[Congressional Bills 114th Congress]
[From the U.S. Government Publishing Office]
[S. 3060 Introduced in Senate (IS)]

<DOC>






114th CONGRESS
  2d Session
                                S. 3060

To provide an exception from certain group health plan requirements for 
      qualified small employer health reimbursement arrangements.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             June 15, 2016

 Mr. Grassley (for himself, Ms. Heitkamp, Mr. Portman, Mr. Vitter, Mr. 
  Gardner, Mr. Roberts, Mr. Isakson, Mr. Johnson, Mr. Bennet, and Mr. 
Coons) introduced the following bill; which was read twice and referred 
                      to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
To provide an exception from certain group health plan requirements for 
      qualified small employer health reimbursement arrangements.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Small Business Health Care Relief 
Act of 2016''.

SEC. 2. EXCEPTION FROM GROUP HEALTH PLAN REQUIREMENTS FOR QUALIFIED 
              SMALL EMPLOYER HEALTH REIMBURSEMENT ARRANGEMENTS.

    (a) Amendments to the Internal Revenue Code of 1986 and the Patient 
Protection and Affordable Care Act.--
            (1) In general.--Section 9831 of the Internal Revenue Code 
        of 1986 is amended by adding at the end the following new 
        subsection:
    ``(d) Exception for Qualified Small Employer Health Reimbursement 
Arrangements.--
            ``(1) In general.--For purposes of this title (except as 
        provided in section 4980I(f)(4) and notwithstanding any other 
        provision of this title), the term `group health plan' shall 
        not include any qualified small employer health reimbursement 
        arrangement.
            ``(2) Qualified small employer health reimbursement 
        arrangement.--For purposes of this subsection--
                    ``(A) In general.--The term `qualified small 
                employer health reimbursement arrangement' means an 
                arrangement which--
                            ``(i) is described in subparagraph (B), and
                            ``(ii) is provided on the same terms to all 
                        eligible employees of the eligible employer.
                    ``(B) Arrangement described.--An arrangement is 
                described in this subparagraph if--
                            ``(i) such arrangement is funded solely by 
                        an eligible employer and no salary reduction 
                        contributions may be made under such 
                        arrangement,
                            ``(ii) such arrangement provides, after the 
                        employee provides proof of coverage, for the 
                        payment of, or reimbursement of, an eligible 
                        employee for expenses for medical care (as 
                        defined in section 213(d)) incurred by the 
                        eligible employee or the eligible employee's 
                        family members (as determined under the terms 
                        of the arrangement), and
                            ``(iii) the amount of payments and 
                        reimbursements described in clause (ii) for any 
                        year do not exceed $5,130 ($10,260 in the case 
                        of an arrangement that also provides for 
                        payments or reimbursements for family members 
                        of the employee).
                    ``(C) Certain variation permitted.--For purposes of 
                subparagraph (A)(ii), an arrangement shall not fail to 
                be treated as provided on the same terms to each 
                eligible employee merely because the employee's 
                permitted benefits under such arrangement vary in 
                accordance with the variation in the price of an 
                insurance policy in the relevant individual health 
                insurance market based on--
                            ``(i) the age of the eligible employee 
                        (and, in the case of an arrangement which 
                        covers medical expenses of the eligible 
                        employee's family members, the age of such 
                        family members), or
                            ``(ii) the number of family members of the 
                        eligible employee the medical expenses of which 
                        are covered under such arrangement.
                The variation permitted under the preceding sentence 
                shall be determined by reference to the same insurance 
                policy with respect to all eligible employees.
                    ``(D) Rules relating to maximum dollar 
                limitation.--
                            ``(i) Amount prorated in certain cases.--In 
                        the case of an individual who is not covered by 
                        an arrangement for the entire year, the 
                        limitation under subparagraph (A)(iii) for such 
                        year shall be an amount which bears the same 
                        ratio to the amount which would (but for this 
                        clause) be in effect for such individual for 
                        such year under subparagraph (A)(iii) as the 
                        number of months for which such individual is 
                        covered by the arrangement for such year bears 
                        to 12.
                            ``(ii) Inflation adjustment.--In the case 
                        of any year beginning after 2016, each of the 
                        dollar amounts in subparagraph (A)(iii) shall 
                        be increased by an amount equal to--
                                    ``(I) such dollar amount, 
                                multiplied by
                                    ``(II) the cost-of-living 
