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 Com-
mittee on Education and the Workforce, and in addition to the Commit-
tees 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 con-
cerned 
A BILL 
To recognize small employer benefit arrangements as 
employers, and for other purposes. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SMALL EMPLOYER BENEFIT ARRANGEMENTS. 
(a) AMENDMENTS TO IRC.— 
(1) IN GENERAL.—Section 414 of the Internal 
Revenue Code of 1986 is amended by adding at the 
end the following new subsection: 
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‘‘(y) 
SMALL
EMPLOYER
BENEFIT
ARRANGE-
MENTS.— 
‘‘(1) TREATMENT AS EMPLOYER.— 
‘‘(A) 
RETIREMENT, 
ACCIDENT, 
AND 
HEALTH INSURANCE.—A small employer benefit 
arrangement meeting the requirements of this 
subsection shall be treated as an ‘employer’ for 
the purpose of providing qualified retirement 
and accident and health plans (including a plan 
qualified under section 105(h) or section 125) 
or group-term life insurance under section 79. 
‘‘(B) ALLOCATION OF INCOME.—Notwith-
standing subparagraph (A), the shareholder- 
members of the small employer benefit arrange-
ment shall be treated as employers for purposes 
of administering and allocating items of income, 
credits, deductions, or exclusions associated 
with the provision of employee benefits. 
‘‘(2) CERTAIN ORGANIZATIONS PROHIBITED.— 
‘‘(A) IN GENERAL.—An organization shall 
not be treated as a small employer benefit ar-
rangement if the small employer benefit ar-
rangement or any related entity is owned, in 
whole or in part, or managed or controlled in 
whole or in part, by any management agree-
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ment or certificates of indebtedness, directly or 
indirectly, or by an agents, brokers or providers 
of a— 
‘‘(i) health, life, or disability insurer; 
‘‘(ii) retirement plan service provider 
(including persons who provide plan de-
sign, administration, and investment advice 
services to retirement plans); 
‘‘(iii) claim administrators; and 
‘‘(iv) investment advisors. 
‘‘(B) ORDINARY PROVISION OF PRODUCTS 
AND
SERVICES.—Nothing in this paragraph 
shall be construed— 
‘‘(i) to prohibit a small employer ben-
efit arrangement from contracting for the 
ordinary provision of products and services 
from any persons or organizations that 
might otherwise be prohibited from having 
an ownership or management interest in a 
small employer benefit arrangement, or 
‘‘(ii) to prohibit small employer ben-
efit arrangements from creating, by and 
between themselves, service organizations 
owned and controlled exclusively by small 
employer benefit arrangements to provide 
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for such products and services in the ful-
fillment of their purposes. 
‘‘(3) DEFINITION.—The term ‘small employer 
benefit arrangement’ means a member owned, demo-
cratically controlled cooperative organization that— 
‘‘(A) meets the requirements of subchapter 
T; 
‘‘(B) has at least 21 shareholders of whom 
90 percent are in the same or similar line of 
business; 
‘‘(C) sponsors an accident and health plan 
for shareholder-members and any employees of 
shareholder-members; 
‘‘(D) sponsors a qualified retirement plan 
that meets the requirements of paragraph (12) 
or (13) of section 401(k) and is available to 
shareholder-members and any employees of 
shareholder-members; 
‘‘(E) provides employee benefits pursuant 
to a written agreement; and 
‘‘(F) requires all benefit eligible employees 
of a shareholder-member to participate accord-
ing to the same statutory eligibility criteria nor-
mally accorded such persons.’’. 
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(2) EFFECTIVE DATE.—The amendments made 
by this subsection shall apply with respect to plan 
years beginning on or after the date of the enact-
ment of this Act. 
