ACA Now

Statutory Text

SEC. 9022. ESTABLISHMENT OF SIMPLE CAFETERIA PLANS FOR SMALL
BUSINESSES.
(a) IN GENERAL.—Section 125 of the Internal Revenue Code of
1986 (relating to cafeteria plans), as amended by this Act, is
amended by redesignating subsections (j) and (k) as subsections (k)
and (l), respectively, and by inserting after subsection (i) the following
new subsection:
‘‘(j) SIMPLE CAFETERIA PLANS FOR SMALL BUSINESSES.—
‘‘(1) IN GENERAL.—An eligible employer maintaining a simple
cafeteria plan with respect to which the requirements of
this subsection are met for any year shall be treated as meeting
any applicable nondiscrimination requirement during such
year.
‘‘(2) SIMPLE CAFETERIA PLAN.—For purposes of this subsection,
the term ‘simple cafeteria plan’ means a cafeteria
plan—
‘‘(A) which is established and maintained by an eligible
employer, and
‘‘(B) with respect to which the contribution requirements
of paragraph (3), and the eligibility and participation
requirements of paragraph (4), are met.
‘‘(3) CONTRIBUTION REQUIREMENTS.—
‘‘(A) IN GENERAL.—The requirements of this paragraph
are met if, under the plan the employer is required, without
regard to whether a qualified employee makes any salary
reduction contribution, to make a contribution to provide
qualified benefits under the plan on behalf of each
qualified employee in an amount equal to—
‘‘(i) a uniform percentage (not less than 2 percent)
of the employee’s compensation for the plan year, or
‘‘(ii) an amount which is not less than the lesser
of—
‘‘(I) 6 percent of the employee’s compensation
for the plan year, or
‘‘(II) twice the amount of the salary reduction
contributions of each qualified employee.
‘‘(B) MATCHING CONTRIBUTIONS ON BEHALF OF HIGHLY
COMPENSATED AND KEY EMPLOYEES.—The requirements of
subparagraph (A)(ii) shall not be treated as met if, under
the plan, the rate of contributions with respect to any salary
reduction contribution of a highly compensated or key
employee at any rate of contribution is greater than that
with respect to an employee who is not a highly compensated
or key employee.
‘‘(C) ADDITIONAL CONTRIBUTIONS.—Subject to subparagraph
(B), nothing in this paragraph shall be treated as
prohibiting an employer from making contributions to provide
qualified benefits under the plan in addition to contributions
required under subparagraph (A).
‘‘(D) DEFINITIONS.—For purposes of this paragraph—
‘‘(i) SALARY REDUCTION CONTRIBUTION.—The term
‘salary reduction contribution’ means, with respect to
a cafeteria plan, any amount which is contributed to
the plan at the election of the employee and which is
not includible in gross income by reason of this section.
‘‘(ii) QUALIFIED EMPLOYEE.—The term ‘qualified
employee’ means, with respect to a cafeteria plan, any
employee who is not a highly compensated or key employee
and who is eligible to participate in the plan.
‘‘(iii) HIGHLY COMPENSATED EMPLOYEE.—The term
‘highly compensated employee’ has the meaning given
such term by section 414(q).
‘‘(iv) KEY EMPLOYEE.—The term ‘key employee’
has the meaning given such term by section 416(i).
‘‘(4) MINIMUM ELIGIBILITY AND PARTICIPATION REQUIREMENTS.—
‘‘(A) IN GENERAL.—The requirements of this paragraph
shall be treated as met with respect to any year if, under
the plan—
‘‘(i) all employees who had at least 1,000 hours of
service for the preceding plan year are eligible to participate,
and
‘‘(ii) each employee eligible to participate in the
plan may, subject to terms and conditions applicable
to all participants, elect any benefit available under
the plan.
‘‘(B) CERTAIN EMPLOYEES MAY BE EXCLUDED.—For purposes
of subparagraph (A)(i), an employer may elect to exclude
under the plan employees—
‘‘(i) who have not attained the age of 21 before the
close of a plan year,
‘‘(ii) who have less than 1 year of service with the
employer as of any day during the plan year,
‘‘(iii) who are covered under an agreement which
the Secretary of Labor finds to be a collective bargaining
agreement if there is evidence that the benefits
covered under the cafeteria plan were the subject
of good faith bargaining between employee representatives
and the employer, or
‘‘(iv) who are described in section 410(b)(3)(C) (relating
to nonresident aliens working outside the
United States).
A plan may provide a shorter period of service or younger
age for purposes of clause (i) or (ii).
‘‘(5) ELIGIBLE EMPLOYER.—For purposes of this subsection—
‘‘(A) IN GENERAL.—The term ‘eligible employer’ means,
with respect to any year, any employer if such employer
employed an average of 100 or fewer employees on business
days during either of the 2 preceding years. For purposes
of this subparagraph, a year may only be taken into
account if the employer was in existence throughout the
year.
‘‘(B) EMPLOYERS NOT IN EXISTENCE DURING PRECEDING
YEAR.—If an employer was not in existence throughout the
preceding year, the determination under subparagraph (A)
shall be based on the average number of employees that
it is reasonably expected such employer will employ on
business days in the current year.
‘‘(C) GROWING EMPLOYERS RETAIN TREATMENT AS
SMALL EMPLOYER.—
‘‘(i) IN GENERAL.—If—
‘‘(I) an employer was an eligible employer for
any year (a ‘qualified year’), and
‘‘(II) such employer establishes a simple cafeteria
plan for its employees for such year,
then, notwithstanding the fact the employer fails to
meet the requirements of subparagraph (A) for any
subsequent year, such employer shall be treated as an
eligible employer for such subsequent year with respect
to employees (whether or not employees during
a qualified year) of any trade or business which was
covered by the plan during any qualified year.
‘‘(ii) EXCEPTION.—This subparagraph shall cease
to apply if the employer employs an average of 200 or
more employees on business days during any year preceding
any such subsequent year.
‘‘(D) SPECIAL RULES.—
‘‘(i) PREDECESSORS.—Any reference in this paragraph
to an employer shall include a reference to any
predecessor of such employer.
‘‘(ii) AGGREGATION RULES.—All persons treated as
a single employer under subsection (a) or (b) of section
52, or subsection (n) or (o) of section 414, shall be
treated as one person.
‘‘(6) APPLICABLE NONDISCRIMINATION REQUIREMENT.—For
purposes of this subsection, the term ‘applicable nondiscrimination
requirement’ means any requirement under subsection (b)
of this section, section 79(d), section 105(h), or paragraph (2),
(3), (4), or (8) of section 129(d).
‘‘(7) COMPENSATION.—The term ‘compensation’ has the
meaning given such term by section 414(s).’’.
(b) EFFECTIVE DATE.—The amendments made by this section
shall apply to years beginning after December 31, 2010.