I 

110TH CONGRESS 

1ST SESSION H. R. 1012 

To reform laws and procedures affecting small business. 

IN THE HOUSE OF REPRESENTATIVES 

FEBRUARY 13, 2007 

Mr. BUCHANAN (for himself, Ms. FALLIN, Mr. GILCHREST, Mr. DAVIS of Illinois, and Ms. GINNY BROWN-WAITE of Florida) introduced the following 

bill; which was referred to the Committee on Education and Labor, and 

in addition to the Committees on Small Business, Judiciary, Oversight 

and Government Reform, and Ways and Means, 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 reform laws and procedures affecting small business. 

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 AND TABLE OF CONTENTS. 

4 (a) SHORT TITLE.—This Act may be cited as the 

5 ‘‘Small Business Growth Act of 2007’’. 

6 (b) TABLE OF CONTENTS.—The table of contents is 

7 as follows: 

Sec. 1. Short title and table of contents. 

TITLE I—ASSOCIATION HEALTH PLANS 

Sec. 101. Rules governing association health plans. 


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‘‘PART 8—RULES GOVERNING ASSOCIATION HEALTH PLANS

‘‘Sec. 801. Association health plans. 

‘‘Sec. 802. Certification of association health plans. 

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

‘‘Sec. 804. Participation and coverage requirements. 

‘‘Sec. 805. Other requirements relating to plan documents, contribution 

rates, and benefit options. 

‘‘Sec. 806. Maintenance of reserves and provisions for solvency for plans 

providing health benefits in addition to health insurance 

coverage. 

‘‘Sec. 807. Requirements for application and related requirements. 

‘‘Sec. 808. Notice requirements for voluntary termination. 

‘‘Sec. 809. Corrective actions and mandatory termination. 

‘‘Sec. 810. Trusteeship by the Secretary of insolvent association health 

plans providing health benefits in addition to health insurance coverage. 

‘‘Sec. 811. State assessment authority. 

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

Sec. 102. Clarification of treatment of single employer arrangements. 

Sec. 103. Enforcement provisions relating to association health plans. 

Sec. 104. Cooperation between Federal and State authorities. 

Sec. 105. Effective date and transitional and other rules. 

TITLE II—EXTENSION OF INCREASED EXPENSING 

Sec. 201. Extension of increased expensing for small businesses. 

TITLE III—PAPERWORK REQUIREMENTS 

Sec. 301. Suspension of fines for first-time paperwork violations by small business concerns. 

TITLE IV—FEDERAL RULES OF CIVIL PROCEDURE 

IMPROVEMENTS 

Sec. 401. Attorney accountability. 

Sec. 402. Applicability of Rule 11 to State cases affecting interstate commerce. 

Sec. 403. Prevention of forum-shopping. 

Sec. 404. Rule of construction. 

Sec. 405. Three-strikes rule for suspending attorneys who commit multiple Rule 

11 violations. 

Sec. 406. Presumption of rule 11 violation for repeatedly relitigating same 

issue. 

Sec. 407. Enhanced sanctions for document destruction in pending Federal 

court proceedings. 

Sec. 408. Ban on concealment of unlawful conduct. 

TITLE V—AWARDING OF PROCUREMENT CONTRACTS 

Sec. 501. Increase in government-wide goal for procurement contracts awarded 

to small business concerns. 


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1 TITLE I—ASSOCIATION HEALTH 

2 PLANS 

3 SEC. 101. RULES GOVERNING ASSOCIATION HEALTH 

4 PLANS. 

5 (a) IN GENERAL.—Subtitle B of title I of the Em6 ployee Retirement Income Security Act of 1974 is amend7 ed by adding after part 7 the following new part: 

8 ‘‘PART 8—RULES GOVERNING ASSOCIATION 

9 HEALTH PLANS 

10 ‘‘SEC. 801. ASSOCIATION HEALTH PLANS. 

11 ‘‘(a) IN GENERAL.—For purposes of this part, the 

12 term ‘association health plan’ means a group health plan 

13 whose sponsor is (or is deemed under this part to be) de14 scribed in subsection (b). 

15 ‘‘(b) SPONSORSHIP.—The sponsor of a group health 

16 plan is described in this subsection if such sponsor— 

17 ‘‘(1) is organized and maintained in good faith, 

18 with a constitution and bylaws specifically stating its 

19 purpose and providing for periodic meetings on at 

20 least an annual basis, as a bona fide trade associa21 tion, a bona fide industry association (including a 

22 rural electric cooperative association or a rural tele23 phone cooperative association), a bona fide profes24 sional association, or a bona fide chamber of com25 merce (or similar bona fide business association, inVerDate Aug 31 2005 01:39 Feb 17, 2007 Jkt 059200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H1012.IH H1012

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1 cluding a corporation or similar organization that 

2 operates on a cooperative basis (within the meaning 

3 of section 1381 of the Internal Revenue Code of 

4 1986)), for substantial purposes other than that of 

5 obtaining or providing medical care; 

6 ‘‘(2) is established as a permanent entity which 

7 receives the active support of its members and re8 quires for membership payment on a periodic basis 

9 of dues or payments necessary to maintain eligibility 

10 for membership in the sponsor; and 

11 ‘‘(3) does not condition membership, such dues 

12 or payments, or coverage under the plan on the 

13 basis of health status-related factors with respect to 

14 the employees of its members (or affiliated mem15 bers), or the dependents of such employees, and does 

16 not condition such dues or payments on the basis of 

17 group health plan participation. 

18 Any sponsor consisting of an association of entities which 

19 meet the requirements of paragraphs (1), (2), and (3) 

20 shall be deemed to be a sponsor described in this sub21 section. 

22 ‘‘SEC. 802. CERTIFICATION OF ASSOCIATION HEALTH 

23 PLANS. 

24 ‘‘(a) IN GENERAL.—The applicable authority shall 

25 prescribe by regulation a procedure under which, subject 


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1 to subsection (b), the applicable authority shall certify as2 sociation health plans which apply for certification as 

3 meeting the requirements of this part. 

4 ‘‘(b) STANDARDS.—Under the procedure prescribed 

5 pursuant to subsection (a), in the case of an association 

6 health plan that provides at least one benefit option which 

7 does not consist of health insurance coverage, the applica8 ble authority shall certify such plan as meeting the re9 quirements of this part only if the applicable authority is 

10 satisfied that the applicable requirements of this part are 

11 met (or, upon the date on which the plan is to commence 

12 operations, will be met) with respect to the plan. 

13 ‘‘(c) REQUIREMENTS APPLICABLE TO CERTIFIED

14 PLANS.—An association health plan with respect to which 

15 certification under this part is in effect shall meet the ap16 plicable requirements of this part, effective on the date 

17 of certification (or, if later, on the date on which the plan 

18 is to commence operations). 

19 ‘‘(d) REQUIREMENTS FOR CONTINUED CERTIFI20 CATION.—The applicable authority may provide by regula21 tion for continued certification of association health plans 

22 under this part. 

23 ‘‘(e) CLASS CERTIFICATION FOR FULLY INSURED

24 PLANS.—The applicable authority shall establish a class 

25 certification procedure for association health plans under 


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1 which all benefits consist of health insurance coverage. 

2 Under such procedure, the applicable authority shall pro3 vide for the granting of certification under this part to 

4 the plans in each class of such association health plans 

5 upon appropriate filing under such procedure in connec6 tion with plans in such class and payment of the pre7 scribed fee under section 807(a). 

8 ‘‘(f) CERTIFICATION OF SELF-INSURED ASSOCIATION

9 HEALTH PLANS.—An association health plan which offers 

10 one or more benefit options which do not consist of health 

11 insurance coverage may be certified under this part only 

12 if such plan consists of any of the following: 

13 ‘‘(1) a plan which offered such coverage on the 

14 date of the enactment of the Small Business Growth 

15 Act of 2007, 

16 ‘‘(2) a plan under which the sponsor does not 

17 restrict membership to one or more trades and busi18 nesses or industries and whose eligible participating 

19 employers represent a broad cross-section of trades 

20 and businesses or industries, or 

21 ‘‘(3) a plan whose eligible participating employ22 ers represent one or more trades or businesses, or 

23 one or more industries, consisting of any of the fol24 lowing: agriculture; equipment and automobile deal25 erships; barbering and cosmetology; certified public 


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1 accounting practices; child care; construction; dance, 

2 theatrical and orchestra productions; disinfecting 

3 and pest control; financial services; fishing; food 

4 service establishments; hospitals; labor organiza5 tions; logging; manufacturing (metals); mining; med6 ical and dental practices; medical laboratories; pro7 fessional consulting services; sanitary services; trans8 portation (local and freight); warehousing; whole9 saling/distributing; or any other trade or business or 

10 industry which has been indicated as having average 

11 or above-average risk or health claims experience by 

12 reason of State rate filings, denials of coverage, pro13 posed premium rate levels, or other means dem14 onstrated by such plan in accordance with regula15 tions. 

16 ‘‘SEC. 803. REQUIREMENTS RELATING TO SPONSORS AND 

17 BOARDS OF TRUSTEES. 

18 ‘‘(a) SPONSOR.—The requirements of this subsection 

19 are met with respect to an association health plan if the 

20 sponsor has met (or is deemed under this part to have 

21 met) the requirements of section 801(b) for a continuous 

22 period of not less than 3 years ending with the date of 

23 the application for certification under this part. 


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1 ‘‘(b) BOARD OF TRUSTEES.—The requirements of 

2 this subsection are met with respect to an association 

3 health plan if the following requirements are met: 

4 ‘‘(1) FISCAL CONTROL.—The plan is operated, 

5 pursuant to a trust agreement, by a board of trust6 ees which has complete fiscal control over the plan 

7 and which is responsible for all operations of the 

8 plan. 

9 ‘‘(2) RULES OF OPERATION AND FINANCIAL

10 CONTROLS.—The board of trustees has in effect 

11 rules of operation and financial controls, based on a 

12 3-year plan of operation, adequate to carry out the 

13 terms of the plan and to meet all requirements of 

14 this title applicable to the plan. 

15 ‘‘(3) RULES GOVERNING RELATIONSHIP TO

16 PARTICIPATING EMPLOYERS AND TO CONTRAC17 TORS.— 

18 ‘‘(A) BOARD MEMBERSHIP.— 

19 ‘‘(i) IN GENERAL.—Except as pro20 vided in clauses (ii) and (iii), the members 

21 of the board of trustees are individuals se22 lected from individuals who are the owners, 

23 officers, directors, or employees of the par24 ticipating employers or who are partners in 


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1 the participating employers and actively 

2 participate in the business. 

3 ‘‘(ii) LIMITATION.— 

4 ‘‘(I) GENERAL RULE.—Except as 

5 provided in subclauses (II) and (III), 

6 no such member is an owner, officer, 

7 director, or employee of, or partner in, 

8 a contract administrator or other 

9 service provider to the plan. 

10 ‘‘(II) LIMITED EXCEPTION FOR

11 PROVIDERS OF SERVICES SOLELY ON

12 BEHALF OF THE SPONSOR.—Officers 

13 or employees of a sponsor which is a 

14 service provider (other than a contract 

15 administrator) to the plan may be 

16 members of the board if they con17 stitute not more than 25 percent of 

18 the membership of the board and they 

19 do not provide services to the plan 

20 other than on behalf of the sponsor. 

