Section 9022

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.