New Stimulus Bill Impacts Employers
New Stimulus Bill Impacts Employers[1]
On March 11, 2021, President Biden signed into law the American Rescue Plan Act of 2021 (the “ARPA"), which is the third stimulus package since the first COVID-19 relief bill containing the Families First Coronavirus Response Act (FFCRA) was passed. This new stimulus package not only provides additional financial relief for small businesses, particularly food service establishments, it extends and expands optional tax credits that will reimburse employers who opt to provide paid sick and family leave due to COVID-19, which first became available under the FFCRA. Below are some of the employment-related changes under the ARPA that impact employers.
CHANGES TO PAID SICK AND FAMILY LEAVE UNDER THE FFCRA
Does the ARPA reinstate the mandatory paid COVID-19 leave requirements established under the Family First Coronavirus Response Act (FFCRA)?
No, it is not mandatory. Paid emergency sick leave (EPSL) and/or emergency family and medical leave (EFMLA) to employees remains optional for employers and is now extended through September 30, 2021.
Importantly, although the ARPA does not extend mandatory COVID-19 leave, employers should make sure that paid leave is not required at the state and/or local level. Additionally, employers must keep in mind that may not interfere with any protected leave rights afforded to employees by federal, state, and/or local laws for employees with COVID-related absences (e.g., FMLA leave or ADA leave as a reasonable accommodation).
Does the ARPA broaden the qualifying reasons for which employees would be entitled to EPSL and/or EFMLA?
Yes. The ARPA maintains the same COVID-19 qualifying events for leave under the FFCRA, but adds paid EPSL and/or paid EFMLA under the following qualifying COVID related events:
1) The employee is seeking or awaiting the results of a diagnostic test for, or a medical diagnosis of, COVID-19 and such employee has been exposed to COVID-19 or the employee’s employer has requested such test or diagnosis; or
2) The employee is obtaining immunization related to COVID-19 or recovering from any injury, disability, illness, or condition related to such immunization.
Are employees still required to wait 10 days before obtaining paid EFMLA?
No. Although the FFCRA originally provided that the first 10 days of the EFMLA leave would be unpaid (unless the employee’s qualifying reason for EFMLA was also a qualifying reason for Paid Sick Leave), the ARPA strikes that 10-day requirement. Accordingly, employees are authorized to take EFMLA immediately if they are eligible.
Does the ARPA provide additional FFCRA paid sick leave for employees?
Yes. The ARPA resets the 10-day allotment for employers who opt to provide leave under the EPSL beginning April 1, 2021. Employers who voluntarily provide this additional bank of paid sick leave under the FFCRA would be eligible to receive tax credit. Multi-state employers should make sure that there are no state and/or local COVID-19 paid leave requirements.
TAX CREDITS FOR PAID LEAVE
Does the ARPA extend the availability of the Consolidated Appropriations Act tax credits for covered employers who voluntarily provide employees paid EFMLA and/or paid EPSL?
Yes. Like the Consolidated Appropriations Act (the “CAA”) (which was the second COVID-19 stimulus package passed on December 27, 2020 and set to expire on March 31, 2021), the ARPA makes corresponding tax credits available to covered employers who voluntarily provide employees with paid FFCRA sick leave and/or paid family medical leave until September 30, 2021.
Did the ARPA change the maximum tax credit threshold?
Yes, the ARPA modified the tax credit threshold in part. Specifically, employers are entitled to tax credits of: i) up to $200 per day in qualified wages (which is what the CAA had provided); and ii) an aggregate family leave cap of $12,000 with respect to all calendar quarters (which differs from the previous aggregate family leave cap of $10,000).
Does the ARPA give employers discretion to provide paid leave to only a select group of employees?
No. The ARPA prohibits employers from providing only a certain group of employees paid FFCRA leave. In other words, employers are eligible to receive reimbursement through tax credit only if they provide paid FFCRA leave in a uniform, nondiscriminatory manner. The ARPA prohibits employers from discriminating against highly compensated employees, full-time employees, or employees with tenure or seniority.
SUBSIDIZED COBRA COVERAGE
Is it optional for employers to provide subsidized COBRA coverage for eligible individuals?
No. In accordance with the ARPA, employers are obligated to pay 100% COBRA subsidy for eligible individuals during the ARPA’s six (6) month subsidy period (effective April 1, 2021 through September 30, 2021). In other words, employers are obligated to provide COBRA continuation coverage to employees who elected COBRA coverage after they were involuntarily terminated or had a reduction in work hours and their current COBRA continuation coverage period covers some or the entire subsidy period. This subsidy is not available to individuals who qualify for COBRA due to their voluntary termination, retirement, or death.
The ARPA extends the COBRA election period for individuals who lost their employer-sponsored health coverage (i.e., previously declined COBRA coverage; accepted but later dropped COBRA; COBRA terminated because of nonpayment of premiums) within the past 18 months. The ARPA imposes new notification requirements on group health plans to provide individuals the information they need regarding: i) the availability of the COBRA premiums subsidy for up to six (6) months during the subsidy period; ii) the extended COBRA coverage enrollment period to receive continued medical, dental and vision coverage at no cost; and iii) the expiration of the COBRA subsidy (which is available for up to six (6) months only during the subsidy period -- April 1, 2021 through September 30, 2021).
Are employers able to seek reimbursement for the COBRA premium costs through tax credit?
Yes. Employers may recover the costs expended on COBRA premiums through tax credits against its quarterly Medicare payroll tax liability. The credit can be advanced and is refundable if the subsidy paid exceeds the taxes due.
MINIMUM WAGE REMAINS THE SAME
Did the ARPA increase the federal minimum wage to $15/hour?
No. The proposed federal wage increase provision was removed prior to President Biden signing the ARPA.
UNEMPLOYMENT BENEFITS EXTENDED
Did the ARPA affect unemployment benefits?
Yes and no. Unemployment benefit payments remain at $300/week in federal unemployment in addition to any unemployment aid received from an employee’s state. However, the ARPA extended payment of unemployment benefits through September 6, 2021.
The Pandemic Emergency Unemployment Compensation program for those who have exhausted state payments and the Pandemic Unemployment Assistance program — for the self-employed, independent contractors, and gig workers — are also extended through September 6, 2021.
CHANGES TO THE EMPLOYEE RETENTION CREDIT
The ARPA extends the availability of the Employee Retention Credit through December 31, 2021 (which does not become effective until June 30, 2021 when the retention credit was originally scheduled to lapse). This means employers whose operations were fully or partially suspended due to government orders or who experienced a significant decline in gross receipts due to the COVID-19 pandemic are eligible for a refundable payroll tax credit up to 50% of qualified wages for 2020 and 70% of qualified wages paid in 2021. Accordingly, employers eligible for the retention credit during all four quarters could receive up to $28,000 in credit per employee in 2021 ($10,000 quarterly wage cap x 70% ($7,000) x 4 (four quarters)).
The ARPA also expands eligibility for the employee retention credit to a “recovery startup business.”
The ARPA may be accessed with this link: Text - H.R.1319 - 117th Congress (2021-2022): American Rescue Plan Act of 2021 | Congress.gov | Library of Congress
[1] The information provided in this document is intended to be used for information purposes. This document is not intended to be comprehensive and is not designed to be specifically tailored for an organization’s needs. The information contained in this document should not be construed to be formal legal advice and does not substitute for obtaining legal advice.