21 ‘‘(III) TREATMENT OF PRO22 VIDERS OF MEDICAL CARE.—In the 

23 case of a sponsor which is an associa24 tion whose membership consists pri25 marily of providers of medical care, 


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1 subclause (I) shall not apply in the 

2 case of any service provider described 

3 in subclause (I) who is a provider of 

4 medical care under the plan. 

5 ‘‘(iii) CERTAIN PLANS EXCLUDED.— 

6 Clause (i) shall not apply to an association 

7 health plan which is in existence on the 

8 date of the enactment of the Small Busi9 ness Growth Act of 2007. 

10 ‘‘(B) SOLE AUTHORITY.—The board has 

11 sole authority under the plan to approve appli12 cations for participation in the plan and to con13 tract with a service provider to administer the 

14 day-to-day affairs of the plan. 

15 ‘‘(c) TREATMENT OF FRANCHISE NETWORKS.—In 

16 the case of a group health plan which is established and 

17 maintained by a franchiser for a franchise network con18 sisting of its franchisees— 

19 ‘‘(1) the requirements of subsection (a) and sec20 tion 801(a) shall be deemed met if such require21 ments would otherwise be met if the franchiser were 

22 deemed to be the sponsor referred to in section 

23 801(b), such network were deemed to be an associa24 tion described in section 801(b), and each franchisee 


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1 were deemed to be a member (of the association and 

2 the sponsor) referred to in section 801(b); and 

3 ‘‘(2) the requirements of section 804(a)(1) shall 

4 be deemed met. 

5 The Secretary may by regulation define for purposes of 

6 this subsection the terms ‘franchiser’, ‘franchise network’, 

7 and ‘franchisee’. 

8 ‘‘SEC. 804. PARTICIPATION AND COVERAGE REQUIRE9 MENTS. 

10 ‘‘(a) COVERED EMPLOYERS AND INDIVIDUALS.—The 

11 requirements of this subsection are met with respect to 

12 an association health plan if, under the terms of the 

13 plan— 

14 ‘‘(1) each participating employer must be— 

15 ‘‘(A) a member of the sponsor, 

16 ‘‘(B) the sponsor, or 

17 ‘‘(C) an affiliated member of the sponsor 

18 with respect to which the requirements of sub19 section (b) are met, 

20 except that, in the case of a sponsor which is a pro21 fessional association or other individual-based asso22 ciation, if at least one of the officers, directors, or 

23 employees of an employer, or at least one of the in24 dividuals who are partners in an employer and who 

25 actively participates in the business, is a member or 


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1 such an affiliated member of the sponsor, partici2 pating employers may also include such employer; 

3 and 

4 ‘‘(2) all individuals commencing coverage under 

5 the plan after certification under this part must 

6 be— 

7 ‘‘(A) active or retired owners (including 

8 self-employed individuals), officers, directors, or 

9 employees of, or partners in, participating em10 ployers; or 

11 ‘‘(B) the beneficiaries of individuals de12 scribed in subparagraph (A). 

13 ‘‘(b) COVERAGE OF PREVIOUSLY UNINSURED EM14 PLOYEES.—In the case of an association health plan in 

15 existence on the date of the enactment of the Small Busi16 ness Growth Act of 2007, an affiliated member of the 

17 sponsor of the plan may be offered coverage under the 

18 plan as a participating employer only if— 

19 ‘‘(1) the affiliated member was an affiliated 

20 member on the date of certification under this part; 

21 or 

22 ‘‘(2) during the 12-month period preceding the 

23 date of the offering of such coverage, the affiliated 

24 member has not maintained or contributed to a 

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1 ees who would otherwise be eligible to participate in 

2 such association health plan. 

3 ‘‘(c) INDIVIDUAL MARKET UNAFFECTED.—The re4 quirements of this subsection are met with respect to an 

5 association health plan if, under the terms of the plan, 

6 no participating employer may provide health insurance 

7 coverage in the individual market for any employee not 

8 covered under the plan which is similar to the coverage 

9 contemporaneously provided to employees of the employer 

10 under the plan, if such exclusion of the employee from cov11 erage under the plan is based on a health status-related 

12 factor with respect to the employee and such employee 

13 would, but for such exclusion on such basis, be eligible 

14 for coverage under the plan. 

15 ‘‘(d) PROHIBITION OF DISCRIMINATION AGAINST

16 EMPLOYERS AND EMPLOYEES ELIGIBLE TO PARTICI17 PATE.—The requirements of this subsection are met with 

18 respect to an association health plan if— 

19 ‘‘(1) under the terms of the plan, all employers 

20 meeting the preceding requirements of this section 

21 are eligible to qualify as participating employers for 

22 all geographically available coverage options, unless, 

23 in the case of any such employer, participation or 

24 contribution requirements of the type referred to in 


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1 section 2711 of the Public Health Service Act are 

2 not met; 

3 ‘‘(2) upon request, any employer eligible to par4 ticipate is furnished information regarding all cov5 erage options available under the plan; and 

6 ‘‘(3) the applicable requirements of sections 

7 701, 702, and 703 are met with respect to the plan. 

8 ‘‘SEC. 805. OTHER REQUIREMENTS RELATING TO PLAN 

9 DOCUMENTS, CONTRIBUTION RATES, AND 

10 BENEFIT OPTIONS. 

11 ‘‘(a) IN GENERAL.—The requirements of this section 

12 are met with respect to an association health plan if the 

13 following requirements are met: 

14 ‘‘(1) CONTENTS OF GOVERNING INSTRU15 MENTS.—The instruments governing the plan in16 clude a written instrument, meeting the require17 ments of an instrument required under section 

18 402(a)(1), which— 

19 ‘‘(A) provides that the board of trustees 

20 serves as the named fiduciary required for plans 

21 under section 402(a)(1) and serves in the ca22 pacity of a plan administrator (referred to in 

23 section 3(16)(A)); 


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1 ‘‘(B) provides that the sponsor of the plan 

2 is to serve as plan sponsor (referred to in sec3 tion 3(16)(B)); and 

4 ‘‘(C) incorporates the requirements of sec5 tion 806. 

6 ‘‘(2) CONTRIBUTION RATES MUST BE NON7 DISCRIMINATORY.— 

8 ‘‘(A) The contribution rates for any par9 ticipating small employer do not vary on the 

10 basis of any health status-related factor in rela11 tion to employees of such employer or their 

12 beneficiaries and do not vary on the basis of the 

13 type of business or industry in which such em14 ployer is engaged. 

15 ‘‘(B) Nothing in this title or any other pro16 vision of law shall be construed to preclude an 

17 association health plan, or a health insurance 

18 issuer offering health insurance coverage in 

19 connection with an association health plan, 

20 from— 

21 ‘‘(i) setting contribution rates based 

22 on the claims experience of the plan; or 

23 ‘‘(ii) varying contribution rates for 

24 small employers in a State to the extent 

25 that such rates could vary using the same 


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1 methodology employed in such State for 

2 regulating premium rates in the small 

3 group market with respect to health insur4 ance coverage offered in connection with 

5 bona fide associations (within the meaning 

6 of section 2791(d)(3) of the Public Health 

7 Service Act), 

8 subject to the requirements of section 702(b) 

9 relating to contribution rates. 

10 ‘‘(3) FLOOR FOR NUMBER OF COVERED INDI11 VIDUALS WITH RESPECT TO CERTAIN PLANS.—If 

12 any benefit option under the plan does not consist 

13 of health insurance coverage, the plan has as of the 

14 beginning of the plan year not fewer than 1,000 par15 ticipants and beneficiaries. 

16 ‘‘(4) MARKETING REQUIREMENTS.— 

17 ‘‘(A) IN GENERAL.—If a benefit option 

18 which consists of health insurance coverage is 

19 offered under the plan, State-licensed insurance 

20 agents shall be used to distribute to small em21 ployers coverage which does not consist of 

22 health insurance coverage in a manner com23 parable to the manner in which such agents are 

24 used to distribute health insurance coverage. 


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1 ‘‘(B) STATE-LICENSED INSURANCE

2 AGENTS.—For purposes of subparagraph (A), 

3 the term ‘State-licensed insurance agents’ 

4 means one or more agents who are licensed in 

5 a State and are subject to the laws of such 

6 State relating to licensure, qualification, test7 ing, examination, and continuing education of 

8 persons authorized to offer, sell, or solicit 

9 health insurance coverage in such State. 

10 ‘‘(5) REGULATORY REQUIREMENTS.—Such 

11 other requirements as the applicable authority deter12 mines are necessary to carry out the purposes of this 

13 part, which shall be prescribed by the applicable au14 thority by regulation. 

15 ‘‘(b) ABILITY OF ASSOCIATION HEALTH PLANS TO

16 DESIGN BENEFIT OPTIONS.—Subject to section 514(d), 

17 nothing in this part or any provision of State law (as de18 fined in section 514(c)(1)) shall be construed to preclude 

19 an association health plan, or a health insurance issuer 

20 offering health insurance coverage in connection with an 

21 association health plan, from exercising its sole discretion 

22 in selecting the specific items and services consisting of 

23 medical care to be included as benefits under such plan 

24 or coverage, except (subject to section 514) in the case 

25 of (1) any law to the extent that it is not preempted under 


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1 section 731(a)(1) with respect to matters governed by sec2 tion 711, 712, or 713, or (2) any law of the State with 

3 which filing and approval of a policy type offered by the 

4 plan was initially obtained to the extent that such law pro5 hibits an exclusion of a specific disease from such cov6 erage. 

7 ‘‘SEC. 806. MAINTENANCE OF RESERVES AND PROVISIONS 

8 FOR SOLVENCY FOR PLANS PROVIDING 

9 HEALTH BENEFITS IN ADDITION TO HEALTH 

10 INSURANCE COVERAGE. 

11 ‘‘(a) IN GENERAL.—The requirements of this section 

12 are met with respect to an association health plan if— 

13 ‘‘(1) the benefits under the plan consist solely 

14 of health insurance coverage; or 

15 ‘‘(2) if the plan provides any additional benefit 

16 options which do not consist of health insurance cov17 erage, the plan— 

18 ‘‘(A) establishes and maintains reserves 

19 with respect to such additional benefit options, 

20 in amounts recommended by the qualified actu21 ary, consisting of— 

22 ‘‘(i) a reserve sufficient for unearned 

23 contributions; 

24 ‘‘(ii) a reserve sufficient for benefit li25 abilities which have been incurred, which 


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1 have not been satisfied, and for which risk 

2 of loss has not yet been transferred, and 

3 for expected administrative costs with re4 spect to such benefit liabilities; 

5 ‘‘(iii) a reserve sufficient for any other 

6 obligations of the plan; and 

7 ‘‘(iv) a reserve sufficient for a margin 

8 of error and other fluctuations, taking into 

9 account the specific circumstances of the 

10 plan; and 

11 ‘‘(B) establishes and maintains aggregate 

12 and specific excess/stop loss insurance and sol13 vency indemnification, with respect to such ad14 ditional benefit options for which risk of loss 

15 has not yet been transferred, as follows: 

16 ‘‘(i) The plan shall secure aggregate 

17 excess/stop loss insurance for the plan with 

18 an attachment point which is not greater 

19 than 125 percent of expected gross annual 

20 claims. The applicable authority may by 

21 regulation provide for upward adjustments 

22 in the amount of such percentage in speci23 fied circumstances in which the plan spe24 cifically provides for and maintains reVerDate Aug 31 2005 01:39 Feb 17, 2007 Jkt 059200 PO 00000 Frm 00019 Fmt 6652 Sfmt 6201 E:\BILLS\H1012.IH H1012

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1 serves in excess of the amounts required 

2 under subparagraph (A). 

