‘‘(B) the excluded employer does not sat-
isfy a required minimum level of employment
uniformly applicable to participating employers,
‘‘(2) the applicable requirements of sections
701, 702, and 703 are met with respect to the plan,
and
‘‘(3) applicable benefit options under the plan
are actively marketed to all eligible participating em-
ployers.
‘‘SEC. 805. OTHER REQUIREMENTS RELATING TO PLAN
DOCUMENTS, CONTRIBUTION RATES, AND
BENEFIT OPTIONS.
‘‘(a) IN GENERAL.—The requirements of this section
are met with respect to an association health plan if the
following requirements are met:
‘‘(1) 
CONTENTS
OF
GOVERNING
INSTRU-
MENTS.—The instruments governing the plan in-
clude a written instrument, meeting the require-
ments of an instrument required under section
402(a)(1), which—
‘‘(A) provides that the board of trustees
serves as the named fiduciary required for plans
under section 402(a)(1) and serves in the ca-
pacity of a plan administrator (referred to in
section 3(16)(A)),
‘‘(B) provides that the sponsor of the plan
is to serve as plan sponsor (referred to in sec-
tion 3(16)(B)), and
‘‘(C) incorporates the requirements of sec-
tion 806.
‘‘(2) CONTRIBUTION
RATES
MUST
BE
NON-
DISCRIMINATORY.—
‘‘(A) The contribution rates for any par-
ticipating employer do not vary significantly on
the basis of the claims experience of such em-
ployer and do not vary on the basis of the type
of business or industry in which such employer
is engaged.
‘‘(B) Nothing in this title or any other pro-
vision of law shall be construed to preclude an
association health plan, or a health insurance
issuer offering health insurance coverage in
connection with an association health plan,
from setting contribution rates based on the
claims experience of the plan, to the extent con-
tribution rates under the plan meet the require-
ments of section 702(b).
‘‘(3) FLOOR FOR NUMBER OF COVERED INDI-
VIDUALS
WITH
RESPECT
TO
CERTAIN
PLANS.—If
any benefit option under the plan does not consist
of health insurance coverage, the plan has not fewer
than 1,000 participants and beneficiaries.
‘‘(4) 
REGULATORY
REQUIREMENTS.—Such
other requirements as the Secretary may prescribe
by regulation as necessary to carry out the purposes
of this part.
‘‘(b) ABILITY OF ASSOCIATION HEALTH PLANS TO
DESIGN BENEFIT OPTIONS.—Nothing in this part or any
provision of State law (as defined in section 514(c)(1))
shall be construed to preclude an association health plan,
or a health insurance issuer offering health insurance cov-
erage in connection with an association health plan, from
exercising its sole discretion in selecting the specific items
and services consisting of medical care to be included as
benefits under such plan or coverage, except in the case
of any law to the extent that it (1) prohibits an exclusion
of a specific disease from such coverage, or (2) is not pre-
empted under section 731(a)(1) with respect to matters
governed by section 711 or 712.
‘‘SEC. 806. MAINTENANCE OF RESERVES AND PROVISIONS
FOR 
SOLVENCY 
FOR 
PLANS 
PROVIDING
HEALTH BENEFITS IN ADDITION TO HEALTH
INSURANCE COVERAGE.
‘‘(a) IN GENERAL.—The requirements of this section
are met with respect to an association health plan if—
‘‘(1) the benefits under the plan consist solely
of health insurance coverage, or
‘‘(2) if the plan provides any additional benefit
options which do not consist of health insurance cov-
erage, the plan—
‘‘(A) establishes and maintains reserves
with respect to such additional benefit options,
consisting of—
‘‘(i) a reserve sufficient for unearned
contributions,
‘‘(ii) a reserve sufficient for benefit li-
abilities which have been incurred, which
have not been satisfied, and for which risk
of loss has not yet been transferred, and
for expected administrative costs with re-
spect to such benefit liabilities, and
‘‘(iii) a reserve, in an amount rec-
ommended by the qualified actuary, for
any other obligations of the plan,
and
‘‘(B) establishes and maintains aggregate
excess/stop loss insurance and solvency indem-
nification as follows:
‘‘(i) The plan shall secure aggregate
excess/stop loss insurance for the plan with
an attachment point which is not greater
than 125 percent of expected gross annual
claims. The Secretary may by regulation
define the incurred or paid basis and rel-
evant claims periods for purposes of deter-
mining expected claims under this clause
and provide for upward adjustments in the
amount of such percentage in specified cir-
cumstances in which the plan specifically
provides for and maintains reserves in ex-
cess of the amounts required under sub-
paragraph (A).
‘‘(ii) The plan shall secure a means of
indemnification for any claims which the
plan is unable to satisfy by reason of a ter-
mination pursuant to section 809(b) (relat-
ing to mandatory termination).
Any regulations prescribed by the Secretary pursuant to
paragraph (2)(B)(i) may allow for such adjustments in the
required levels of excess/stop loss insurance as the quali-
fied actuary may recommend, taking into account the spe-
cific circumstances of the plan.
‘‘(b) MINIMUM AMOUNT FOR CERTAIN RESERVES.—
The total of the reserves described in subsection (a)(2)(B)
shall not be less than an amount equal to the greater of—
‘‘(1) 25 percent of expected incurred claims and
expenses for the plan year, or
‘‘(2) $400,000.
