To recognize small employer benefit arrangements as employers, and for other purposes.

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:
    ``(y) Small Employer Benefit Arrangements.--
            ``(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.--Notwithstanding 
                subparagraph (A), the shareholder-members of the small 
                employer benefit arrangement 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 arrangement if the 
                small employer benefit arrangement or any related 
                entity is owned, in whole or in part, or managed or 
                controlled in whole or in part, by any management 
                agreement 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 design, 
                        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 benefit 
                        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 benefit 
                        arrangements from creating, by and between 
                        themselves, service organizations owned and 
                        controlled exclusively by small employer 
                        benefit arrangements to provide for such 
                        products and services in the fulfillment of 
                        their purposes.
            ``(3) Definition.--The term `small employer benefit 
        arrangement' means a member owned, democratically 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 according to the same 
                statutory eligibility criteria normally accorded such 
                persons.''.
            (2) Effective date.--The amendments made by this subsection 
        shall apply with respect to plan years beginning on or after 
        the date of the enactment 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 cooperative 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 shareholder-members;
            ``(D) sponsors a qualified retirement plan that meets the 
        requirements of paragraph (12) or (13) of 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 subsection 
                (f); and
                    (B) by inserting after subsection (d) the following 
                new subsection:
    ``(e) Small Employer Benefit Arrangements.--
            ``(1) Self-insurance prohibited.--Any group health plan 
        established or maintained by a small employer benefit 
        arrangement shall be fully insured.
            ``(2) Fully insured defined.--A group health plan 
        established or maintained by a small employer benefit 
        arrangement shall be considered fully insured only if the terms 
        of the arrangement provide for benefits the amount of all of 
        which the Secretary determines are guaranteed under a contract, 
        or policy of insurance, issued by an insurance company, 
        insurance service, or insurance organization, qualified 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 enactment of this Act.
    (c) Amendments to PPACA.--
            (1) Small employer benefit arrangement defined.--Section 
        1304(b) of the Patient Protection 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 arrangement.--The term `small 
        employer benefit arrangement' has the meaning given such term 
        in section 3(43) of the Employee Retirement and Income Security 
        Act.''.
            (2) Qualified health plans.--Section 1301(a) of such Act 
        (42 U.S.C. 18021(a)) is amended by adding at the end the 
        following new paragraph:
            ``(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 arrangements.--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.

Summary: Amends the Internal Revenue Code, the Employee Retirement and Income Security Act (ERISA), and the Patient Protection and Affordable Care Act to treat certain small employer benefit arrangements (SEBAs) as employers for the purpose of providing qualified retirement and accident and health plans or group-term life insurance.

Defines a SEBA as a member owned, democratically controlled cooperative organization that: (1) has at least 21 shareholders of whom 90% percent are in the same or similar line of business; (2) sponsors an accident and health plan for shareholder-members and any of their employees; (3) sponsors a qualified retirement plan meeting specified requirements and available to shareholder-members and their employees; (4) provides employee benefits pursuant to a written agreement; and (5) requires all benefit eligible employees of a shareholder-member to participate according to the same statutory eligibility criteria normally accorded them.

Treats the shareholder-members of a SEBA as employers for purposes of administering and allocating items of income, credits, deductions, or exclusions associated with the provision of employee benefits.

Prohibits treatment as a SEBA of any organization or related entity that is owned, in whole or in part, or managed or controlled in whole or in part, by any management agreement or certificates of indebtedness, directly or indirectly, or by: (1) any agents, brokers or providers of a health, life, or disability insurer; (2) a retirement plan service provider; (3) claim administrators; or (4) investment advisors.

Requires any group health plan established or maintained by a SEBA to be fully insured (thus prohibiting self-insurance).