I 

112TH CONGRESS 

1ST SESSION H. R. 3249 

To recognize small employer benefit arrangements as employers, and for 

other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

OCTOBER 24, 2011 

Mr. ANDREWS introduced the following bill; which was referred to the Committee on Education and the Workforce, and in addition to the Committees on Ways and Means and Energy and Commerce, for a period to be 

subsequently determined by the Speaker, in each case for consideration 

of such provisions as fall within the jurisdiction of the committee concerned 

A BILL 

To recognize small employer benefit arrangements as 

employers, and for other purposes. 

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

3 SECTION 1. SMALL EMPLOYER BENEFIT ARRANGEMENTS. 

4 (a) AMENDMENTS TO IRC.— 

5 (1) IN GENERAL.—Section 414 of the Internal 

6 Revenue Code of 1986 is amended by adding at the 

7 end the following new subsection: 


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1 ‘‘(y) SMALL EMPLOYER BENEFIT ARRANGE2 MENTS.— 

3 ‘‘(1) TREATMENT AS EMPLOYER.— 

4 ‘‘(A) RETIREMENT, ACCIDENT, AND

5 HEALTH INSURANCE.—A small employer benefit 

6 arrangement meeting the requirements of this 

7 subsection shall be treated as an ‘employer’ for 

8 the purpose of providing qualified retirement 

9 and accident and health plans (including a plan 

10 qualified under section 105(h) or section 125) 

11 or group-term life insurance under section 79. 

12 ‘‘(B) ALLOCATION OF INCOME.—Notwith13 standing subparagraph (A), the shareholder14 members of the small employer benefit arrange15 ment shall be treated as employers for purposes 

16 of administering and allocating items of income, 

17 credits, deductions, or exclusions associated 

18 with the provision of employee benefits. 

19 ‘‘(2) CERTAIN ORGANIZATIONS PROHIBITED.— 

20 ‘‘(A) IN GENERAL.—An organization shall 

21 not be treated as a small employer benefit ar22 rangement if the small employer benefit ar23 rangement or any related entity is owned, in 

24 whole or in part, or managed or controlled in 

25 whole or in part, by any management agreeVerDate Mar 15 2010 00:58 Oct 25, 2011 Jkt 099200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H3249.IH H3249

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1 ment or certificates of indebtedness, directly or 

2 indirectly, or by an agents, brokers or providers 

3 of a— 

4 ‘‘(i) health, life, or disability insurer; 

5 ‘‘(ii) retirement plan service provider 

6 (including persons who provide plan de7 sign, administration, and investment advice 

8 services to retirement plans); 

9 ‘‘(iii) claim administrators; and 

10 ‘‘(iv) investment advisors. 

11 ‘‘(B) ORDINARY PROVISION OF PRODUCTS

12 AND SERVICES.—Nothing in this paragraph 

13 shall be construed— 

14 ‘‘(i) to prohibit a small employer ben15 efit arrangement from contracting for the 

16 ordinary provision of products and services 

17 from any persons or organizations that 

18 might otherwise be prohibited from having 

19 an ownership or management interest in a 

20 small employer benefit arrangement, or 

21 ‘‘(ii) to prohibit small employer ben22 efit arrangements from creating, by and 

23 between themselves, service organizations 

24 owned and controlled exclusively by small 

25 employer benefit arrangements to provide 


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1 for such products and services in the ful2 fillment of their purposes. 

3 ‘‘(3) DEFINITION.—The term ‘small employer 

4 benefit arrangement’ means a member owned, demo5 cratically controlled cooperative organization that— 

6 ‘‘(A) meets the requirements of subchapter 

7 T; 

8 ‘‘(B) has at least 21 shareholders of whom 

9 90 percent are in the same or similar line of 

10 business; 

11 ‘‘(C) sponsors an accident and health plan 

12 for shareholder-members and any employees of 

13 shareholder-members; 

14 ‘‘(D) sponsors a qualified retirement plan 

15 that meets the requirements of paragraph (12) 

16 or (13) of section 401(k) and is available to 

17 shareholder-members and any employees of 

18 shareholder-members; 

19 ‘‘(E) provides employee benefits pursuant 

20 to a written agreement; and 

21 ‘‘(F) requires all benefit eligible employees 

22 of a shareholder-member to participate accord23 ing to the same statutory eligibility criteria nor24 mally accorded such persons.’’. 


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1 (2) EFFECTIVE DATE.—The amendments made 

2 by this subsection shall apply with respect to plan 

3 years beginning on or after the date of the enact4 ment of this Act. 