‘‘(c) REQUIRED
MARGIN.—In determining the
amounts of reserves required under this section in connec-
tion with any association health plan described in sub-
section (a)(2), the qualified actuary shall include a margin
for error and other fluctuations taking into account the
specific circumstances of such plan.
‘‘(d) ADDITIONAL REQUIREMENTS.—In the case of
any association health plan described in subsection (a)(2),
the Secretary may provide such additional requirements
relating to reserves and excess/stop loss insurance as the
Secretary considers appropriate. Such requirements may
be provided, by regulation or otherwise, with respect to
any such plan or any class of such plans.
‘‘(e) ADJUSTMENTS FOR EXCESS/STOP LOSS INSUR-
ANCE.—The Secretary may provide for adjustments to the
levels of reserves otherwise required under subsections (a)
and (b) with respect to any plan or class of plans to take
into account excess/stop loss insurance provided with re-
spect to such plan or plans.
‘‘(f) ALTERNATIVE MEANS OF COMPLIANCE.—The
Secretary may permit an association health plan described
in subsection (a)(2) to substitute, for all or part of the
requirements of this section, such security, guarantee,
hold-harmless arrangement, or other financial arrange-
ment as the Secretary determines to be adequate to enable
the plan to fully meet all its financial obligations on a
timely basis. The Secretary may take into account, for
purposes of this subsection, evidence provided by the plan
or sponsor which demonstrates an assumption of liability
with respect to the plan. Such evidence may be in the form
of a contract of indemnification, lien, bonding, insurance,
letter of credit, recourse under applicable terms of the plan
in the form of assessments of participating employers, se-
curity, or other financial arrangement.
‘‘(g) EXCESS/STOP LOSS INSURANCE.—For purposes
of this section, the term ‘excess/stop loss insurance’
means, in connection with an association health plan, a
contract under which a health insurance issuer (or such
other insurer as may be determined under regulations of
the Secretary) provides for payment to the plan with re-
spect to claims under the plan in excess of an amount or
amounts specified in such contract.
‘‘SEC. 807. REQUIREMENTS FOR APPLICATION AND RELAT-
ED REQUIREMENTS.
‘‘(a) FILING FEE.—Under the procedure prescribed
pursuant to section 802(a), an association health plan
shall pay to the Secretary at the time of filing an applica-
tion for certification under this part a filing fee in the
amount of $5,000, which shall be available, to the extent
provided in appropriation Acts, to the Secretary for the
sole purpose of administering the certification procedures
applicable with respect to association health plans.
‘‘(b) INFORMATION TO BE INCLUDED IN APPLICA-
TION FOR CERTIFICATION.—An application for certifi-
cation under this part meets the requirements of this sec-
tion only if it includes, in a manner and form prescribed
in regulations of the Secretary, at least the following infor-
mation:
‘‘(1) IDENTIFYING INFORMATION.—The names
and addresses of—
‘‘(A) the sponsor, and
‘‘(B) the members of the board of trustees
of the plan.
‘‘(2) STATES IN WHICH PLAN INTENDS TO DO
BUSINESS.—The States in which participants and
beneficiaries under the plan are to be located and
the number of them expected to be located in each
such State.
‘‘(3) BONDING REQUIREMENTS.—Evidence pro-
vided by the board of trustees that the bonding re-
quirements of section 412 will be met as of the date
of the application or (if later) commencement of op-
erations.
‘‘(4) PLAN DOCUMENTS.—A copy of the docu-
ments governing the plan (including any bylaws and
trust agreements), the summary plan description,
and other material describing the benefits that will
be provided to participants and beneficiaries under
the plan.
‘‘(5) AGREEMENTS
WITH
SERVICE
PROVID-
ERS.—A copy of any agreements between the plan
and contract administrators and other service pro-
viders.
‘‘(6) FUNDING REPORT.—In the case of asso-
ciation health plans providing benefits options in ad-
dition to health insurance coverage, a report setting
forth information with respect to such additional
benefit options determined as of a date within the
120-day period ending with the date of the applica-
tion, including the following:
‘‘(A) RESERVES.—A statement, certified
by the board of trustees of the plan, and a
statement of actuarial opinion, signed by a
qualified actuary, that all applicable require-
ments of section 806 are or will be met in ac-
cordance with regulations which the Secretary
shall prescribe.
‘‘(B) 
ADEQUACY
OF
CONTRIBUTION
RATES.—A statement of actuarial opinion,
signed by a qualified actuary, which sets forth
a description of the extent to which contribution
rates are adequate to provide for the payment
of all obligations and the maintenance of re-
quired reserves under the plan for the 12-
month period beginning with such date within
such 120-day period, taking into account the
expected coverage and experience of the plan. If
the contribution rates are not fully adequate,
the statement of actuarial opinion shall indicate
the extent to which the rates are inadequate
and the changes needed to ensure adequacy.
‘‘(C) CURRENT AND PROJECTED VALUE OF
ASSETS AND LIABILITIES.—A statement of ac-
tuarial opinion signed by a qualified actuary,
which sets forth the current value of the assets
and liabilities accumulated under the plan and
a projection of the assets, liabilities, income,
and expenses of the plan for the 12-month pe-
riod referred to in subparagraph (B). The in-
come statement shall identify separately the
plan’s administrative expenses and claims.
‘‘(D) 
COSTS
OF
COVERAGE
TO
BE
CHARGED
AND
OTHER
EXPENSES.—A state-
ment of the costs of coverage to be charged, in-
cluding an itemization of amounts for adminis-
tration, reserves, and other expenses associated
with the operation of the plan.