3 ‘‘(ii) The plan shall secure specific ex4 cess/stop loss insurance for the plan with 

5 an attachment point which is at least equal 

6 to an amount recommended by the plan’s 

7 qualified actuary. The applicable authority 

8 may by regulation provide for adjustments 

9 in the amount of such insurance in speci10 fied circumstances in which the plan spe11 cifically provides for and maintains re12 serves in excess of the amounts required 

13 under subparagraph (A). 

14 ‘‘(iii) The plan shall secure indem15 nification insurance for any claims which 

16 the plan is unable to satisfy by reason of 

17 a plan termination. 

18 Any person issuing to a plan insurance described in clause 

19 (i), (ii), or (iii) of subparagraph (B) shall notify the Sec20 retary of any failure of premium payment meriting can21 cellation of the policy prior to undertaking such a cancella22 tion. Any regulations prescribed by the applicable author23 ity pursuant to clause (i) or (ii) of subparagraph (B) may 

24 allow for such adjustments in the required levels of excess/ 

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1 ommend, taking into account the specific circumstances 

2 of the plan. 

3 ‘‘(b) MINIMUM SURPLUS IN ADDITION TO CLAIMS

4 RESERVES.—In the case of any association health plan de5 scribed in subsection (a)(2), the requirements of this sub6 section are met if the plan establishes and maintains sur7 plus in an amount at least equal to— 

8 ‘‘(1) $500,000, or 

9 ‘‘(2) such greater amount (but not greater than 

10 $2,000,000) as may be set forth in regulations pre11 scribed by the applicable authority, considering the 

12 level of aggregate and specific excess/stop loss insur13 ance provided with respect to such plan and other 

14 factors related to solvency risk, such as the plan’s 

15 projected levels of participation or claims, the nature 

16 of the plan’s liabilities, and the types of assets avail17 able to assure that such liabilities are met. 

18 ‘‘(c) ADDITIONAL REQUIREMENTS.—In the case of 

19 any association health plan described in subsection (a)(2), 

20 the applicable authority may provide such additional re21 quirements relating to reserves, excess/stop loss insurance, 

22 and indemnification insurance as the applicable authority 

23 considers appropriate. Such requirements may be provided 

24 by regulation with respect to any such plan or any class 

25 of such plans. 


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1 ‘‘(d) ADJUSTMENTS FOR EXCESS/STOP LOSS INSUR2 ANCE.—The applicable authority may provide for adjust3 ments to the levels of reserves otherwise required under 

4 subsections (a) and (b) with respect to any plan or class 

5 of plans to take into account excess/stop loss insurance 

6 provided with respect to such plan or plans. 

7 ‘‘(e) ALTERNATIVE MEANS OF COMPLIANCE.—The 

8 applicable authority may permit an association health plan 

9 described in subsection (a)(2) to substitute, for all or part 

10 of the requirements of this section (except subsection 

11 (a)(2)(B)(iii)), such security, guarantee, hold-harmless ar12 rangement, or other financial arrangement as the applica13 ble authority determines to be adequate to enable the plan 

14 to fully meet all its financial obligations on a timely basis 

15 and is otherwise no less protective of the interests of par16 ticipants and beneficiaries than the requirements for 

17 which it is substituted. The applicable authority may take 

18 into account, for purposes of this subsection, evidence pro19 vided by the plan or sponsor which demonstrates an as20 sumption of liability with respect to the plan. Such evi21 dence may be in the form of a contract of indemnification, 

22 lien, bonding, insurance, letter of credit, recourse under 

23 applicable terms of the plan in the form of assessments 

24 of participating employers, security, or other financial ar25 rangement. 


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1 ‘‘(f) MEASURES TO ENSURE CONTINUED PAYMENT

2 OF BENEFITS BY CERTAIN PLANS IN DISTRESS.— 

3 ‘‘(1) PAYMENTS BY CERTAIN PLANS TO ASSO4 CIATION HEALTH PLAN FUND.— 

5 ‘‘(A) IN GENERAL.—In the case of an as6 sociation health plan described in subsection 

7 (a)(2), the requirements of this subsection are 

8 met if the plan makes payments into the Asso9 ciation Health Plan Fund under this subpara10 graph when they are due. Such payments shall 

11 consist of annual payments in the amount of 

12 $5,000, and, in addition to such annual pay13 ments, such supplemental payments as the Sec14 retary may determine to be necessary under 

15 paragraph (2). Payments under this paragraph 

16 are payable to the Fund at the time determined 

17 by the Secretary. Initial payments are due in 

18 advance of certification under this part. Pay19 ments shall continue to accrue until a plan’s as20 sets are distributed pursuant to a termination 

21 procedure. 

22 ‘‘(B) PENALTIES FOR FAILURE TO MAKE

23 PAYMENTS.—If any payment is not made by a 

24 plan when it is due, a late payment charge of 

25 not more than 100 percent of the payment 


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1 which was not timely paid shall be payable by 

2 the plan to the Fund. 

3 ‘‘(C) CONTINUED DUTY OF THE SEC4 RETARY.—The Secretary shall not cease to 

5 carry out the provisions of paragraph (2) on ac6 count of the failure of a plan to pay any pay7 ment when due. 

8 ‘‘(2) PAYMENTS BY SECRETARY TO CONTINUE

9 EXCESS/STOP LOSS INSURANCE COVERAGE AND IN10 DEMNIFICATION INSURANCE COVERAGE FOR CER11 TAIN PLANS.—In any case in which the applicable 

12 authority determines that there is, or that there is 

13 reason to believe that there will be: (A) a failure to 

14 take necessary corrective actions under section 

15 809(a) with respect to an association health plan de16 scribed in subsection (a)(2); or (B) a termination of 

17 such a plan under section 809(b) or 810(b)(8) (and, 

18 if the applicable authority is not the Secretary, cer19 tifies such determination to the Secretary), the Sec20 retary shall determine the amounts necessary to 

21 make payments to an insurer (designated by the 

22 Secretary) to maintain in force excess/stop loss in23 surance coverage or indemnification insurance cov24 erage for such plan, if the Secretary determines that 

25 there is a reasonable expectation that, without such 


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1 payments, claims would not be satisfied by reason of 

2 termination of such coverage. The Secretary shall, to 

3 the extent provided in advance in appropriation 

4 Acts, pay such amounts so determined to the insurer 

5 designated by the Secretary. 

6 ‘‘(3) ASSOCIATION HEALTH PLAN FUND.— 

7 ‘‘(A) IN GENERAL.—There is established 

8 on the books of the Treasury a fund to be 

9 known as the ‘Association Health Plan Fund’. 

10 The Fund shall be available for making pay11 ments pursuant to paragraph (2). The Fund 

12 shall be credited with payments received pursu13 ant to paragraph (1)(A), penalties received pur14 suant to paragraph (1)(B); and earnings on in15 vestments of amounts of the Fund under sub16 paragraph (B). 

17 ‘‘(B) INVESTMENT.—Whenever the Sec18 retary determines that the moneys of the fund 

19 are in excess of current needs, the Secretary 

20 may request the investment of such amounts as 

21 the Secretary determines advisable by the Sec22 retary of the Treasury in obligations issued or 

23 guaranteed by the United States. 

24 ‘‘(g) EXCESS/STOP LOSS INSURANCE.—For purposes 

25 of this section— 


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1 ‘‘(1) AGGREGATE EXCESS/STOP LOSS INSUR2 ANCE.—The term ‘aggregate excess/stop loss insur3 ance’ means, in connection with an association 

4 health plan, a contract— 

5 ‘‘(A) under which an insurer (meeting such 

6 minimum standards as the applicable authority 

7 may prescribe by regulation) provides for pay8 ment to the plan with respect to aggregate 

9 claims under the plan in excess of an amount 

10 or amounts specified in such contract; 

11 ‘‘(B) which is guaranteed renewable; and 

12 ‘‘(C) which allows for payment of pre13 miums by any third party on behalf of the in14 sured plan. 

15 ‘‘(2) SPECIFIC EXCESS/STOP LOSS INSUR16 ANCE.—The term ‘specific excess/stop loss insur17 ance’ means, in connection with an association 

18 health plan, a contract— 

19 ‘‘(A) under which an insurer (meeting such 

20 minimum standards as the applicable authority 

21 may prescribe by regulation) provides for pay22 ment to the plan with respect to claims under 

23 the plan in connection with a covered individual 

24 in excess of an amount or amounts specified in 


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1 such contract in connection with such covered 

2 individual; 

3 ‘‘(B) which is guaranteed renewable; and 

4 ‘‘(C) which allows for payment of pre5 miums by any third party on behalf of the in6 sured plan. 

7 ‘‘(h) INDEMNIFICATION INSURANCE.—For purposes 

8 of this section, the term ‘indemnification insurance’ 

9 means, in connection with an association health plan, a 

10 contract— 

11 ‘‘(1) under which an insurer (meeting such min12 imum standards as the applicable authority may pre13 scribe by regulation) provides for payment to the 

14 plan with respect to claims under the plan which the 

15 plan is unable to satisfy by reason of a termination 

16 pursuant to section 809(b) (relating to mandatory 

17 termination); 

18 ‘‘(2) which is guaranteed renewable and 

19 noncancellable for any reason (except as the applica20 ble authority may prescribe by regulation); and 

21 ‘‘(3) which allows for payment of premiums by 

22 any third party on behalf of the insured plan. 

23 ‘‘(i) RESERVES.—For purposes of this section, the 

24 term ‘reserves’ means, in connection with an association 

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1 ards under part 4 and such additional requirements re2 garding liquidity as the applicable authority may prescribe 

3 by regulation. 

4 ‘‘(j) SOLVENCY STANDARDS WORKING GROUP.— 

5 ‘‘(1) IN GENERAL.—Within 90 days after the 

6 date of the enactment of the Small Business Growth 

7 Act of 2007, the applicable authority shall establish 

8 a Solvency Standards Working Group. In prescribing 

9 the initial regulations under this section, the applica10 ble authority shall take into account the rec11 ommendations of such Working Group. 

12 ‘‘(2) MEMBERSHIP.—The Working Group shall 

13 consist of not more than 15 members appointed by 

14 the applicable authority. The applicable authority 

15 shall include among persons invited to membership 

16 on the Working Group at least one of each of the 

17 following: 

18 ‘‘(A) a representative of the National Asso19 ciation of Insurance Commissioners; 

20 ‘‘(B) a representative of the American 

21 Academy of Actuaries; 

22 ‘‘(C) a representative of the State govern23 ments, or their interests; 

24 ‘‘(D) a representative of existing self-in25 sured arrangements, or their interests; 


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1 ‘‘(E) a representative of associations of the 

2 type referred to in section 801(b)(1), or their 

3 interests; and 

4 ‘‘(F) a representative of multiemployer 

5 plans that are group health plans, or their in6 terests. 

