 

14 ‘‘(D) QUALIFIED SMALL EMPLOYER

15 HEALTH REIMBURSEMENT ARRANGEMENTS.— 

16 In the case of applicable employer-sponsored 

17 coverage consisting of coverage under any quali18 fied small employer health reimbursement ar19 rangement (as defined in section 9831(d)(2)), 

20 the cost of coverage shall be equal to the 

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

22 (5) ENFORCEMENT OF NOTICE REQUIRE23 MENT.—Section 6652 of such Code is amended by 

24 adding at the end the following new subsection: 


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

2 TO QUALIFIED SMALL EMPLOYER HEALTH REIMBURSE3 MENT ARRANGEMENTS.—In the case of each failure to 

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

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

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

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

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

9 an amount equal to $50 per employee per incident of fail10 ure to provide such notice, but the total amount imposed 

11 on such person for all such failures during any calendar 

12 year shall not exceed $2,500.’’. 

13 (6) REPORTING.— 

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

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

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

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

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

19 following new paragraph: 

20 ‘‘(15) the total amount of permitted benefits 

21 (as defined in section 9831(d)(3)(C)) for the year 

22 under a qualified small employer health reimburse23 ment arrangement (as defined in section 9831(d)(2)) 

24 with respect to the employee.’’. 


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1 (B) INFORMATION REQUIRED TO BE PRO2 VIDED BY EXCHANGE SUBSIDY APPLICANTS.— 

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

4 and Affordable Care Act is amended by redesig5 nating subparagraph (B) as subparagraph (C) 

6 and by inserting after subparagraph (A) the fol7 lowing new subparagraph: 

8 ‘‘(B) CERTAIN INDIVIDUAL HEALTH IN9 SURANCE POLICIES OBTAINED THROUGH SMALL

10 EMPLOYERS.—The amount of the enrollee’s 

11 permitted benefit (as defined in section 

12 9831(d)(3)(C) of the Internal Revenue Code of 

13 1986) under a qualified small employer health 

14 reimbursement arrangement (as defined in sec15 tion 9831(d)(2) of such Code).’’. 

16 (7) EFFECTIVE DATES.— 

17 (A) IN GENERAL.—Except as otherwise 

18 provided in this paragraph, the amendments 

19 made by this subsection shall apply to years be20 ginning after the earlier of— 

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

22 date of the enactment of this Act, or 

23 (ii) December 31, 2016. 

24 (B) TRANSITION RELIEF.—The relief 

25 under Treasury Notice 2015–17 shall be treatVerDate Sep 11 2014 04:35 Jun 11, 2016 Jkt 059200 PO 00000 Frm 00013 Fmt 6652 Sfmt 6201 E:\BILLS\H5447.IH H5447

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1 ed as applying to any plan year beginning on or 

2 before the date described in subparagraph (A). 

3 (C) COORDINATION WITH HEALTH INSUR4 ANCE PREMIUM CREDIT.—The amendments 

5 made by paragraph (3) shall apply to taxable 

6 years beginning after the date described in sub7 paragraph (A). 

8 (D) EMPLOYEE NOTICE.—The amend9 ments made by paragraph (5) shall apply to no10 tices with respect to years beginning after the 

11 date described in subparagraph (A). 

12 (E) W–2 REPORTING.—The amendments 

13 made by paragraph (6)(A) shall apply to cal14 endar years beginning after December 31, 

15 2016. 

16 (F) INFORMATION PROVIDED BY EX17 CHANGE SUBSIDY APPLICANTS.— 

18 (i) IN GENERAL.—The amendments 

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

20 applications for enrollment made after the 

21 date described in subparagraph (A). 

22 (ii) VERIFICATION.—Verification 

23 under section 1411 of the Patient Protec24 tion and Affordable Care Act of informa25 tion provided under section 1411(b)(3)(B) 


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1 of such Act shall apply with respect to 

2 months beginning after October 2016. 

3 (8) SUBSTANTIATION REQUIREMENTS.—The 

4 Secretary of the Treasury (or his designee) may 

5 issue substantiation requirements as necessary to 

6 carry out this subsection. 

7 (b) AMENDMENTS TO THE EMPLOYEE RETIREMENT

8 INCOME SECURITY ACT OF 1974.— 

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

10 Employee Retirement Income Security Act of 1974 

11 (29 U.S.C. 1191b(a)(1)) is amended by adding at 

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

13 any qualified small employer health reimbursement 

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

15 Internal Revenue Code of 1986).’’. 

16 (2) EXCEPTION FROM CONTINUATION COV17 ERAGE REQUIREMENTS, ETC.—Section 607(1) of 

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

19 at the end the following: ‘‘Such term shall not in20 clude any qualified small employer health reimburse21 ment arrangement (as defined in section 9831(d)(2) 

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

23 (3) EFFECTIVE DATE.—The amendments made 

24 by this subsection shall apply to plan years begin25 ning after the date described in subsection (a)(7)(A). 


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1 (c) AMENDMENTS TO THE PUBLIC HEALTH SERVICE

2 ACT.— 

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

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

5 91(a)(1)) is amended by adding at the end the fol6 lowing: ‘‘Except for purposes of part C of title XI 

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

8 such term shall not include any qualified small em9 ployer health reimbursement arrangement (as de10 fined in section 9831(d)(2) of the Internal Revenue 

11 Code of 1986).’’. 

12 (2) EXCEPTION FROM CONTINUATION COV13 ERAGE REQUIREMENTS.—Section 2208(1) of the 

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

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

16 term shall not include any qualified small employer 

17 health reimbursement arrangement (as defined in 

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

19 1986).’’. 

20 (3) EFFECTIVE DATE.—The amendments made 

21 by this subsection shall apply to plan years begin22 ning after the date described in subsection (a)(7)(A). 

Æ 


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