‘‘(E) OTHER
INFORMATION.—Any other
information which may be prescribed in regula-
tions of the Secretary as necessary to carry out
the purposes of this part.
‘‘(c) FILING
NOTICE
OF
CERTIFICATION
WITH
STATES.—A certification granted under this part to an
association health plan shall not be effective unless written
notice of such certification is filed with the applicable
State authority of each State in which at least 25 percent
of the participants and beneficiaries under the plan are
located. For purposes of this subsection, an individual
shall be considered to be located in the State in which a
known address of such individual is located or in which
such individual is employed.
‘‘(d) NOTICE OF MATERIAL CHANGES.—In the case
of any association health plan certified under this part,
descriptions of material changes in any information which
was required to be submitted with the application for the
certification under this part shall be filed in such form
and manner as shall be prescribed in regulations of the
Secretary. The Secretary may require by regulation prior
notice of material changes with respect to specified mat-
ters which might serve as the basis for suspension or rev-
ocation of the certification.
‘‘(e) REPORTING REQUIREMENTS FOR CERTAIN AS-
SOCIATION HEALTH PLANS.—An association health plan
certified under this part which provides benefit options in
addition to health insurance coverage for such plan year
shall meet the requirements of section 103 by filing an
annual report under such section which shall include infor-
mation described in subsection (b)(6) with respect to the
plan year and, notwithstanding section 104(a)(1)(A), shall
be filed not later than 90 days after the close of the plan
year (or on such later date as may be prescribed by the
Secretary).
‘‘(f) ENGAGEMENT OF QUALIFIED ACTUARY.—The
board of trustees of each association health plan which
provides benefits options in addition to health insurance
coverage and which is applying for certification under this
part or is certified under this part shall engage, on behalf
of all participants and beneficiaries, a qualified actuary
who shall be responsible for the preparation of the mate-
rials comprising information necessary to be submitted by
a qualified actuary under this part. The qualified actuary
shall utilize such assumptions and techniques as are nec-
essary to enable such actuary to form an opinion as to
whether the contents of the matters reported under this
part—
‘‘(1) are in the aggregate reasonably related to
the experience of the plan and to reasonable expecta-
tions, and
‘‘(2) represent such actuary’s best estimate of
anticipated experience under the plan.
The opinion by the qualified actuary shall be made with
respect to, and shall be made a part of, the annual report.
‘‘SEC. 808. NOTICE REQUIREMENTS FOR VOLUNTARY TER-
MINATION.
‘‘Except as provided in section 809(b), an association
health plan which is or has been certified under this part
may terminate (upon or at any time after cessation of ac-
cruals in benefit liabilities) only if the board of trustees—
‘‘(1) not less than 60 days before the proposed
termination date, provides to the participants and
beneficiaries a written notice of intent to terminate
stating that such termination is intended and the
proposed termination date,
‘‘(2) develops a plan for winding up the affairs
of the plan in connection with such termination in
a manner which will result in timely payment of all
benefits for which the plan is obligated, and
‘‘(3) submits such plan in writing to the Sec-
retary.
Actions required under this section shall be taken in such
form and manner as may be prescribed in regulations of
the Secretary.
‘‘SEC. 809. CORRECTIVE ACTIONS AND MANDATORY TERMI-
NATION.
‘‘(a) ACTIONS
TO
AVOID
DEPLETION
OF
RE-
SERVES.—An association health plan which is certified
under this part and which provides benefits other than
health insurance coverage shall continue to meet the re-
quirements of section 806, irrespective of whether such
certification continues in effect. The board of trustees of
such plan shall determine quarterly whether the require-
ments of section 806 are met. In any case in which the
board determines that there is reason to believe that there
is or will be a failure to meet such requirements, or the
Secretary makes such a determination and so notifies the
board, the board shall immediately notify the qualified ac-
tuary engaged by the plan, and such actuary shall, not
later than the end of the next following month, make such
recommendations to the board for corrective action as the
actuary determines necessary to ensure compliance with
section 806. Not later than 30 days after receiving from
the actuary recommendations for corrective actions, the
board shall notify the Secretary (in such form and manner
as the Secretary may prescribe by regulation) of such rec-
ommendations of the actuary for corrective action, to-
gether with a description of the actions (if any) that the
board has taken or plans to take in response to such rec-
ommendations. The board shall thereafter report to the
Secretary, in such form and frequency as the Secretary
may specify to the board, regarding corrective action taken
by the board until the requirements of section 806 are
met.
‘‘(b) MANDATORY TERMINATION.—In any case in
which—
‘‘(1) the Secretary has been notified under sub-
section (a) of a failure of an association health plan
which is or has been certified under this part and
is described in section 806(a)(2) to meet the require-
ments of section 806 and has not been notified by
the board of trustees of the plan that corrective ac-
tion has restored compliance with such require-
ments, and
‘‘(2) the Secretary determines that there is a
reasonable expectation that the plan will continue to
fail to meet the requirements of section 806,
the board of trustees of the plan shall, at the direction
of the Secretary, terminate the plan and, in the course
of the termination, take such actions as the Secretary may
require, including satisfying any claims referred to in sec-
tion 806(a)(2)(B)(ii) and recovering for the plan any li-
ability under section 806(f), as necessary to ensure that
the affairs of the plan will be, to the maximum extent pos-
sible, wound up in a manner which will result in timely
provision of all benefits for which the plan is obligated.