7 ‘‘SEC. 807. REQUIREMENTS FOR APPLICATION AND RE8 LATED REQUIREMENTS. 

9 ‘‘(a) FILING FEE.—Under the procedure prescribed 

10 pursuant to section 802(a), an association health plan 

11 shall pay to the applicable authority at the time of filing 

12 an application for certification under this part a filing fee 

13 in the amount of $5,000, which shall be available in the 

14 case of the Secretary, to the extent provided in appropria15 tion Acts, for the sole purpose of administering the certifi16 cation procedures applicable with respect to association 

17 health plans. 

18 ‘‘(b) INFORMATION TO BE INCLUDED IN APPLICA19 TION FOR CERTIFICATION.—An application for certifi20 cation under this part meets the requirements of this sec21 tion only if it includes, in a manner and form which shall 

22 be prescribed by the applicable authority by regulation, at 

23 least the following information: 

24 ‘‘(1) IDENTIFYING INFORMATION.—The names 

25 and addresses of— 


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1 ‘‘(A) the sponsor; and 

2 ‘‘(B) the members of the board of trustees 

3 of the plan. 

4 ‘‘(2) STATES IN WHICH PLAN INTENDS TO DO

5 BUSINESS.—The States in which participants and 

6 beneficiaries under the plan are to be located and 

7 the number of them expected to be located in each 

8 such State. 

9 ‘‘(3) BONDING REQUIREMENTS.—Evidence pro10 vided by the board of trustees that the bonding re11 quirements of section 412 will be met as of the date 

12 of the application or (if later) commencement of op13 erations. 

14 ‘‘(4) PLAN DOCUMENTS.—A copy of the docu15 ments governing the plan (including any bylaws and 

16 trust agreements), the summary plan description, 

17 and other material describing the benefits that will 

18 be provided to participants and beneficiaries under 

19 the plan. 

20 ‘‘(5) AGREEMENTS WITH SERVICE PRO21 VIDERS.—A copy of any agreements between the 

22 plan and contract administrators and other service 

23 providers. 

24 ‘‘(6) FUNDING REPORT.—In the case of asso25 ciation health plans providing benefits options in adVerDate Aug 31 2005 01:39 Feb 17, 2007 Jkt 059200 PO 00000 Frm 00030 Fmt 6652 Sfmt 6201 E:\BILLS\H1012.IH H1012

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1 dition to health insurance coverage, a report setting 

2 forth information with respect to such additional 

3 benefit options determined as of a date within the 

4 120-day period ending with the date of the applica5 tion, including the following: 

6 ‘‘(A) RESERVES.—A statement, certified 

7 by the board of trustees of the plan, and a 

8 statement of actuarial opinion, signed by a 

9 qualified actuary, that all applicable require10 ments of section 806 are or will be met in ac11 cordance with regulations which the applicable 

12 authority shall prescribe. 

13 ‘‘(B) ADEQUACY OF CONTRIBUTION

14 RATES.—A statement of actuarial opinion, 

15 signed by a qualified actuary, which sets forth 

16 a description of the extent to which contribution 

17 rates are adequate to provide for the payment 

18 of all obligations and the maintenance of re19 quired reserves under the plan for the 12- 

20 month period beginning with such date within 

21 such 120-day period, taking into account the 

22 expected coverage and experience of the plan. If 

23 the contribution rates are not fully adequate, 

24 the statement of actuarial opinion shall indicate 


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1 the extent to which the rates are inadequate 

2 and the changes needed to ensure adequacy. 

3 ‘‘(C) CURRENT AND PROJECTED VALUE OF

4 ASSETS AND LIABILITIES.—A statement of ac5 tuarial opinion signed by a qualified actuary, 

6 which sets forth the current value of the assets 

7 and liabilities accumulated under the plan and 

8 a projection of the assets, liabilities, income, 

9 and expenses of the plan for the 12-month pe10 riod referred to in subparagraph (B). The in11 come statement shall identify separately the 

12 plan’s administrative expenses and claims. 

13 ‘‘(D) COSTS OF COVERAGE TO BE

14 CHARGED AND OTHER EXPENSES.—A state15 ment of the costs of coverage to be charged, in16 cluding an itemization of amounts for adminis17 tration, reserves, and other expenses associated 

18 with the operation of the plan. 

19 ‘‘(E) OTHER INFORMATION.—Any other 

20 information as may be determined by the appli21 cable authority, by regulation, as necessary to 

22 carry out the purposes of this part. 

23 ‘‘(c) FILING NOTICE OF CERTIFICATION WITH

24 STATES.—A certification granted under this part to an 

25 association health plan shall not be effective unless written 


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1 notice of such certification is filed with the applicable 

2 State authority of each State in which at least 25 percent 

3 of the participants and beneficiaries under the plan are 

4 located. For purposes of this subsection, an individual 

5 shall be considered to be located in the State in which a 

6 known address of such individual is located or in which 

7 such individual is employed. 

8 ‘‘(d) NOTICE OF MATERIAL CHANGES.—In the case 

9 of any association health plan certified under this part, 

10 descriptions of material changes in any information which 

11 was required to be submitted with the application for the 

12 certification under this part shall be filed in such form 

13 and manner as shall be prescribed by the applicable au14 thority by regulation. The applicable authority may re15 quire by regulation prior notice of material changes with 

16 respect to specified matters which might serve as the basis 

17 for suspension or revocation of the certification. 

18 ‘‘(e) REPORTING REQUIREMENTS FOR CERTAIN AS19 SOCIATION HEALTH PLANS.—An association health plan 

20 certified under this part which provides benefit options in 

21 addition to health insurance coverage for such plan year 

22 shall meet the requirements of section 103 by filing an 

23 annual report under such section which shall include infor24 mation described in subsection (b)(6) with respect to the 

25 plan year and, notwithstanding section 104(a)(1)(A), shall 


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1 be filed with the applicable authority not later than 90 

2 days after the close of the plan year (or on such later date 

3 as may be prescribed by the applicable authority). The ap4 plicable authority may require by regulation such interim 

5 reports as it considers appropriate. 

6 ‘‘(f) ENGAGEMENT OF QUALIFIED ACTUARY.—The 

7 board of trustees of each association health plan which 

8 provides benefits options in addition to health insurance 

9 coverage and which is applying for certification under this 

10 part or is certified under this part shall engage, on behalf 

11 of all participants and beneficiaries, a qualified actuary 

12 who shall be responsible for the preparation of the mate13 rials comprising information necessary to be submitted by 

14 a qualified actuary under this part. The qualified actuary 

15 shall utilize such assumptions and techniques as are nec16 essary to enable such actuary to form an opinion as to 

17 whether the contents of the matters reported under this 

18 part— 

19 ‘‘(1) are in the aggregate reasonably related to 

20 the experience of the plan and to reasonable expecta21 tions; and 

22 ‘‘(2) represent such actuary’s best estimate of 

23 anticipated experience under the plan. 

24 The opinion by the qualified actuary shall be made with 

25 respect to, and shall be made a part of, the annual report. 


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1 ‘‘SEC. 808. NOTICE REQUIREMENTS FOR VOLUNTARY TER2 MINATION. 

3 ‘‘Except as provided in section 809(b), an association 

4 health plan which is or has been certified under this part 

5 may terminate (upon or at any time after cessation of ac6 cruals in benefit liabilities) only if the board of trustees, 

7 not less than 60 days before the proposed termination 

8 date— 

9 ‘‘(1) provides to the participants and bene10 ficiaries a written notice of intent to terminate stat11 ing that such termination is intended and the pro12 posed termination date; 

13 ‘‘(2) develops a plan for winding up the affairs 

14 of the plan in connection with such termination in 

15 a manner which will result in timely payment of all 

16 benefits for which the plan is obligated; and 

17 ‘‘(3) submits such plan in writing to the appli18 cable authority. 

19 Actions required under this section shall be taken in such 

20 form and manner as may be prescribed by the applicable 

21 authority by regulation. 

22 ‘‘SEC. 809. CORRECTIVE ACTIONS AND MANDATORY TERMI23 NATION. 

24 ‘‘(a) ACTIONS TO AVOID DEPLETION OF RE25 SERVES.—An association health plan which is certified 

26 under this part and which provides benefits other than 


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1 health insurance coverage shall continue to meet the re2 quirements of section 806, irrespective of whether such 

3 certification continues in effect. The board of trustees of 

4 such plan shall determine quarterly whether the require5 ments of section 806 are met. In any case in which the 

6 board determines that there is reason to believe that there 

7 is or will be a failure to meet such requirements, or the 

8 applicable authority makes such a determination and so 

9 notifies the board, the board shall immediately notify the 

10 qualified actuary engaged by the plan, and such actuary 

11 shall, not later than the end of the next following month, 

12 make such recommendations to the board for corrective 

13 action as the actuary determines necessary to ensure com14 pliance with section 806. Not later than 30 days after re15 ceiving from the actuary recommendations for corrective 

16 actions, the board shall notify the applicable authority (in 

17 such form and manner as the applicable authority may 

18 prescribe by regulation) of such recommendations of the 

19 actuary for corrective action, together with a description 

20 of the actions (if any) that the board has taken or plans 

21 to take in response to such recommendations. The board 

22 shall thereafter report to the applicable authority, in such 

23 form and frequency as the applicable authority may speci24 fy to the board, regarding corrective action taken by the 

25 board until the requirements of section 806 are met. 


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

2 which— 

3 ‘‘(1) the applicable authority has been notified 

4 under subsection (a) (or by an issuer of excess/stop 

5 loss insurance or indemnity insurance pursuant to 

6 section 806(a)) of a failure of an association health 

7 plan which is or has been certified under this part 

8 and is described in section 806(a)(2) to meet the re9 quirements of section 806 and has not been notified 

10 by the board of trustees of the plan that corrective 

11 action has restored compliance with such require12 ments; and 

13 ‘‘(2) the applicable authority determines that 

14 there is a reasonable expectation that the plan will 

15 continue to fail to meet the requirements of section 

16 806, 

17 the board of trustees of the plan shall, at the direction 

18 of the applicable authority, terminate the plan and, in the 

19 course of the termination, take such actions as the appli20 cable authority may require, including satisfying any 

21 claims referred to in section 806(a)(2)(B)(iii) and recov22 ering for the plan any liability under subsection 

23 (a)(2)(B)(iii) or (e) of section 806, as necessary to ensure 

24 that the affairs of the plan will be, to the maximum extent 


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1 possible, wound up in a manner which will result in timely 

2 provision of all benefits for which the plan is obligated. 