5 (b) AMENDMENTS TO ERISA.— 

6 (1) TREATMENT AS EMPLOYER.—Section 3 of 

7 the Employee Retirement and Income Security Act 

8 (29 U.S.C. 1002) is amended— 

9 (A) in paragraph (5), by inserting ‘‘or a 

10 small employer benefit arrangement’’ after ‘‘a 

11 group or association of employers’’; and 

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

13 paragraph: 

14 ‘‘(43) The term ‘small employer benefit arrangement’ 

15 means a member owned, democratically controlled cooper16 ative organization that— 

17 ‘‘(A) meets the requirements of subchapter T of 

18 chapter 1 of the Internal Revenue Code of 1986; 

19 ‘‘(B) has at least 21 shareholders of whom 90 

20 percent are in the same or similar line of business; 

21 ‘‘(C) sponsors an accident and health plan for 

22 shareholder-members and any employees of share23 holder-members; 

24 ‘‘(D) sponsors a qualified retirement plan that 

25 meets the requirements of paragraph (12) or (13) of 


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1 section 401(k) of the Internal Revenue Code of 1986 

2 and is available to shareholder-members and any 

3 employees of shareholder-members; 

4 ‘‘(E) provides employee benefits pursuant to a 

5 written agreement; and 

6 ‘‘(F) requires all benefit eligible employees of a 

7 shareholder-member to participate according to the 

8 same statutory eligibility criteria normally accorded 

9 such persons.’’. 

10 (2) SELF-INSURANCE PROHIBITED.—Section 

11 609 of such Act (29 U.S.C. 1169) is amended— 

12 (A) by redesignating subsection (e) as sub13 section (f); and 

14 (B) by inserting after subsection (d) the 

15 following new subsection: 

16 ‘‘(e) SMALL EMPLOYER BENEFIT ARRANGE17 MENTS.— 

18 ‘‘(1) SELF-INSURANCE PROHIBITED.—Any 

19 group health plan established or maintained by a 

20 small employer benefit arrangement shall be fully in21 sured. 

22 ‘‘(2) FULLY INSURED DEFINED.—A group 

23 health plan established or maintained by a small em24 ployer benefit arrangement shall be considered fully 

25 insured only if the terms of the arrangement provide 


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1 for benefits the amount of all of which the Secretary 

2 determines are guaranteed under a contract, or pol3 icy of insurance, issued by an insurance company, 

4 insurance service, or insurance organization, quali5 fied to conduct business in a State.’’. 

6 (3) EFFECTIVE DATE.—The amendments made 

7 by this subsection shall apply with respect to plan 

8 years beginning on or after the date of the enact9 ment of this Act. 

10 (c) AMENDMENTS TO PPACA.— 

11 (1) SMALL EMPLOYER BENEFIT ARRANGEMENT

12 DEFINED.—Section 1304(b) of the Patient Protec13 tion and Affordable Care Act (42 U.S.C. 18024(b)) 

14 is amended by adding at the end the following new 

15 paragraph: 

16 ‘‘(5) SMALL EMPLOYER BENEFIT ARRANGE17 MENT.—The term ‘small employer benefit arrange18 ment’ has the meaning given such term in section 

19 3(43) of the Employee Retirement and Income Secu20 rity Act.’’. 

21 (2) QUALIFIED HEALTH PLANS.—Section 

22 1301(a) of such Act (42 U.S.C. 18021(a)) is amend23 ed by adding at the end the following new para24 graph: 


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1 ‘‘(5) INCLUSION OF SMALL EMPLOYER BENEFIT

2 ARRANGEMENT PLANS.—Any reference in this title 

3 to a qualified health plan shall be deemed to include 

4 any group health plan established or maintained by 

5 a small employer benefit arrangement.’’. 

6 (3) ELIGIBILITY TO PARTICIPATE IN AMERICAN

7 HEALTH BENEFIT EXCHANGES.—Section 1312(f)(2) 

8 of such Act (42 U.S.C. 18032(f)(2)) is amended by 

9 adding at the end the following new subparagraph: 

10 ‘‘(C) SMALL EMPLOYER BENEFIT AR11 RANGEMENTS.—For purposes of subparagraph 

12 (A), a small employer benefit arrangement shall 

13 be treated as a small employer.’’. 

14 (4) EFFECTIVE DATE.—The amendments made 

15 to any provision by this subsection shall take effect 

16 as if included in the enactment of such provision. 

Æ 


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