‘‘SEC. 810. SPECIAL RULES FOR CHURCH PLANS.
‘‘(a) ELECTION
FOR CHURCH PLANS.—Notwith-
standing section 4(b)(2), if a church, a convention or asso-
ciation of churches, or an organization described in section
3(33)(C)(i) maintains a church plan which is a group
health plan (as defined in section 733(a)(1)), and such
church, convention, association, or organization makes an
election with respect to such plan under this subsection
(in such form and manner as the Secretary may by regula-
tion prescribe), then the provisions of this section shall
apply to such plan, with respect to benefits provided under
such plan consisting of medical care, as if section 4(b)(2)
did not contain an exclusion for church plans. Nothing in
this paragraph shall be construed to render any other sec-
tion of this title applicable to church plans, except to the
extent that such other section is incorporated by reference
in this section.
‘‘(b) EFFECT OF ELECTION.—
‘‘(1) PREEMPTION OF STATE INSURANCE LAWS
REGULATING COVERED CHURCH PLANS.—Subject to
paragraphs (2) and (3), this section shall supersede
any and all State laws which regulate insurance in-
sofar as they may now or hereafter regulate church
plans to which this section applies or trusts estab-
lished under such church plans.
‘‘(2) GENERAL STATE INSURANCE REGULATION
UNAFFECTED.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), nothing in this section shall
be construed to exempt or relieve any person
from any provision of State law which regulates
insurance.
‘‘(B) CHURCH PLANS NOT TO BE DEEMED
INSURANCE COMPANIES OR INSURERS.—Neither
a church plan to which this section applies, nor
any trust established under such a church plan,
shall be deemed to be an insurance company or
other insurer or to be engaged in the business
of insurance for purposes of any State law pur-
porting to regulate insurance companies or in-
surance contracts.
‘‘(3) PREEMPTION
OF
CERTAIN
STATE
LAWS
RELATING
TO
PREMIUM
RATE
REGULATION
AND
BENEFIT MANDATES.—The provisions of subsections
(a)(2)(B) and (b) of section 805 shall apply with re-
spect to a church plan to which this section applies
in the same manner and to the same extent as such
provisions apply with respect to association health
plans.
‘‘(4) DEFINITIONS.—For purposes of this sub-
section—
‘‘(A) STATE LAW.—The term ‘State law’
includes all laws, decisions, rules, regulations,
or other State action having the effect of law,
of any State. A law of the United States appli-
cable only to the District of Columbia shall be
treated as a State law rather than a law of the
United States.
‘‘(B) STATE.—The term ‘State’ includes a
State, any political subdivision thereof, or any
agency or instrumentality of either, which
purports to regulate, directly or indirectly, the
terms and conditions of church plans covered by
this section.
‘‘(c) 
REQUIREMENTS
FOR
COVERED
CHURCH
PLANS.—
‘‘(1) FIDUCIARY RULES AND EXCLUSIVE PUR-
POSE.—A fiduciary shall discharge his duties with
respect to a church plan to which this section ap-
plies—
‘‘(A) for the exclusive purpose of:
‘‘(i) providing benefits to participants
and their beneficiaries; and
‘‘(ii) defraying reasonable expenses of
administering the plan;
‘‘(B) with the care, skill, prudence and dili-
gence under the circumstances then prevailing
that a prudent man acting in a like capacity
and familiar with such matters would use in the
conduct of an enterprise of a like character and
with like aims; and
‘‘(C) in accordance with the documents
and instruments governing the plan.
The requirements of this paragraph shall not be
treated as not satisfied solely because the plan as-
sets are commingled with other church assets, to the
extent that such plan assets are separately ac-
counted for.
‘‘(2) CLAIMS PROCEDURE.—In accordance with
regulations of the Secretary, every church plan to
which this section applies shall—
‘‘(A) provide adequate notice in writing to
any participant or beneficiary whose claim for
benefits under the plan has been denied, setting
forth the specific reasons for such denial, writ-
ten in a manner calculated to be understood by
the participant;
‘‘(B) afford a reasonable opportunity to
any participant whose claim for benefits has
been denied for a full and fair review by the ap-
propriate fiduciary of the decision denying the
claim; and
‘‘(C) provide a written statement to each
participant describing the procedures estab-
lished pursuant to this paragraph.
‘‘(3) ANNUAL
STATEMENTS.—In accordance
with regulations of the Secretary, every church plan
to which this section applies shall file with the Sec-
retary an annual statement—
‘‘(A) stating the names and addresses of
the plan and of the church, convention, or asso-
ciation maintaining the plan (and its principal
place of business);
‘‘(B) certifying that it is a church plan to
which this section applies and that it complies
with the requirements of paragraphs (1) and
(2);
‘‘(C) identifying the States in which par-
ticipants and beneficiaries under the plan are or
likely will be located during the 1-year period
covered by the statement; and
‘‘(D) containing a copy of a statement of
actuarial opinion signed by a qualified actuary
that the plan maintains capital, reserves, insur-
ance, other financial arrangements, or any com-
bination thereof adequate to enable the plan to
fully meet all of its financial obligations on a
timely basis.