3 ‘‘SEC. 810. TRUSTEESHIP BY THE SECRETARY OF INSOL4 VENT ASSOCIATION HEALTH PLANS PRO5 VIDING HEALTH BENEFITS IN ADDITION TO 

6 HEALTH INSURANCE COVERAGE. 

7 ‘‘(a) APPOINTMENT OF SECRETARY AS TRUSTEE FOR

8 INSOLVENT PLANS.—Whenever the Secretary determines 

9 that an association health plan which is or has been cer10 tified under this part and which is described in section 

11 806(a)(2) will be unable to provide benefits when due or 

12 is otherwise in a financially hazardous condition, as shall 

13 be defined by the Secretary by regulation, the Secretary 

14 shall, upon notice to the plan, apply to the appropriate 

15 United States district court for appointment of the Sec16 retary as trustee to administer the plan for the duration 

17 of the insolvency. The plan may appear as a party and 

18 other interested persons may intervene in the proceedings 

19 at the discretion of the court. The court shall appoint such 

20 Secretary trustee if the court determines that the trustee21 ship is necessary to protect the interests of the partici22 pants and beneficiaries or providers of medical care or to 

23 avoid any unreasonable deterioration of the financial con24 dition of the plan. The trusteeship of such Secretary shall 

25 continue until the conditions described in the first senVerDate Aug 31 2005 01:39 Feb 17, 2007 Jkt 059200 PO 00000 Frm 00038 Fmt 6652 Sfmt 6201 E:\BILLS\H1012.IH H1012

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1 tence of this subsection are remedied or the plan is termi2 nated. 

3 ‘‘(b) POWERS AS TRUSTEE.—The Secretary, upon 

4 appointment as trustee under subsection (a), shall have 

5 the power— 

6 ‘‘(1) to do any act authorized by the plan, this 

7 title, or other applicable provisions of law to be done 

8 by the plan administrator or any trustee of the plan; 

9 ‘‘(2) to require the transfer of all (or any part) 

10 of the assets and records of the plan to the Sec11 retary as trustee; 

12 ‘‘(3) to invest any assets of the plan which the 

13 Secretary holds in accordance with the provisions of 

14 the plan, regulations prescribed by the Secretary, 

15 and applicable provisions of law; 

16 ‘‘(4) to require the sponsor, the plan adminis17 trator, any participating employer, and any employee 

18 organization representing plan participants to fur19 nish any information with respect to the plan which 

20 the Secretary as trustee may reasonably need in 

21 order to administer the plan; 

22 ‘‘(5) to collect for the plan any amounts due the 

23 plan and to recover reasonable expenses of the trust24 eeship; 


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1 ‘‘(6) to commence, prosecute, or defend on be2 half of the plan any suit or proceeding involving the 

3 plan; 

4 ‘‘(7) to issue, publish, or file such notices, state5 ments, and reports as may be required by the Sec6 retary by regulation or required by any order of the 

7 court; 

8 ‘‘(8) to terminate the plan (or provide for its 

9 termination in accordance with section 809(b)) and 

10 liquidate the plan assets, to restore the plan to the 

11 responsibility of the sponsor, or to continue the 

12 trusteeship; 

13 ‘‘(9) to provide for the enrollment of plan par14 ticipants and beneficiaries under appropriate cov15 erage options; and 

16 ‘‘(10) to do such other acts as may be nec17 essary to comply with this title or any order of the 

18 court and to protect the interests of plan partici19 pants and beneficiaries and providers of medical 

20 care. 

21 ‘‘(c) NOTICE OF APPOINTMENT.—As soon as prac22 ticable after the Secretary’s appointment as trustee, the 

23 Secretary shall give notice of such appointment to— 

24 ‘‘(1) the sponsor and plan administrator; 

25 ‘‘(2) each participant; 


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1 ‘‘(3) each participating employer; and 

2 ‘‘(4) if applicable, each employee organization 

3 which, for purposes of collective bargaining, rep4 resents plan participants. 

5 ‘‘(d) ADDITIONAL DUTIES.—Except to the extent in6 consistent with the provisions of this title, or as may be 

7 otherwise ordered by the court, the Secretary, upon ap8 pointment as trustee under this section, shall be subject 

9 to the same duties as those of a trustee under section 704 

10 of title 11, United States Code, and shall have the duties 

11 of a fiduciary for purposes of this title. 

12 ‘‘(e) OTHER PROCEEDINGS.—An application by the 

13 Secretary under this subsection may be filed notwith14 standing the pendency in the same or any other court of 

15 any bankruptcy, mortgage foreclosure, or equity receiver16 ship proceeding, or any proceeding to reorganize, conserve, 

17 or liquidate such plan or its property, or any proceeding 

18 to enforce a lien against property of the plan. 

19 ‘‘(f) JURISDICTION OF COURT.— 

20 ‘‘(1) IN GENERAL.—Upon the filing of an appli21 cation for the appointment as trustee or the issuance 

22 of a decree under this section, the court to which the 

23 application is made shall have exclusive jurisdiction 

24 of the plan involved and its property wherever lo25 cated with the powers, to the extent consistent with 


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1 the purposes of this section, of a court of the United 

2 States having jurisdiction over cases under chapter 

3 11 of title 11, United States Code. Pending an adju4 dication under this section such court shall stay, and 

5 upon appointment by it of the Secretary as trustee, 

6 such court shall continue the stay of, any pending 

7 mortgage foreclosure, equity receivership, or other 

8 proceeding to reorganize, conserve, or liquidate the 

9 plan, the sponsor, or property of such plan or spon10 sor, and any other suit against any receiver, conser11 vator, or trustee of the plan, the sponsor, or prop12 erty of the plan or sponsor. Pending such adjudica13 tion and upon the appointment by it of the Sec14 retary as trustee, the court may stay any proceeding 

15 to enforce a lien against property of the plan or the 

16 sponsor or any other suit against the plan or the 

17 sponsor. 

18 ‘‘(2) VENUE.—An action under this section 

19 may be brought in the judicial district where the 

20 sponsor or the plan administrator resides or does 

21 business or where any asset of the plan is situated. 

22 A district court in which such action is brought may 

23 issue process with respect to such action in any 

24 other judicial district. 


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1 ‘‘(g) PERSONNEL.—In accordance with regulations 

2 which shall be prescribed by the Secretary, the Secretary 

3 shall appoint, retain, and compensate accountants, actu4 aries, and other professional service personnel as may be 

5 necessary in connection with the Secretary’s service as 

6 trustee under this section. 

7 ‘‘SEC. 811. STATE ASSESSMENT AUTHORITY. 

8 ‘‘(a) IN GENERAL.—Notwithstanding section 514, a 

9 State may impose by law a contribution tax on an associa10 tion health plan described in section 806(a)(2), if the plan 

11 commenced operations in such State after the date of the 

12 enactment of the Small Business Growth Act of 2007. 

13 ‘‘(b) CONTRIBUTION TAX.—For purposes of this sec14 tion, the term ‘contribution tax’ imposed by a State on 

15 an association health plan means any tax imposed by such 

16 State if— 

17 ‘‘(1) such tax is computed by applying a rate to 

18 the amount of premiums or contributions, with re19 spect to individuals covered under the plan who are 

20 residents of such State, which are received by the 

21 plan from participating employers located in such 

22 State or from such individuals; 

23 ‘‘(2) the rate of such tax does not exceed the 

24 rate of any tax imposed by such State on premiums 

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1 tenance organizations for health insurance coverage 

2 offered in such State in connection with a group 

3 health plan; 

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

5 and 

6 ‘‘(4) the amount of any such tax assessed on 

7 the plan is reduced by the amount of any tax or as8 sessment otherwise imposed by the State on pre9 miums, contributions, or both received by insurers or 

10 health maintenance organizations for health insur11 ance coverage, aggregate excess/stop loss insurance 

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

13 loss insurance (as defined in section 806(g)(2)), 

14 other insurance related to the provision of medical 

15 care under the plan, or any combination thereof pro16 vided by such insurers or health maintenance organi17 zations in such State in connection with such plan. 

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

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

20 ‘‘(1) GROUP HEALTH PLAN.—The term ‘group 

21 health plan’ has the meaning provided in section 

22 733(a)(1) (after applying subsection (b) of this sec23 tion). 

24 ‘‘(2) MEDICAL CARE.—The term ‘medical care’ 

25 has the meaning provided in section 733(a)(2). 


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1 ‘‘(3) HEALTH INSURANCE COVERAGE.—The 

2 term ‘health insurance coverage’ has the meaning 

3 provided in section 733(b)(1). 

4 ‘‘(4) HEALTH INSURANCE ISSUER.—The term 

5 ‘health insurance issuer’ has the meaning provided 

6 in section 733(b)(2). 

7 ‘‘(5) APPLICABLE AUTHORITY.—The term ‘ap8 plicable authority’ means the Secretary, except that, 

9 in connection with any exercise of the Secretary’s 

10 authority regarding which the Secretary is required 

11 under section 506(d) to consult with a State, such 

12 term means the Secretary, in consultation with such 

13 State. 

14 ‘‘(6) HEALTH STATUS-RELATED FACTOR.—The 

15 term ‘health status-related factor’ has the meaning 

16 provided in section 733(d)(2). 

17 ‘‘(7) INDIVIDUAL MARKET.— 

18 ‘‘(A) IN GENERAL.—The term ‘individual 

19 market’ means the market for health insurance 

20 coverage offered to individuals other than in 

21 connection with a group health plan. 

22 ‘‘(B) TREATMENT OF VERY SMALL

23 GROUPS.— 

24 ‘‘(i) IN GENERAL.—Subject to clause 

25 (ii), such term includes coverage offered in 


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1 connection with a group health plan that 

2 has fewer than 2 participants as current 

3 employees or participants described in sec4 tion 732(d)(3) on the first day of the plan 

5 year. 

6 ‘‘(ii) STATE EXCEPTION.—Clause (i) 

7 shall not apply in the case of health insur8 ance coverage offered in a State if such 

9 State regulates the coverage described in 

10 such clause in the same manner and to the 

11 same extent as coverage in the small group 

12 market (as defined in section 2791(e)(5) of 

13 the Public Health Service Act) is regulated 

14 by such State. 

15 ‘‘(8) PARTICIPATING EMPLOYER.—The term 

16 ‘participating employer’ means, in connection with 

17 an association health plan, any employer, if any indi18 vidual who is an employee of such employer, a part19 ner in such employer, or a self-employed individual 

20 who is such employer (or any dependent, as defined 

21 under the terms of the plan, of such individual) is 

22 or was covered under such plan in connection with 

23 the status of such individual as such an employee, 

24 partner, or self-employed individual in relation to the 

25 plan. 


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1 ‘‘(9) APPLICABLE STATE AUTHORITY.—The 

2 term ‘applicable State authority’ means, with respect 

3 to a health insurance issuer in a State, the State in4 surance commissioner or official or officials des5 ignated by the State to enforce the requirements of 

6 title XXVII of the Public Health Service Act for the 

7 State involved with respect to such issuer. 

8 ‘‘(10) QUALIFIED ACTUARY.—The term ‘quali9 fied actuary’ means an individual who is a member 

10 of the American Academy of Actuaries. 

11 ‘‘(11) AFFILIATED MEMBER.—The term ‘affili12 ated member’ means, in connection with a sponsor— 

13 ‘‘(A) a person who is otherwise eligible to 

14 be a member of the sponsor but who elects an 

15 affiliated status with the sponsor, 

16 ‘‘(B) in the case of a sponsor with mem17 bers which consist of associations, a person who 

18 is a member of any such association and elects 

19 an affiliated status with the sponsor, or 

20 ‘‘(C) in the case of an association health 

21 plan in existence on the date of the enactment 

22 of the Small Business Growth Act of 2007, a 

23 person eligible to be a member of the sponsor 

24 or one of its member associations. 


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1 ‘‘(12) LARGE EMPLOYER.—The term ‘large em2 ployer’ means, in connection with a group health 

3 plan with respect to a plan year, an employer who 

4 employed an average of at least 51 employees on 

5 business days during the preceding calendar year 

6 and who employs at least 2 employees on the first 

7 day of the plan year. 

