American Rescue Plan Act
On Thursday, March 11, 2021, President Biden signed the American Rescue Plan Act (ARPA) into law which will provide much-needed aid to millions of Americans still grappling with the COVID-19 pandemic. The $1.9 trillion in economic stimulus related to the COVID-19 crisis is aimed at creating immediate relief for struggling families and small businesses, while also extending the tax credits for employers who voluntarily offer paid leave through the Families First Coronavirus Response Act (FFCRA). It will also expand access to COBRA for health care coverage.
What does this mean for your business and what crucial compliance elements of the plan do you need to understand?
The New Expansion and Extension of Paid Sick and Family Leave Credits
- The Act expands the qualified leave reasons and provides new allocations of paid time that can qualify for tax credits under FFCRA.
- It extends the FFCRA paid sick time and paid family leave tax credits from March 31, 2021, through September 30, 2021, for employers that voluntarily provide the benefits to their employees.
- The tax credits are available for emergency paid sick leave (EPSL) and expanded paid family leave (EFML) per the FFCRA criteria, but the Act has also expanded the reasons for both the emergency paid sick leave (EPSL) and paid expanded family and medical leave (EFML) to include leave when an employee is:
- obtaining immunization (vaccination) related to COVID-19;
- recovering from any injury, disability, illness, or condition related to such vaccination; or
- seeking or awaiting the results of a diagnostic test or medical diagnosis for COVID-19 (or their employer has requested such a test or diagnosis).
- Originally, EFML was only available if the employee was unable to work or telework due to the COVID-related unavailability of a child’s school or childcare. Under ARPA, the family leave payroll tax credits may now be claimed for all of the qualifying uses of EPSL, in addition to the above.
- The Act also removes the two-week unpaid waiting period for EFML and employers can receive a tax credit for up to 12 weeks.
- The Plan adds non-discrimination rules to provide that no tax credit is available if the employer, in determining the availability of the paid leave, discriminates against highly compensated employees, full-time employees, or employees on the basis of tenure with the employer.
- The Plan resets the 10-day limit for the tax credit for paid sick leave under the FFCRA beginning April 1, 2021.
- An employer can voluntarily provide an additional 10 days of FFCRA paid sick leave beginning April 1, 2021, and would be eligible for a tax credit.
- NOTE: Tax credits may not be taken for wages paid by an employer that are taken into account as payroll costs in connection with forgiven payroll protection program loans.
Beginning April 1, 2021, through September 30, 2021, eligible individuals who have been laid off, furloughed or had their hours reduced (including non-COVID reasons) can choose to continue group health benefits with 100 percent COBRA subsidy for up to 6 months.
- It also provides a “second chance” election for those who did not initially elect COBRA or who let their COBRA coverage lapse.
- Any election for these participants would not be retroactive to the date coverage was lost.
- Employers will need to determine which employees/dependents lost health plan coverage within the past 18 months (on or after November 1, 2019), because of an involuntary termination of employment or reduction in hours.
- Employers will need to send a notice to each of these employees (and their covered family members) within 60 days of April 1st, 2021.
- The Department of Labor will issue model notices by May 10.
- The subsidy does not extend COBRA coverage—coverage will still expire 18 months after coverage was lost
- The employer would pay the COBRA premiums and the qualifying individuals would pay nothing for their COBRA coverage during this period.
- The employer or insurer will offset the cost by claiming a credit against Medicare payroll taxes.
How SDHRC Can Help
SDHRC understands this past year has been challenging for many businesses due to the uncertainties and continued changes during this pandemic. We continue our commitment to staying informed of current changes in regulations, laws and how that can impact your business. Let us take some of the burden off your shoulders and allow our team of experts to provide you with support and peace of mind on all HR compliance matters.
About the Author
Marsi Harris, “Madre of HR”
Marsi is an HR Consultant who has been with SDHRC for over 2 years but has over 17 years of experience in talent management, organizational development, compensation analysis, and HR compliance. In the free time that Marsi does have, she enjoys traveling and enjoying time with her family.