‘‘(4) DISCLOSURE.—At the time that the an-
nual statement is filed by a church plan with the
Secretary pursuant to paragraph (3), a copy of such
statement shall be made available by the Secretary
to the State insurance commissioner (or similar offi-
cial) of any State. The name of each church plan
and sponsoring organization filing an annual state-
ment in compliance with paragraph (3) shall be pub-
lished annually in the Federal Register.
‘‘(c) ENFORCEMENT.—The Secretary may enforce
the provisions of this section in a manner consistent with
section 502, to the extent applicable with respect to ac-
tions under section 502(a)(5), and with section 3(33)(D),
except that, other than for the purpose of seeking a tem-
porary restraining order, a civil action may be brought
with respect to the plan’s failure to meet any requirement
of this section only if the plan fails to correct its failure
within the correction period described in section 3(33)(D).
The other provisions of part 5 (except sections 501(a),
503, 512, 514, and 515) shall apply with respect to the
enforcement and administration of this section.
‘‘(d) DEFINITIONS AND OTHER RULES.—For pur-
poses of this section—
‘‘(1) IN GENERAL.—Except as otherwise pro-
vided in this section, any term used in this section
which is defined in any provision of this title shall
have the definition provided such term by such pro-
vision.
‘‘(2) SEMINARY STUDENTS.—Seminary students
who are enrolled in an institution of higher learning
described in section 3(33)(C)(iv) and who are treat-
ed as participants under the terms of a church plan
to which this section applies shall be deemed to be
employees as defined in section 3(6) if the number
of such students constitutes an insignificant portion
of the total number of individuals who are treated
as participants under the terms of the plan.’’.
‘‘SEC. 811. DEFINITIONS AND RULES OF CONSTRUCTION.
‘‘(a) DEFINITIONS.—For purposes of this part—
‘‘(1) GROUP HEALTH PLAN.—The term ‘group
health plan’ has the meaning provided in section
733(a)(1).
‘‘(2) MEDICAL CARE.—The term ‘medical care’
has the meaning provided in section 733(a)(2).
‘‘(3) HEALTH
INSURANCE
COVERAGE.—The
term ‘health insurance coverage’ has the meaning
provided in section 733(b)(1).
‘‘(4) HEALTH INSURANCE ISSUER.—The term
‘health insurance issuer’ has the meaning provided
in section 733(b)(2).
‘‘(5) HEALTH STATUS-RELATED FACTOR.—The
term ‘health status-related factor’ has the meaning
provided in section 733(d)(2).
‘‘(6) INDIVIDUAL MARKET.—
‘‘(A) IN GENERAL.—The term ‘individual
market’ means the market for health insurance
coverage offered to individuals other than in
connection with a group health plan.
‘‘(B) 
TREATMENT
OF
VERY
SMALL
GROUPS.—
‘‘(i) IN GENERAL.—Subject to clause
(ii), such term includes coverage offered in
connection with a group health plan that
has fewer than 2 participants as current
employees or participants described in sec-
tion 732(d)(3) on the first day of the plan
year.
‘‘(ii) STATE
EXCEPTION.—Clause (i)
shall not apply in the case of health insur-
ance coverage offered in a State if such
State regulates the coverage described in
such clause in the same manner and to the
same extent as coverage in the small group
market (as defined in section 2791(e)(5) of
the Public Health Service Act) is regulated
by such State.
‘‘(7) PARTICIPATING
EMPLOYER.—The term
‘participating employer’ means, in connection with
an association health plan, any employer, if any indi-
vidual who is an employee of such employer, a part-
ner in such employer, or a self-employed individual
who is such employer (or any dependent, as defined
under the terms of the plan, of such individual) is
or was covered under such plan in connection with
the status of such individual as such an employee,
partner, or self-employed individual in relation to the
plan.
‘‘(8) APPLICABLE
STATE
AUTHORITY.—The
term ‘applicable State authority’ means, with respect
to a health insurance issuer in a State, the State in-
surance commissioner or official or officials des-
ignated by the State to enforce the requirements of
title XXVII of the Public Health Service Act for the
State involved with respect to such issuer.
‘‘(9) QUALIFIED
ACTUARY.—The term ‘quali-
fied actuary’ means an individual who is a member
of the American Academy of Actuaries or meets
such reasonable standards and qualifications as the
Secretary may provide by regulation.
‘‘(b) RULES OF CONSTRUCTION.—
‘‘(1) EMPLOYERS AND EMPLOYEES.—For pur-
poses of determining whether a plan, fund, or pro-
gram is an employee welfare benefit plan which is an
association health plan, and for purposes of applying
this title in connection with such plan, fund, or pro-
gram so determined to be such an employee welfare
benefit plan, the term ‘employer’ (as defined in sec-
tion 3(5)) and the term ‘employee’ (as defined in
section 3(6)) shall include an individual who is a
partner or a self-employed individual.
‘‘(2) PLANS, FUNDS, AND PROGRAMS TREATED
AS GROUP HEALTH PLANS.—In the case of any plan,
fund, or program which was established or is main-
tained for the purpose of providing medical care
(through the purchase of insurance or otherwise) for
individuals covered thereunder and which dem-
onstrates to the Secretary that all requirements for
certification under this part would be met with re-
spect to such plan, fund, or program if such plan,
fund, or program were a group health plan, such
plan, fund, or program shall be treated for purposes
of this title as an employee welfare benefit plan on
and after the date of such demonstration.’’.
(b) CONFORMING AMENDMENTS
TO PREEMPTION
RULES.—
(1) Section 514(b)(6) of such Act (29 U.S.C.