                                adjustment determined under section 
                                1(f)(3) for the calendar year in which 
                                the taxable year begins, determined by 
                                substituting `calendar year 2015' for 
                                `calendar year 1992' in subparagraph 
                                (B) thereof.
                        If any dollar amount increased under the 
                        preceding sentence is not a multiple of $100, 
                        such dollar amount shall be rounded to the next 
                        lowest multiple of $100.
            ``(3) Other definitions.--For purposes of this subsection--
                    ``(A) Eligible employee.--The term `eligible 
                employee' means any employee of an eligible employer, 
                except that the terms of the arrangement may exclude 
                from consideration employees described in any clause of 
                section 105(h)(3)(B) (applied by substituting `90 days' 
                for `3 years' in clause (i) thereof).
                    ``(B) Eligible employer.--The term `eligible 
                employer' means an employer that--
                            ``(i) is not an applicable large employer 
                        as defined in section 4980H(c)(2), and
                            ``(ii) does not offer a group health plan 
                        to any of its employees.
                    ``(C) Permitted benefit.--The term `permitted 
                benefit' means, with respect to any eligible employee, 
                the maximum dollar amount of payments and 
                reimbursements which may be made under the terms of the 
                qualified small employer health reimbursement 
                arrangement for the year with respect to such employee.
            ``(4) Notice.--
                    ``(A) In general.--An employer funding a qualified 
                small employer health reimbursement arrangement for any 
                year shall, not later than 90 days before the beginning 
                of such year (or, in the case of an employee who is not 
                eligible to participate in the arrangement as of the 
                beginning of such year, the date on which such employee 
                is first so eligible), provide a written notice to each 
                eligible employee which includes the information 
                described in subparagraph (B).
                    ``(B) Contents of notice.--The notice required 
                under subparagraph (A) shall include each of the 
                following:
                            ``(i) A statement of the amount which would 
                        be such eligible employee's permitted benefits 
                        under the arrangement for the year.
                            ``(ii) A statement that the eligible 
                        employee should provide the information 
                        described in clause (i) to any health insurance 
                        exchange to which the employee applies 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 income.''.
            (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 Reimbursement Arrangement.--
For purposes of this section and section 105, payments or 
reimbursements from a qualified small employer health reimbursement 
arrangement (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 provided the individual does not have minimum 
essential coverage (within the meaning of section 5000A(f)).''.
            (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 arrangements.--
                    ``(A) In general.--The term `coverage month' shall 
                not include any month with respect to an employee (or 
                any spouse or dependent of such employee) if for such 
                month the employee is provided a qualified small 
                employer health reimbursement arrangement which 
                constitutes affordable coverage.
                    ``(B) Denial of double benefit.--In the case of any 
                employee who is provided a qualified small employer 
                health reimbursement arrangement for any coverage month 
                (determined without regard to subparagraph (A)), the 
                credit otherwise allowable under subsection (a) to the 
                taxpayer for such month shall be reduced (but not below 
                zero) by the amount described in subparagraph 
                (C)(i)(II) for such month.
                    ``(C) Affordable coverage.--For purposes of 
                subparagraph (A), a qualified small employer health 
                reimbursement arrangement shall be treated as 
                constituting affordable coverage 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 
                                permitted benefit (as defined in 
                                section 9831(d)(3)(C)) under such 
                                arrangement, does not exceed--
                            ``(ii) \1/12\ of 9.5 percent of the 
                        employee'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) Coverage for less than entire year.--In the 
                case of an employee who is provided a qualified small 
                employer health reimbursement arrangement for less than 
                an entire year, subparagraph (C)(i)(II) shall be 
                applied by substituting `the number of months during 
                the year for which such arrangement was provided' for 
                `12'.
                    ``(F) 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 as the 
                percentages are adjusted under subsection 
                (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 coverage.--Section 
                4980I(d)(2) of such Code is amended by redesignating 
