ance exchange to which the employee ap-
plies for advance payment of the premium 
assistance tax credit. 
‘‘(iii) A statement that if the employee 
is not covered under minimum essential 
coverage for any month the employee may 
be subject to tax under section 5000A for 
such month and reimbursements under the 
arrangement may be includible in gross in-
come.’’. 
(2) LIMITATION ON EXCLUSION FROM GROSS 
INCOME.—Section 106 of such Code is amended by 
adding at the end the following: 
‘‘(g) QUALIFIED SMALL EMPLOYER HEALTH REIM-
BURSEMENT ARRANGEMENT.—For purposes of this sec-
tion and section 105, payments or reimbursements from 
a qualified small employer health reimbursement arrange-
ment (as defined in section 9831(d)) of an individual for 
medical care (as defined in section 213(d)) shall not be 
treated as paid or reimbursed under employer-provided 
coverage for medical expenses under an accident or health 
plan if for the month in which such medical care is pro-
vided the individual does not have minimum essential cov-
erage (within the meaning of section 5000A(f)).’’. 
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(3) COORDINATION WITH HEALTH INSURANCE 
PREMIUM CREDIT.—Section 36B(c) of such Code is 
amended by adding at the end the following new 
paragraph: 
‘‘(4) SPECIAL
RULES
FOR
QUALIFIED
SMALL 
EMPLOYER
HEALTH
REIMBURSEMENT
ARRANGE-
MENTS.— 
‘‘(A) IN
GENERAL.—The term ‘coverage 
month’ shall not include any month with re-
spect to an employee (or any spouse or depend-
ent of such employee) if for such month the em-
ployee is provided a qualified small employer 
health reimbursement arrangement which con-
stitutes affordable coverage. 
‘‘(B) DENIAL OF DOUBLE BENEFIT.—In 
the case of any employee who is covered under 
a qualified small employer health reimburse-
ment arrangement for any month, the credit 
otherwise allowed under subsection (a) to the 
taxpayer for such month shall be reduced (but 
not below zero) by the amount described in sub-
paragraph (C)(i)(II) for such month. 
‘‘(C) AFFORDABLE COVERAGE.—For pur-
poses of subparagraph (A), a qualified small 
employer health reimbursement arrangement 
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shall be treated as constituting affordable cov-
erage for a month if— 
‘‘(i) the excess of— 
‘‘(I) the amount that would be 
paid by the employee as the premium 
for such month for self-only coverage 
under the second lowest cost silver 
plan offered in the relevant individual 
health insurance market, over 
‘‘(II) 1⁄12 of the employee’s per-
mitted benefit (as defined in section 
9831(d)(3)(C)) under such arrange-
ment, does not exceed— 
‘‘(ii) 1⁄12 of 9.5 percent of the employ-
ee’s household income. 
‘‘(D) 
QUALIFIED
SMALL
EMPLOYER 
HEALTH
REIMBURSEMENT
ARRANGEMENT.— 
For purposes of this paragraph, the term 
‘qualified small employer health reimbursement 
arrangement’ has the meaning given such term 
by section 9831(d)(2). 
‘‘(E) INDEXING.—In the case of plan years 
beginning in any calendar year after 2014, the 
Secretary shall adjust the 9.5 percent amount 
under subparagraph (C)(ii) in the same manner 
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as the percentages are adjusted under sub-
section (b)(3)(A)(ii).’’. 
(4) APPLICATION
OF
EXCISE
TAX
ON
HIGH 
COST EMPLOYER-SPONSORED HEALTH COVERAGE.— 
(A) IN GENERAL.—Section 4980I(f)(4) of 
such Code is amended by adding at the end the 
following: ‘‘Section 9831(d)(1) shall not apply 
for purposes of this section.’’. 
(B) DETERMINATION
OF
COST
OF
COV-
ERAGE.—Section 4980I(d)(2) of such Code is 
amended by redesignating subparagraph (D) as 
subparagraph (E) and by inserting after sub-
paragraph (C) the following new subparagraph: 
‘‘(D) 
QUALIFIED
SMALL
EMPLOYER 
HEALTH
REIMBURSEMENT
ARRANGEMENTS.— 
In the case of applicable employer-sponsored 
coverage consisting of coverage under any quali-
fied small employer health reimbursement ar-
rangement (as defined in section 9831(d)(2)), 
the cost of coverage shall be equal to the 
amount described in section 6051(a)(15).’’. 
(5) 
ENFORCEMENT
OF
NOTICE
REQUIRE-
MENT.—Section 6652 of such Code is amended by 
adding at the end the following new subsection: 
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‘‘(o) FAILURE TO PROVIDE NOTICES WITH RESPECT 
TO QUALIFIED SMALL EMPLOYER HEALTH REIMBURSE-
MENT ARRANGEMENTS.—In the case of each failure to 
provide a written notice as required by section 9831(d)(4), 
unless it is shown that such failure is due to reasonable 
cause and not willful neglect, there shall be paid, on notice 
and demand of the Secretary and in the same manner as 
tax, by the person failing to provide such written notice, 
an amount equal to $50 per employee per incident of fail-
ure to provide such notice, but the total amount imposed 
on such person for all such failures during any calendar 
year shall not exceed $2,500.’’. 
(6) REPORTING.— 
(A) W–2 REPORTING.—Section 6051(a) of 
such Code is amended by striking ‘‘and’’ at the 
end of paragraph (13), by striking the period at 
the end of paragraph (14) and inserting ‘‘, 
and’’, and by inserting after paragraph (14) the 
following new paragraph: 
‘‘(15) the total amount of permitted benefits 
(as defined in section 9831(d)(3)(C)) for the year 
under a qualified small employer health reimburse-
ment arrangement (as defined in section 9831(d)(2)) 
with respect to the employee.’’. 
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