1144(b)(6)) is amended by adding at the end the
following new subparagraph:
‘‘(E) The preceding subparagraphs of this paragraph
do not apply with respect to any State law in the case
of an association health plan which is certified under part
8.’’.
(2) Section 514 of such Act (29 U.S.C. 1144)
is amended—
(A) in subsection (b)(4), by striking ‘‘Sub-
section (a)’’ and inserting ‘‘Subsections (a) and
(d)’’;
(B) in subsection (b)(5), by striking ‘‘sub-
section (a)’’ in subparagraph (A) and inserting
‘‘subsection (a) of this section and subsections
(a)(2)(B) and (b) of section 805’’, and by strik-
ing ‘‘subsection (a)’’ in subparagraph (B) and
inserting ‘‘subsection (a) of this section or sub-
section (a)(2)(B) or (b) of section 805’’;
(C) by redesignating subsection (d) as sub-
section (e); and
(D) by inserting after subsection (c) the
following new subsection:
‘‘(d)(1) Except as provided in subsection (b)(4), the
provisions of this title shall supersede any and all State
laws insofar as they may now or hereafter preclude a
health insurance issuer from offering health insurance cov-
erage in connection with an association health plan which
is certified under part 8.
‘‘(2) Except as provided in paragraphs (4) and (5)
of subsection (b) of this section—
‘‘(A) In any case in which health insurance cov-
erage of any policy type is offered under an associa-
tion health plan certified under part 8 to a partici-
pating employer operating in such State, the provi-
sions of this title shall supersede any and all laws
of such State insofar as they may preclude a health
insurance issuer from offering health insurance cov-
erage of the same policy type to other employers op-
erating in the State which are eligible for coverage
under such association health plan, whether or not
such other employers are participating employers in
such plan.
‘‘(B) In any case in which health insurance cov-
erage of any policy type is offered under an associa-
tion health plan in a State and the filing, with the
applicable State authority, of the policy form in con-
nection with such policy type is approved by such
State authority, the provisions of this title shall su-
persede any and all laws of any other State in which
health insurance coverage of such type is offered, in-
sofar as they may preclude, upon the filing in the
same form and manner of such policy form with the
applicable State authority in such other State, the
approval of the filing in such other State.
‘‘(3) For additional provisions relating to association
health plans, see subsections (a)(2)(B) and (b) of section
805.
‘‘(4) For purposes of this subsection, the term ‘asso-
ciation health plan’ has the meaning provided in section
801(a), and the terms ‘health insurance coverage’, ‘par-
ticipating employer’, and ‘health insurance issuer’ have
the meanings provided such terms in section 811, respec-
tively.’’.
(3) Section 514(b)(6)(A) of such Act (29
U.S.C. 1144(b)(6)(A)) is amended—
(A) in clause (i)(II), by striking ‘‘and’’ at
the end;
(B) in clause (ii), by inserting ‘‘and which
does not provide medical care (within the mean-
ing of section 733(a)(2)),’’ after ‘‘arrange-
ment’’, and by striking ‘‘title.’’ and inserting
‘‘title, and’’; and
(C) by adding at the end the following new
clause:
‘‘(iii) subject to subparagraph (E), in the
case of any other employee welfare benefit plan
which is a multiple employer welfare arrange-
ment and which provides medical care (within
the meaning of section 733(a)(2)), any law of
any State which regulates insurance may
apply.’’.
(c) PLAN SPONSOR.—Section 3(16)(B) of such Act
(29 U.S.C. 102(16)(B)) is amended by adding at the end
the following new sentence: ‘‘Such term also includes a
person serving as the sponsor of an association health plan
under part 8.’’.
(d) SAVINGS CLAUSE.—Section 731(c) of such Act
is amended by inserting ‘‘or part 8’’ after ‘‘this part’’.
(e) CLERICAL AMENDMENT.—The table of contents
in section 1 of the Employee Retirement Income Security
Act of 1974 is amended by inserting after the item relat-
ing to section 734 the following new items:
‘‘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 pro-
viding 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. Special rules for church plans.
‘‘Sec. 811. Definitions and rules of construction.’’
SEC. 3. CLARIFICATION OF TREATMENT OF SINGLE EM-
PLOYER ARRANGEMENTS.
Section 3(40)(B) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1002(40)(B)) is amend-
ed—
(1) in clause (i), by inserting ‘‘for any plan year
of any such plan, or any fiscal year of any such
other arrangement;’’ after ‘‘single employer’’, and by
inserting ‘‘during such year or at any time during
the preceding 1-year period’’ after ‘‘control group’’;
(2) in clause (iii)—
(A) by striking ‘‘common control shall not
be based on an interest of less than 25 percent’’
and inserting ‘‘an interest of greater than 25
percent may not be required as the minimum
interest necessary for common control’’; and
(B) by striking ‘‘similar to’’ and inserting
‘‘consistent and coextensive with’’;
(3) by redesignating clauses (iv) and (v) as
clauses (v) and (vi), respectively; and
(4) by inserting after clause (iii) the following
new clause:
‘‘(iv) in determining, after the application of
clause (i), whether benefits are provided to employ-
ees of two or more employers, the arrangement shall
be treated as having only 1 participating employer
if, after the application of clause (i), the number of
individuals who are employees and former employees
of any one participating employer and who are cov-
ered under the arrangement is greater than 75 per-
cent of the aggregate number of all individuals who
are employees or former employees of participating
employers and who are covered under the arrange-
ment,’’.