8 ‘‘(13) SMALL EMPLOYER.—The term ‘small em9 ployer’ means, in connection with a group health 

10 plan with respect to a plan year, an employer who 

11 is not a large employer. 

12 ‘‘(b) RULES OF CONSTRUCTION.— 

13 ‘‘(1) EMPLOYERS AND EMPLOYEES.—For pur14 poses of determining whether a plan, fund, or pro15 gram is an employee welfare benefit plan which is an 

16 association health plan, and for purposes of applying 

17 this title in connection with such plan, fund, or pro18 gram so determined to be such an employee welfare 

19 benefit plan— 

20 ‘‘(A) in the case of a partnership, the term 

21 ‘employer’ (as defined in section 3(5)) includes 

22 the partnership in relation to the partners, and 

23 the term ‘employee’ (as defined in section 3(6)) 

24 includes any partner in relation to the partner25 ship; and 


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1 ‘‘(B) in the case of a self-employed indi2 vidual, the term ‘employer’ (as defined in sec3 tion 3(5)) and the term ‘employee’ (as defined 

4 in section 3(6)) shall include such individual. 

5 ‘‘(2) PLANS, FUNDS, AND PROGRAMS TREATED

6 AS EMPLOYEE WELFARE BENEFIT PLANS.—In the 

7 case of any plan, fund, or program which was estab8 lished or is maintained for the purpose of providing 

9 medical care (through the purchase of insurance or 

10 otherwise) for employees (or their dependents) cov11 ered thereunder and which demonstrates to the Sec12 retary that all requirements for certification under 

13 this part would be met with respect to such plan, 

14 fund, or program if such plan, fund, or program 

15 were a group health plan, such plan, fund, or pro16 gram shall be treated for purposes of this title as an 

17 employee welfare benefit plan on and after the date 

18 of such demonstration.’’. 

19 (b) CONFORMING AMENDMENTS TO PREEMPTION

20 RULES.— 

21 (1) Section 514(b)(6) of such Act (29 U.S.C. 

22 1144(b)(6)) is amended by adding at the end the 

23 following new subparagraph: 

24 ‘‘(E) The preceding subparagraphs of this paragraph 

25 do not apply with respect to any State law in the case 


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1 of an association health plan which is certified under part 

2 8.’’. 

3 (2) Section 514 of such Act (29 U.S.C. 1144) 

4 is amended— 

5 (A) in subsection (b)(4), by striking ‘‘Sub6 section (a)’’ and inserting ‘‘Subsections (a) and 

7 (d)’’; 

8 (B) in subsection (b)(5), by striking ‘‘sub9 section (a)’’ in subparagraph (A) and inserting 

10 ‘‘subsection (a) of this section and subsections 

11 (a)(2)(B) and (b) of section 805’’, and by strik12 ing ‘‘subsection (a)’’ in subparagraph (B) and 

13 inserting ‘‘subsection (a) of this section or sub14 section (a)(2)(B) or (b) of section 805’’; 

15 (C) by redesignating subsections (d) and 

16 (e) as subsections (e) and (f), respectively; and 

17 (D) by inserting after subsection (c) the 

18 following new subsection: 

19 ‘‘(d)(1) Except as provided in subsection (b)(4), the 

20 provisions of this title shall supersede any and all State 

21 laws insofar as they may now or hereafter preclude, or 

22 have the effect of precluding, a health insurance issuer 

23 from offering health insurance coverage in connection with 

24 an association health plan which is certified under part 

25 8. 


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1 ‘‘(2) Except as provided in paragraphs (4) and (5) 

2 of subsection (b) of this section— 

3 ‘‘(A) In any case in which health insurance cov4 erage of any policy type is offered under an associa5 tion health plan certified under part 8 to a partici6 pating employer operating in such State, the provi7 sions of this title shall supersede any and all laws 

8 of such State insofar as they may preclude a health 

9 insurance issuer from offering health insurance cov10 erage of the same policy type to other employers op11 erating in the State which are eligible for coverage 

12 under such association health plan, whether or not 

13 such other employers are participating employers in 

14 such plan. 

15 ‘‘(B) In any case in which health insurance cov16 erage of any policy type is offered in a State under 

17 an association health plan certified under part 8 and 

18 the filing, with the applicable State authority (as de19 fined in section 812(a)(9)), of the policy form in 

20 connection with such policy type is approved by such 

21 State authority, the provisions of this title shall su22 persede any and all laws of any other State in which 

23 health insurance coverage of such type is offered, in24 sofar as they may preclude, upon the filing in the 

25 same form and manner of such policy form with the 


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1 applicable State authority in such other State, the 

2 approval of the filing in such other State. 

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

4 provisions of this subsection shall be construed, with re5 spect to health insurance issuers or health insurance cov6 erage, to supersede or impair the law of any State— 

7 ‘‘(A) providing solvency standards or similar 

8 standards regarding the adequacy of insurer capital, 

9 surplus, reserves, or contributions, or 

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

11 ‘‘(4) For additional provisions relating to association 

12 health plans, see subsections (a)(2)(B) and (b) of section 

13 805. 

14 ‘‘(5) For purposes of this subsection, the term ‘asso15 ciation health plan’ has the meaning provided in section 

16 801(a), and the terms ‘health insurance coverage’, ‘par17 ticipating employer’, and ‘health insurance issuer’ have 

18 the meanings provided such terms in section 812, respec19 tively.’’. 

20 (3) Section 514(b)(6)(A) of such Act (29 

21 U.S.C. 1144(b)(6)(A)) is amended— 

22 (A) in clause (i)(II), by striking ‘‘and’’ at 

23 the end; 

24 (B) in clause (ii), by inserting ‘‘and which 

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1 ing of section 733(a)(2)),’’ after ‘‘arrange2 ment,’’, and by striking ‘‘title.’’ and inserting 

3 ‘‘title, and’’; and 

4 (C) by adding at the end the following new 

5 clause: 

6 ‘‘(iii) subject to subparagraph (E), in the case 

7 of any other employee welfare benefit plan which is 

8 a multiple employer welfare arrangement and which 

9 provides medical care (within the meaning of section 

10 733(a)(2)), any law of any State which regulates in11 surance may apply.’’. 

12 (4) Section 514(e) of such Act (as redesignated 

13 by paragraph (2)(C)) is amended— 

14 (A) by striking ‘‘Nothing’’ and inserting 

15 ‘‘(1) Except as provided in paragraph (2), noth16 ing’’; and 

17 (B) by adding at the end the following new 

18 paragraph: 

19 ‘‘(2) Nothing in any other provision of law enacted 

20 on or after the date of the enactment of the Small Busi21 ness Growth Act of 2007 shall be construed to alter, 

22 amend, modify, invalidate, impair, or supersede any provi23 sion of this title, except by specific cross-reference to the 

24 affected section.’’. 


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1 (c) PLAN SPONSOR.—Section 3(16)(B) of such Act 

2 (29 U.S.C. 102(16)(B)) is amended by adding at the end 

3 the following new sentence: ‘‘Such term also includes a 

4 person serving as the sponsor of an association health plan 

5 under part 8.’’. 

6 (d) DISCLOSURE OF SOLVENCY PROTECTIONS RE7 LATED TO SELF-INSURED AND FULLY INSURED OPTIONS

8 UNDER ASSOCIATION HEALTH PLANS.—Section 102(b) 

9 of such Act (29 U.S.C. 102(b)) is amended by adding at 

10 the end the following: ‘‘An association health plan shall 

11 include in its summary plan description, in connection 

12 with each benefit option, a description of the form of sol13 vency or guarantee fund protection secured pursuant to 

14 this Act or applicable State law, if any.’’. 

15 (e) SAVINGS CLAUSE.—Section 731(c) of such Act is 

16 amended by inserting ‘‘or part 8’’ after ‘‘this part’’. 

17 (f) REPORT TO THE CONGRESS REGARDING CERTIFI18 CATION OF SELF-INSURED ASSOCIATION HEALTH

19 PLANS.—Not later than January 1, 2012, the Secretary 

20 of Labor shall report to the Committee on Education and 

21 Labor of the House of Representatives and the Committee 

22 on Health, Education, Labor, and Pensions of the Senate 

23 the effect association health plans have had, if any, on 

24 reducing the number of uninsured individuals. 


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1 (g) CLERICAL AMENDMENT.—The table of contents 

2 in section 1 of the Employee Retirement Income Security 

3 Act of 1974 is amended by inserting after the item relat4 ing 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.’’. 

5 SEC. 102. CLARIFICATION OF TREATMENT OF SINGLE EM6 PLOYER ARRANGEMENTS. 

7 Section 3(40)(B) of the Employee Retirement Income 

8 Security Act of 1974 (29 U.S.C. 1002(40)(B)) is amend9 ed— 

10 (1) in clause (i), by inserting after ‘‘control 

11 group,’’ the following: ‘‘except that, in any case in 

12 which the benefit referred to in subparagraph (A) 

13 consists of medical care (as defined in section 

14 812(a)(2)), two or more trades or businesses, wheth15 er or not incorporated, shall be deemed a single em16 ployer for any plan year of such plan, or any fiscal 

17 year of such other arrangement, if such trades or 


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1 businesses are within the same control group during 

2 such year or at any time during the preceding 1-year 

3 period,’’; 

4 (2) in clause (iii), by striking ‘‘(iii) the deter5 mination’’ and inserting the following: 

6 ‘‘(iii)(I) in any case in which the benefit re7 ferred to in subparagraph (A) consists of medical 

8 care (as defined in section 812(a)(2)), the deter9 mination of whether a trade or business is under 

10 ‘common control’ with another trade or business 

11 shall be determined under regulations of the Sec12 retary applying principles consistent and coextensive 

13 with the principles applied in determining whether 

14 employees of two or more trades or businesses are 

15 treated as employed by a single employer under sec16 tion 4001(b), except that, for purposes of this para17 graph, an interest of greater than 25 percent may 

18 not be required as the minimum interest necessary 

19 for common control, or 

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

21 (3) by redesignating clauses (iv) and (v) as 

22 clauses (v) and (vi), respectively; and 

23 (4) by inserting after clause (iii) the following 

24 new clause: 


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1 ‘‘(iv) in any case in which the benefit referred 

2 to in subparagraph (A) consists of medical care (as 

3 defined in section 812(a)(2)), in determining, after 

4 the application of clause (i), whether benefits are 

5 provided to employees of two or more employers, the 

6 arrangement shall be treated as having only one par7 ticipating employer if, after the application of clause 

8 (i), the number of individuals who are employees and 

9 former employees of any one participating employer 

10 and who are covered under the arrangement is 

11 greater than 75 percent of the aggregate number of 

12 all individuals who are employees or former employ13 ees of participating employers and who are covered 

14 under the arrangement,’’. 