(b) AMENDMENTS TO ERISA.— 
(1) TREATMENT AS EMPLOYER.—Section 3 of 
the Employee Retirement and Income Security Act 
(29 U.S.C. 1002) is amended— 
(A) in paragraph (5), by inserting ‘‘or a 
small employer benefit arrangement’’ after ‘‘a 
group or association of employers’’; and 
(B) by adding at the end the following new 
paragraph: 
‘‘(43) The term ‘small employer benefit arrangement’ 
means a member owned, democratically controlled cooper-
ative organization that— 
‘‘(A) meets the requirements of subchapter T of 
chapter 1 of the Internal Revenue Code of 1986; 
‘‘(B) has at least 21 shareholders of whom 90 
percent are in the same or similar line of business; 
‘‘(C) sponsors an accident and health plan for 
shareholder-members and any employees of share-
holder-members; 
‘‘(D) sponsors a qualified retirement plan that 
meets the requirements of paragraph (12) or (13) of 
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section 401(k) of the Internal Revenue Code of 1986 
and is available to shareholder-members and any 
employees of shareholder-members; 
‘‘(E) provides employee benefits pursuant to a 
written agreement; and 
‘‘(F) requires all benefit eligible employees of a 
shareholder-member to participate according to the 
same statutory eligibility criteria normally accorded 
such persons.’’. 
(2) 
SELF-INSURANCE
PROHIBITED.—Section 
609 of such Act (29 U.S.C. 1169) is amended— 
(A) by redesignating subsection (e) as sub-
section (f); and 
(B) by inserting after subsection (d) the 
following new subsection: 
‘‘(e) 
SMALL
EMPLOYER
BENEFIT
ARRANGE-
MENTS.— 
‘‘(1) 
SELF-INSURANCE
PROHIBITED.—Any 
group health plan established or maintained by a 
small employer benefit arrangement shall be fully in-
sured. 
‘‘(2) FULLY
INSURED
DEFINED.—A group 
health plan established or maintained by a small em-
ployer benefit arrangement shall be considered fully 
insured only if the terms of the arrangement provide 
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for benefits the amount of all of which the Secretary 
determines are guaranteed under a contract, or pol-
icy of insurance, issued by an insurance company, 
insurance service, or insurance organization, quali-
fied to conduct business in a State.’’. 
(3) EFFECTIVE DATE.—The amendments made 
by this subsection shall apply with respect to plan 
years beginning on or after the date of the enact-
ment of this Act. 
(c) AMENDMENTS TO PPACA.— 
(1) SMALL EMPLOYER BENEFIT ARRANGEMENT 
DEFINED.—Section 1304(b) of the Patient Protec-
tion and Affordable Care Act (42 U.S.C. 18024(b)) 
is amended by adding at the end the following new 
paragraph: 
‘‘(5) SMALL
EMPLOYER
BENEFIT
ARRANGE-
MENT.—The term ‘small employer benefit arrange-
ment’ has the meaning given such term in section 
3(43) of the Employee Retirement and Income Secu-
rity Act.’’. 
(2) 
QUALIFIED
HEALTH
PLANS.—Section 
1301(a) of such Act (42 U.S.C. 18021(a)) is amend-
ed by adding at the end the following new para-
graph: 
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‘‘(5) INCLUSION OF SMALL EMPLOYER BENEFIT 
ARRANGEMENT PLANS.—Any reference in this title 
to a qualified health plan shall be deemed to include 
any group health plan established or maintained by 
a small employer benefit arrangement.’’. 
(3) ELIGIBILITY TO PARTICIPATE IN AMERICAN 
HEALTH BENEFIT EXCHANGES.—Section 1312(f)(2) 
of such Act (42 U.S.C. 18032(f)(2)) is amended by 
adding at the end the following new subparagraph: 
‘‘(C) SMALL
EMPLOYER
BENEFIT
AR-
RANGEMENTS.—For purposes of subparagraph 
(A), a small employer benefit arrangement shall 
be treated as a small employer.’’. 
(4) EFFECTIVE DATE.—The amendments made 
to any provision by this subsection shall take effect 
as if included in the enactment of such provision. 
Æ 
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