SEC. 4. CLARIFICATION OF TREATMENT OF CERTAIN COL-
LECTIVELY BARGAINED ARRANGEMENTS.
(a) IN GENERAL.—Section 3(40)(A)(i) of the Em-
ployee Retirement Income Security Act of 1974 (29
U.S.C. 1002(40)(A)(i)) is amended to read as follows:
‘‘(i)(I) under or pursuant to one or more collec-
tive bargaining agreements which are reached pursu-
ant to collective bargaining described in section 8(d)
of the National Labor Relations Act (29 U.S.C.
158(d)) or paragraph Fourth of section 2 of the
Railway Labor Act (45 U.S.C. 152, paragraph
Fourth) or which are reached pursuant to labor-
management negotiations under similar provisions of
State public employee relations laws, and (II) in ac-
cordance with subparagraphs (C), (D), and (E),’’.
(b) LIMITATIONS.—Section 3(40) of such Act (29
U.S.C. 1002(40)) is amended by adding at the end the
following new subparagraphs:
‘‘(C) A plan or other arrangement is established or
maintained in accordance with this subparagraph only if
the following requirements are met:
‘‘(i) The plan or other arrangement, and the
employee organization or any other entity sponsoring
the plan or other arrangement, do not—
‘‘(I) utilize the services of any licensed in-
surance agent or broker for soliciting or enroll-
ing employers or individuals as participating
employers or covered individuals under the plan
or other arrangement; or
‘‘(II) pay a commission or any other type
of compensation to a person, other than a full
time employee of the employee organization (or
a member of the organization to the extent pro-
vided in regulations of the Secretary), that is
related either to the volume or number of em-
ployers or individuals solicited or enrolled as
participating employers or covered individuals
under the plan or other arrangement, or to the
dollar amount or size of the contributions made
by participating employers or covered individ-
uals to the plan or other arrangement;
except to the extent that the services used by the
plan, arrangement, organization, or other entity con-
sist solely of preparation of documents necessary for
compliance with the reporting and disclosure re-
quirements of part 1 or administrative, investment,
or consulting services unrelated to solicitation or en-
rollment of covered individuals.
‘‘(ii) As of the end of the preceding plan year,
the number of covered individuals under the plan or
other arrangement who are identified to the plan or
arrangement and who are neither—
‘‘(I) employed within a bargaining unit
covered by any of the collective bargaining
agreements with a participating employer (nor
covered on the basis of an individual’s employ-
ment in such a bargaining unit); nor
‘‘(II) present employees (or former employ-
ees who were covered while employed) of the
sponsoring employee organization, of an em-
ployer who is or was a party to any of the col-
lective bargaining agreements, or of the plan or
other arrangement or a related plan or arrange-
ment (nor covered on the basis of such present
or former employment);
does not exceed 15 percent of the total number of
individuals who are covered under the plan or ar-
rangement and who are present or former employees
who are or were covered under the plan or arrange-
ment pursuant to a collective bargaining agreement
with a participating employer. The requirements of
the preceding provisions of this clause shall be treat-
ed as satisfied if, as of the end of the preceding plan
year, such covered individuals are comprised solely
of individuals who were covered individuals under
the plan or other arrangement as of the date of the
enactment of the Expansion of Portability and
Health Insurance Coverage Act of 1997 and, as of
the end of the preceding plan year, the number of
such covered individuals does not exceed 25 percent
of the total number of present and former employees
enrolled under the plan or other arrangement.
‘‘(iii) The employee organization or other entity
sponsoring the plan or other arrangement certifies
to the Secretary each year, in a form and manner
which shall be prescribed in regulations of the Sec-
retary that the plan or other arrangement meets the
requirements of clauses (i) and (ii).
‘‘(D) A plan or arrangement is established or main-
tained in accordance with this subparagraph only if—
‘‘(i) all of the benefits provided under the plan
or arrangement consist of health insurance coverage;
or
‘‘(ii)(I) the plan or arrangement is a multiem-
ployer plan; and
‘‘(II) the requirements of clause (B) of the pro-
viso to clause (5) of section 302(c) of the Labor
Management Relations Act, 1947 (29 U.S.C.
186(c)) are met with respect to such plan or other
arrangement.
‘‘(E) A plan or arrangement is established or main-
tained in accordance with this subparagraph only if—
‘‘(i) the plan or arrangement is in effect as of
the date of the enactment of the Expansion of Port-
ability and Health Insurance Coverage Act of 1997,
or
‘‘(ii) the employee organization or other entity
sponsoring the plan or arrangement—
‘‘(I) has been in existence for at least 3
years or is affiliated with another employee or-
ganization which has been in existence for at
least 3 years, or
‘‘(II) demonstrates to the satisfaction of
the Secretary that the requirements of subpara-
graphs (C) and (D) are met with respect to the
plan or other arrangement.’’.
(c) CONFORMING AMENDMENTS TO DEFINITIONS OF
PARTICIPANT AND BENEFICIARY.—Section 3(7) of such
Act (29 U.S.C. 1002(7)) is amended by adding at the end
the following new sentence: ‘‘Such term includes an indi-
vidual who is a covered individual described in paragraph
(40)(C)(ii).’’.
SEC. 5. ENFORCEMENT PROVISIONS RELATING TO ASSO-
CIATION HEALTH PLANS.