15 SEC. 103. ENFORCEMENT PROVISIONS RELATING TO ASSO16 CIATION HEALTH PLANS. 

17 (a) CRIMINAL PENALTIES FOR CERTAIN WILLFUL

18 MISREPRESENTATIONS.—Section 501 of the Employee 

19 Retirement Income Security Act of 1974 (29 U.S.C. 1131) 

20 is amended— 

21 (1) by inserting ‘‘(a)’’ after ‘‘Sec. 501.’’; and 

22 (2) by adding at the end the following new sub23 section: 

24 ‘‘(b) Any person who willfully falsely represents, to 

25 any employee, any employee’s beneficiary, any employer, 


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1 the Secretary, or any State, a plan or other arrangement 

2 established or maintained for the purpose of offering or 

3 providing any benefit described in section 3(1) to employ4 ees or their beneficiaries as— 

5 ‘‘(1) being an association health plan which has 

6 been certified under part 8; 

7 ‘‘(2) having been established or maintained 

8 under or pursuant to one or more collective bar9 gaining agreements which are reached pursuant to 

10 collective bargaining described in section 8(d) of the 

11 National Labor Relations Act (29 U.S.C. 158(d)) or 

12 paragraph Fourth of section 2 of the Railway Labor 

13 Act (45 U.S.C. 152, paragraph Fourth) or which are 

14 reached pursuant to labor-management negotiations 

15 under similar provisions of State public employee re16 lations laws; or 

17 ‘‘(3) being a plan or arrangement described in 

18 section 3(40)(A)(i), 

19 shall, upon conviction, be imprisoned not more than 5 

20 years, be fined under title 18, United States Code, or 

21 both.’’. 

22 (b) CEASE ACTIVITIES ORDERS.—Section 502 of 

23 such Act (29 U.S.C. 1132) is amended by adding at the 

24 end the following new subsection: 


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1 ‘‘(n) ASSOCIATION HEALTH PLAN CEASE AND DE2 SIST ORDERS.— 

3 ‘‘(1) IN GENERAL.—Subject to paragraph (2), 

4 upon application by the Secretary showing the oper5 ation, promotion, or marketing of an association 

6 health plan (or similar arrangement providing bene7 fits consisting of medical care (as defined in section 

8 733(a)(2))) that— 

9 ‘‘(A) is not certified under part 8, is sub10 ject under section 514(b)(6) to the insurance 

11 laws of any State in which the plan or arrange12 ment offers or provides benefits, and is not li13 censed, registered, or otherwise approved under 

14 the insurance laws of such State; or 

15 ‘‘(B) is an association health plan certified 

16 under part 8 and is not operating in accordance 

17 with the requirements under part 8 for such 

18 certification, 

19 a district court of the United States shall enter an 

20 order requiring that the plan or arrangement cease 

21 activities. 

22 ‘‘(2) EXCEPTION.—Paragraph (1) shall not 

23 apply in the case of an association health plan or 

24 other arrangement if the plan or arrangement shows 

25 that— 


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1 ‘‘(A) all benefits under it referred to in 

2 paragraph (1) consist of health insurance cov3 erage; and 

4 ‘‘(B) with respect to each State in which 

5 the plan or arrangement offers or provides ben6 efits, the plan or arrangement is operating in 

7 accordance with applicable State laws that are 

8 not superseded under section 514. 

9 ‘‘(3) ADDITIONAL EQUITABLE RELIEF.—The 

10 court may grant such additional equitable relief, in11 cluding any relief available under this title, as it 

12 deems necessary to protect the interests of the pub13 lic and of persons having claims for benefits against 

14 the plan.’’. 

15 (c) RESPONSIBILITY FOR CLAIMS PROCEDURE.— 

16 Section 503 of such Act (29 U.S.C. 1133) is amended by 

17 inserting ‘‘(a) IN GENERAL.—’’ before ‘‘In accordance’’, 

18 and by adding at the end the following new subsection: 

19 ‘‘(b) ASSOCIATION HEALTH PLANS.—The terms of 

20 each association health plan which is or has been certified 

21 under part 8 shall require the board of trustees or the 

22 named fiduciary (as applicable) to ensure that the require23 ments of this section are met in connection with claims 

24 filed under the plan.’’. 


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1 SEC. 104. COOPERATION BETWEEN FEDERAL AND STATE 

2 AUTHORITIES. 

3 Section 506 of the Employee Retirement Income Se4 curity Act of 1974 (29 U.S.C. 1136) is amended by adding 

5 at the end the following new subsection: 

6 ‘‘(d) CONSULTATION WITH STATES WITH RESPECT

7 TO ASSOCIATION HEALTH PLANS.— 

8 ‘‘(1) AGREEMENTS WITH STATES.—The Sec9 retary shall consult with the State recognized under 

10 paragraph (2) with respect to an association health 

11 plan regarding the exercise of— 

12 ‘‘(A) the Secretary’s authority under sec13 tions 502 and 504 to enforce the requirements 

14 for certification under part 8; and 

15 ‘‘(B) the Secretary’s authority to certify 

16 association health plans under part 8 in accord17 ance with regulations of the Secretary applica18 ble to certification under part 8. 

19 ‘‘(2) RECOGNITION OF PRIMARY DOMICILE

20 STATE.—In carrying out paragraph (1), the Sec21 retary shall ensure that only one State will be recog22 nized, with respect to any particular association 

23 health plan, as the State with which consultation is 

24 required. In carrying out this paragraph— 

25 ‘‘(A) in the case of a plan which provides 

26 health insurance coverage (as defined in section 


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1 812(a)(3)), such State shall be the State with 

2 which filing and approval of a policy type of3 fered by the plan was initially obtained, and 

4 ‘‘(B) in any other case, the Secretary shall 

5 take into account the places of residence of the 

6 participants and beneficiaries under the plan 

7 and the State in which the trust is main8 tained.’’. 

9 SEC. 105. EFFECTIVE DATE AND TRANSITIONAL AND 

10 OTHER RULES. 

11 (a) EFFECTIVE DATE.—The amendments made by 

12 this Act shall take effect 1 year after the date of the enact13 ment of this Act. The Secretary of Labor shall first issue 

14 all regulations necessary to carry out the amendments 

15 made by this Act within 1 year after the date of the enact16 ment of this Act. 

17 (b) TREATMENT OF CERTAIN EXISTING HEALTH

18 BENEFITS PROGRAMS.— 

19 (1) IN GENERAL.—In any case in which, as of 

20 the date of the enactment of this Act, an arrange21 ment is maintained in a State for the purpose of 

22 providing benefits consisting of medical care for the 

23 employees and beneficiaries of its participating em24 ployers, at least 200 participating employers make 

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1 ment has been in existence for at least 10 years, and 

2 such arrangement is licensed under the laws of one 

3 or more States to provide such benefits to its par4 ticipating employers, upon the filing with the appli5 cable authority (as defined in section 812(a)(5) of 

6 the Employee Retirement Income Security Act of 

7 1974 (as amended by this title)) by the arrangement 

8 of an application for certification of the arrangement 

9 under part 8 of subtitle B of title I of such Act— 

10 (A) such arrangement shall be deemed to 

11 be a group health plan for purposes of title I 

12 of such Act; 

13 (B) the requirements of sections 801(a) 

14 and 803(a) of the Employee Retirement Income 

15 Security Act of 1974 shall be deemed met with 

16 respect to such arrangement; 

17 (C) the requirements of section 803(b) of 

18 such Act shall be deemed met, if the arrange19 ment is operated by a board of directors 

20 which— 

21 (i) is elected by the participating em22 ployers, with each employer having one 

23 vote; and 


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1 (ii) has complete fiscal control over 

2 the arrangement and which is responsible 

3 for all operations of the arrangement; 

4 (D) the requirements of section 804(a) of 

5 such Act shall be deemed met with respect to 

6 such arrangement; and 

7 (E) the arrangement may be certified by 

8 any applicable authority with respect to its op9 erations in any State only if it operates in such 

10 State on the date of certification. 

11 The provisions of this subsection shall cease to apply 

12 with respect to any such arrangement at such time 

13 after the date of the enactment of this Act as the 

14 applicable requirements of this subsection are not 

15 met with respect to such arrangement. 

16 (2) DEFINITIONS.—For purposes of this sub17 section, the terms ‘‘group health plan’’, ‘‘medical 

18 care’’, and ‘‘participating employer’’ shall have the 

19 meanings provided in section 812 of the Employee 

20 Retirement Income Security Act of 1974, except 

21 that the reference in paragraph (7) of such section 

22 to an ‘‘association health plan’’ shall be deemed a 

23 reference to an arrangement referred to in this sub24 section. 


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1 TITLE II—EXTENSION OF 

2 INCREASED EXPENSING 

3 SEC. 201. EXTENSION OF INCREASED EXPENSING FOR 

4 SMALL BUSINESSES. 

5 Section 179 of the Internal Revenue Code of 1986 

6 (relating to election to expense certain depreciable busi7 ness assets) is amended by striking ‘‘2010’’ each place it 

8 appears and inserting ‘‘2011’’. 

9 TITLE III—PAPERWORK 

10 REQUIREMENTS 

11 SEC. 301. SUSPENSION OF FINES FOR FIRST-TIME PAPER12 WORK VIOLATIONS BY SMALL BUSINESS CON13 CERNS. 

14 Section 3506 of title 44, United States Code (com15 monly referred to as the ‘‘Paperwork Reduction Act’’), is 

16 amended by adding at the end the following: 

17 ‘‘(j) SMALL BUSINESSES.— 

18 ‘‘(1) SMALL BUSINESS CONCERN.—In this sub19 section, the term ‘small business concern’ means a 

20 business concern that meets the requirements of sec21 tion 3(a) of the Small Business Act (15 U.S.C. 

22 632(a)) and the regulations promulgated under that 

23 section. 

24 ‘‘(2) IN GENERAL.—In the case of a first-time 

25 violation by a small business concern of a requireVerDate Aug 31 2005 01:39 Feb 17, 2007 Jkt 059200 PO 00000 Frm 00065 Fmt 6652 Sfmt 6201 E:\BILLS\H1012.IH H1012

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1 ment regarding the collection of information by an 

2 agency, the head of such agency shall not impose a 

3 civil fine on the small business concern unless the 

4 head of the agency determines that— 

5 ‘‘(A) the violation has the potential to 

6 cause serious harm to the public interest; 

7 ‘‘(B) failure to impose a civil fine would 

8 impede or interfere with the detection of crimi9 nal activity; 

10 ‘‘(C) the violation is a violation of an inter11 nal revenue law or a law concerning the assess12 ment or collection of any tax, debt, revenue, or 

13 receipt; 

14 ‘‘(D) the violation was not corrected on or 

15 before the date that is 6 months after the date 

16 of receipt by the small business concern of noti17 fication of the violation in writing from the 

18 agency; or 

19 ‘‘(E) except as provided in paragraph (3), 

20 the violation presents a danger to the public 

21 health or safety. 

22 ‘‘(3) DANGER TO PUBLIC HEALTH OR SAFE23 TY.— 

24 ‘‘(A) IN GENERAL.—In any case in which 

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1 graph (2)(E) that a violation presents a danger 

2 to the public health or safety, the head of the 

3 agency may, notwithstanding paragraph (2)(E), 

4 determine not to impose a civil fine on the 

5 small business concern if the violation is cor6 rected not later than 24 hours after receipt by 

7 the small business owner of notification of the 

8 violation in writing. 