                subparagraph (D) as subparagraph (E) and by inserting 
                after subparagraph (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 
                qualified small employer health reimbursement 
                arrangement (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 requirement.--Section 6652 of 
        such Code is amended by adding at the end the following new 
        subsection:
    ``(o) Failure To Provide Notices With Respect to Qualified Small 
Employer Health Reimbursement 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 failure 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 benefit (as defined in 
        section 9831(d)(3)(C)) for the year under a qualified small 
        employer health reimbursement arrangement (as defined in 
        section 9831(d)(2)) with respect to the employee.''.
                    (B) Information required to be provided by exchange 
                subsidy applicants.--Section 1411(b)(3) of the Patient 
                Protection and Affordable Care Act is amended by 
                redesignating subparagraph (B) as subparagraph (C) and 
                by inserting after subparagraph (A) the following new 
                subparagraph:
                    ``(B) Certain individual health insurance policies 
                obtained through small employers.--The amount of the 
                enrollee's permitted benefit (as defined in section 
                9831(d)(3)(C) of the Internal Revenue Code of 1986) 
                under a qualified small employer health reimbursement 
                arrangement (as defined in section 9831(d)(2) of such 
                Code).''.
            (7) Effective dates.--
                    (A) In general.--Except as otherwise provided in 
                this paragraph, the amendments made by this subsection 
                shall apply to years beginning after the earlier of--
                            (i) the date that is 90 days after the date 
                        of the enactment of this Act, or
                            (ii) December 31, 2016.
                    (B) Transition relief.--The relief under Treasury 
                Notice 2015-17 shall be treated as applying to any plan 
                year beginning on or before the date described in 
                subparagraph (A).
                    (C) Coordination with health insurance premium 
                credit.--The amendments made by paragraph (3) shall 
                apply to taxable years beginning after the date 
                described in subparagraph (A).
                    (D) Employee notice.--The amendments made by 
                paragraph (5) shall apply to notices with respect to 
                years beginning after the date described in 
                subparagraph (A).
                    (E) W-2 reporting.--The amendments made by 
                paragraph (6)(A) shall apply to calendar years 
                beginning after December 31, 2016.
                    (F) Information provided by exchange subsidy 
                applicants.--
                            (i) In general.--The amendments made by 
                        paragraph (6)(B) shall apply to applications 
                        for enrollment made after the date described in 
                        subparagraph (A).
                            (ii) Verification.--Verification under 
                        section 1411 of the Patient Protection and 
                        Affordable Care Act of information provided 
                        under section 1411(b)(3)(B) of such Act shall 
                        apply with respect to months beginning after 
                        October 2016.
            (8) Substantiation requirements.--The Secretary of the 
        Treasury (or his designee) may issue substantiation 
        requirements as necessary to carry out this subsection.
    (b) Amendments to the Employee Retirement Income Security Act of 
1974.--
            (1) In general.--Section 733(a)(1) of the Employee 
        Retirement Income Security Act of 1974 (29 U.S.C. 1191b(a)(1)) 
        is amended by adding at the end the following: ``Such term 
        shall not include any qualified small employer health 
        reimbursement arrangement (as defined in section 9831(d)(2) of 
        the Internal Revenue Code of 1986).''.
            (2) Exception from continuation coverage requirements, 
        etc.--Section 607(1) of such Act (29 U.S.C. 1167(1)) is amended 
        by adding at the end the following: ``Such term shall not 
        include any qualified small employer health reimbursement 
        arrangement (as defined in section 9831(d)(2) of the Internal 
        Revenue Code of 1986).''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply to plan years beginning after the date described in 
        subsection (a)(7)(A).
    (c) Amendments to the Public Health Service Act.--
            (1) In general.--Section 2791(a)(1) of the Public Health 
        Service Act (42 U.S.C. 300gg-91(a)(1)) is amended by adding at 
        the end the following: ``Except for purposes of part C of title 
        XI of the Social Security Act (42 U.S.C. 1320d et seq.), such 
        term shall not include any qualified small employer health 
        reimbursement arrangement (as defined in section 9831(d)(2) of 
        the Internal Revenue Code of 1986).''.
            (2) Exception from continuation coverage requirements.--
        Section 2208(1) of the Public Health Service Act (42 U.S.C. 
        300bb-8(1)) is amended by adding at the end the following: 
        ``Such term shall not include any qualified small employer 
        health reimbursement arrangement (as defined in section 
        9831(d)(2) of the Internal Revenue Code of 1986).''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply to plan years beginning after the date described in 
        subsection (a)(7)(A).
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