(a) CRIMINAL PENALTIES FOR CERTAIN WILLFUL
MISREPRESENTATIONS.—Section 501 of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1131)
is amended—
(1) by inserting ‘‘(a)’’ after ‘‘SEC. 501.’’; and
(2) by adding at the end the following new sub-
section:
‘‘(b) Any person who, either willfully or with willful
blindness, falsely represents, to any employee, any employ-
ee’s beneficiary, any employer, the Secretary, or any State,
a plan or other arrangement established or maintained for
the purpose of offering or providing any benefit described
in section 3(1) to employees or their beneficiaries as—
‘‘(1) being an association health plan which has
been certified under part 8;
‘‘(2) having been established or maintained
under or pursuant to one or more collective bargain-
ing agreements which are reached pursuant to col-
lective bargaining described in section 8(d) of the
National Labor Relations Act (29 U.S.C. 158(d)) or
paragraph Fourth of section 2 of the Railway Labor
Act (45 U.S.C. 152, paragraph Fourth) or which are
reached pursuant to labor-management negotiations
under similar provisions of State public employee re-
lations laws; or
‘‘(3) being a plan or arrangement with respect
to which the requirements of subparagraph (C), (D),
or (E) of section 3(40) are met;
shall, upon conviction, be imprisoned not more than five
years, be fined under title 18, United States Code, or
both.’’.
(b) CEASE ACTIVITIES ORDERS.—Section 502 of
such Act (29 U.S.C. 1132) is amended by adding at the
end the following new subsection:
‘‘(n)(1) Subject to paragraph (2), upon application
by the Secretary showing the operation, promotion, or
marketing of an association health plan (or similar ar-
rangement providing benefits consisting of medical care
(as defined in section 733(a)(2))) that—
‘‘(A) is not certified under part 8, is subject
under section 514(b)(6) to the insurance laws of any
State in which the plan or arrangement offers or
provides benefits, and is not licensed, registered, or
otherwise approved under the insurance laws of such
State; or
‘‘(B) is an association health plan certified
under part 8 and is not operating in accordance with
the requirements under part 8 for such certification,
a district court of the United States shall enter an order
requiring that the plan or arrangement cease activities.
‘‘(2) Paragraph (1) shall not apply in the case of an
association health plan or other arrangement if the plan
or arrangement shows that—
‘‘(A) all benefits under it referred to in para-
graph (1) consist of health insurance coverage; and
‘‘(B) with respect to each State in which the
plan or arrangement offers or provides benefits, the
plan or arrangement is operating in accordance with
applicable State laws that are not superseded under
section 514.
‘‘(3) The court may grant such additional equitable
relief, including any relief available under this title, as it
deems necessary to protect the interests of the public and
of persons having claims for benefits against the plan.’’.
(c) RESPONSIBILITY
FOR CLAIMS PROCEDURE.—
Section 503 of such Act (29 U.S.C. 1133) is amended by
adding at the end (after and below paragraph (2)) the fol-
lowing new sentence: ‘‘The terms of each association
health plan which is or has been certified under part 8
shall require the board of trustees or the named fiduciary
(as applicable) to ensure that the requirements of this sec-
tion are met in connection with claims filed under the
plan.’’.
SEC. 6. COOPERATION BETWEEN FEDERAL AND STATE AU-
THORITIES.
Section 506 of the Employee Retirement Income Se-
curity Act of 1974 (29 U.S.C. 1136) is amended by adding
at the end the following new subsection:
‘‘(c) RESPONSIBILITY OF STATES WITH RESPECT TO
ASSOCIATION HEALTH PLANS.—
‘‘(1) AGREEMENTS
WITH
STATES.—A State
may enter into an agreement with the Secretary for
delegation to the State of some or all of the Sec-
retary’s authority under sections 502 and 504 to en-
force the requirements for certification under part 8.
The Secretary shall enter into the agreement if the
Secretary determines that the delegation provided
for therein would not result in a lower level or qual-
ity of enforcement of the provisions of this title.
‘‘(2) DELEGATIONS.—Any department, agency,
or instrumentality of a State to which authority is
delegated pursuant to an agreement entered into
under this paragraph may, if authorized under State
law and to the extent consistent with such agree-
ment, exercise the powers of the Secretary under
this title which relate to such authority.
‘‘(3) RECOGNITION
OF
PRIMARY
DOMICILE
STATE.—In entering into any agreement with a
State under subparagraph (A), the Secretary shall
ensure that, as a result of such agreement and all
other agreements entered into under subparagraph
(A), only one State will be recognized, with respect
to any particular association health plan, as the pri-
mary domicile State to which authority has been del-
egated pursuant to such agreements.’’.
SEC. 7. EFFECTIVE DATE AND TRANSITIONAL RULES.
(a) EFFECTIVE DATE.—The amendments made by
sections 2, 5, and 6 of this Act shall take effect on Janu-
ary 1, 1999. The amendments made by sections 3 and
4 of this Act shall take effect on the date of the enactment
of this Act. The Secretary shall issue all regulations nec-
essary to carry out the amendments made by this Act be-
fore January 1, 1999.
(b) EXCEPTION.—Section 801(a)(2) of the Employee
Retirement Income Security Act of 1974 (added by section
2) does not apply with respect to group health plans (as
defined in section 733(a)(1) of such Act) existing on April
1, 1997, which do not provide health insurance coverage
(as defined in section 733(b)(1) of such Act) on such date.
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