9 ‘‘(B) CONSIDERATIONS.—In determining 

10 whether to provide a small business concern 

11 with 24 hours to correct a violation under sub12 paragraph (A), the head of the agency shall 

13 take into account all of the facts and cir14 cumstances regarding the violation, including— 

15 ‘‘(i) the nature and seriousness of the 

16 violation, including whether the violation is 

17 technical or inadvertent or involves willful 

18 or criminal conduct; 

19 ‘‘(ii) whether the small business con20 cern has made a good faith effort to com21 ply with applicable laws and to remedy the 

22 violation within the shortest practicable pe23 riod of time; and 


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1 ‘‘(iii) whether the small business con2 cern has obtained a significant economic 

3 benefit from the violation. 

4 ‘‘(C) NOTICE TO CONGRESS.—In any case 

5 in which the head of the agency imposes a civil 

6 fine on a small business concern for a violation 

7 that presents a danger to the public health or 

8 safety and does not provide the small business 

9 concern with 24 hours to correct the violation 

10 under subparagraph (A), the head of the agency 

11 shall notify Congress regarding such determina12 tion not later than the date that is 60 days 

13 after the date that the civil fine is imposed by 

14 the agency. 

15 ‘‘(4) LIMITED TO FIRST-TIME VIOLATIONS.— 

16 ‘‘(A) IN GENERAL.—This subsection shall 

17 not apply to any violation by a small business 

18 concern of a requirement regarding collection of 

19 information by an agency if such small business 

20 concern previously violated any requirement re21 garding collection of information by that agen22 cy. 

23 ‘‘(B) OTHER AGENCIES.—For purposes of 

24 making a determination under subparagraph 

25 (A), the head of an agency shall not take into 


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1 account any violation of a requirement regard2 ing collection of information by another agen3 cy.’’. 

4 TITLE IV—FEDERAL RULES OF 

5 CIVIL PROCEDURE IMPROVE6 MENTS 

7 SEC. 401. ATTORNEY ACCOUNTABILITY. 

8 Rule 11(c) of the Federal Rules of Civil Procedure 

9 is amended— 

10 (1) by amending the first sentence to read as 

11 follows: ‘‘If a pleading, motion, or other paper is 

12 signed in violation of this rule, the court, upon mo13 tion or upon its own initiative, shall impose upon the 

14 attorney, law firm, or parties that have violated this 

15 subdivision or are responsible for the violation, an 

16 appropriate sanction, which may include an order to 

17 pay the other party or parties for the reasonable ex18 penses incurred as a direct result of the filing of the 

19 pleading, motion, or other paper, that is the subject 

20 of the violation, including a reasonable attorney’s 

21 fee.’’; 

22 (2) in paragraph (1)(A)— 

23 (A) by striking ‘‘Rule 5’’ and all that fol24 lows through ‘‘corrected.’’ and inserting ‘‘Rule 

25 5.’’; and 


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1 (B) by striking ‘‘the court may award’’ 

2 and inserting ‘‘the court shall award’’; and 

3 (3) in paragraph (2), by striking ‘‘shall be lim4 ited to what is sufficient’’ and all that follows 

5 through the end of the paragraph (including sub6 paragraphs (A) and (B)) and inserting ‘‘shall be suf7 ficient to deter repetition of such conduct or com8 parable conduct by others similarly situated, and to 

9 compensate the parties that were injured by such 

10 conduct. The sanction may consist of an order to 

11 pay to the party or parties the amount of the rea12 sonable expenses incurred as a direct result of the 

13 filing of the pleading, motion, or other paper that is 

14 the subject of the violation, including a reasonable 

15 attorney’s fee.’’. 

16 SEC. 402. APPLICABILITY OF RULE 11 TO STATE CASES AF17 FECTING INTERSTATE COMMERCE. 

18 In any civil action in State court, the court, upon mo19 tion, shall determine within 30 days after the filing of such 

20 motion whether the action substantially affects interstate 

21 commerce. Such court shall make such determination 

22 based on an assessment of the costs to the interstate econ23 omy, including the loss of jobs, were the relief requested 

24 granted. If the court determines such action substantially 

25 affects interstate commerce, the provisions of Rule 11 of 


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1 the Federal Rules of Civil Procedure shall apply to such 

2 action. 

3 SEC. 403. PREVENTION OF FORUM-SHOPPING. 

4 (a) IN GENERAL.—Subject to subsection (b), a per5 sonal injury claim filed in State or Federal court may be 

6 filed only in the State and, within that State, in the county 

7 (or if there is no State court in the county, the nearest 

8 county where a court of general jurisdiction is located), 

9 or Federal district in which— 

10 (1) the person bringing the claim, including an 

11 estate in the case of a decedent and a parent or 

12 guardian in the case of a minor or incompetent— 

13 (A) resides at the time of filing; or 

14 (B) resided at the time of the alleged in15 jury; 

16 (2) the alleged injury or circumstances giving 

17 rise to the personal injury claim allegedly occurred; 

18 (3) the defendant’s principal place of business 

19 is located, if the defendant is a corporation; or 

20 (4) the defendant resides, if the defendant is an 

21 individual. 

22 (b) DETERMINATION OF MOST APPROPRIATE

23 FORUM.—If a person alleges that the injury or cir24 cumstances giving rise to the personal injury claim oc25 curred in more than one county (or Federal district), the 


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1 trial court shall determine which State and county (or 

2 Federal district) is the most appropriate forum for the 

3 claim. If the court determines that another forum would 

4 be the most appropriate forum for a claim, the court shall 

5 dismiss the claim. Any otherwise applicable statute of limi6 tations shall be tolled beginning on the date the claim was 

7 filed and ending on the date the claim is dismissed under 

8 this subsection. 

9 (c) DEFINITIONS.—In this section: 

10 (1) The term ‘‘personal injury claim’’— 

11 (A) means a civil action brought under 

12 State law by any person to recover for a per13 son’s personal injury, illness, disease, death, 

14 mental or emotional injury, risk of disease, or 

15 other injury, or the costs of medical monitoring 

16 or surveillance (to the extent such claims are 

17 recognized under State law), including any de18 rivative action brought on behalf of any person 

19 on whose injury or risk of injury the action is 

20 based by any representative party, including a 

21 spouse, parent, child, or other relative of such 

22 person, a guardian, or an estate; 

23 (B) does not include a claim brought as a 

24 class action; and 


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1 (C) does not include a claim against a 

2 debtor in a case pending under title 11 of the 

3 United States Code that is a personal injury 

4 tort or wrongful death claim within the mean5 ing of section 157(b)(5) of title 28, United 

6 States Code. 

7 (2) The term ‘‘person’’ means any individual, 

8 corporation, company, association, firm, partnership, 

9 society, joint stock company, or any other entity, but 

10 not any governmental entity. 

11 (3) The term ‘‘State’’ includes the District of 

12 Columbia, the Commonwealth of Puerto Rico, the 

13 United States Virgin Islands, Guam, and any other 

14 territory or possession of the United States. 

15 (d) APPLICABILITY.—This section applies to any per16 sonal injury claim filed in Federal or State court on or 

17 after the date of the enactment of this Act. 

18 SEC. 404. RULE OF CONSTRUCTION. 

19 Nothing in section 402 or in the amendments made 

20 by section 401 shall be construed to bar or impede the 

21 assertion or development of new claims or remedies under 

22 Federal, State, or local civil rights law. 


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1 SEC. 405. THREE-STRIKES RULE FOR SUSPENDING ATTOR2 NEYS WHO COMMIT MULTIPLE RULE 11 VIO3 LATIONS. 

4 (a) MANDATORY SUSPENSION.—Whenever a Federal 

5 district court determines that an attorney has violated 

6 Rule 11 of the Federal Rules of Civil Procedure, the court 

7 shall determine the number of times that the attorney has 

8 violated that rule in that Federal district court during that 

9 attorney’s career. If the court determines that the number 

10 is three or more, the Federal district court— 

11 (1) shall suspend that attorney from the prac12 tice of law in that Federal district court for one 

13 year; and 

14 (2) may suspend that attorney from the prac15 tice of law in that Federal district court for any ad16 ditional period that the court considers appropriate. 

17 (b) APPEAL; STAY.—An attorney has the right to ap18 peal a suspension under subsection (a). While such an ap19 peal is pending, the suspension shall be stayed. 

20 (c) REINSTATEMENT.—To be reinstated to the prac21 tice of law in a Federal district court after completion of 

22 a suspension under subsection (a), the attorney involved 

23 must first petition the court for reinstatement under such 

24 procedures and conditions as the court may prescribe. 


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1 SEC. 406. PRESUMPTION OF RULE 11 VIOLATION FOR RE2 PEATEDLY RELITIGATING SAME ISSUE. 

3 Whenever a party presents to a Federal court a 

4 pleading, written motion, or other paper, that includes a 

5 claim or defense that the party has already litigated and 

6 lost on the merits in any forum in final decisions not sub7 ject to appeal on three consecutive occasions, and the 

8 claim or defense, respectively, involves the same plaintiff 

9 and the same defendant on each occasion, there shall be 

10 a rebuttable presumption that the presentation of such 

11 paper is in violation of Rule 11 of the Federal Rules of 

12 Civil Procedure. 

13 SEC. 407. ENHANCED SANCTIONS FOR DOCUMENT DE14 STRUCTION IN PENDING FEDERAL COURT 

15 PROCEEDINGS. 

16 Whoever willfully and intentionally influences, ob17 structs, or impedes, or attempts to influence, or obstruct, 

18 or impede, a pending Federal court proceeding through 

19 the willful and intentional destruction of documents 

20 sought pursuant to the rules of such Federal court pro21 ceeding and highly relevant to that proceeding— 

22 (1) shall be punished with mandatory civil sanc23 tions of a degree commensurate with the civil sanc24 tions available under Rule 11 of the Federal Rules 

25 of Civil Procedure, in addition to any other civil 

26 sanctions that otherwise apply; 


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1 (2) shall be held in contempt of court; and if 

2 an attorney, referred to one or more appropriate 

3 State bar associations for disciplinary proceedings. 

4 SEC. 408. BAN ON CONCEALMENT OF UNLAWFUL CONDUCT. 

5 (a) IN GENERAL.—In any Rule 11 of the Federal 

6 Rules of Civil Procedure proceeding, a court may not order 

7 that a court record not be disclosed unless the court makes 

8 a finding of fact that identifies the interest that justifies 

9 the order and determines that interest outweighs any in10 terest in the public health and safety that the court deter11 mines would be served by disclosing the court record. 

12 (b) APPLICABILITY.—This section applies to any 

13 record formally filed with a court, but shall not include 

14 any records subject to— 

15 (1) the attorney-client privilege or any other 

16 privilege recognized under Federal or State law that 

17 grants the right to prevent disclosure of certain in18 formation unless the privilege has been waived; or 

19 (2) applicable State or Federal laws that pro20 tect the confidentiality of crime victims, including 

21 victims of sexual abuse. 


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1 TITLE V—AWARDING OF 

2 PROCUREMENT CONTRACTS 

3 SEC. 501. INCREASE IN GOVERNMENT-WIDE GOAL FOR 

4 PROCUREMENT CONTRACTS AWARDED TO 

5 SMALL BUSINESS CONCERNS. 

6 Section 15(g)(1) of the Small Business Act (15 

7 U.S.C. 644(g)(1)) is amended by striking ‘‘23 percent’’ 

8 and inserting ‘‘25 percent’’. 

Æ 


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