What Employers Need to Know About the American Rescue Plan Act of 2021 (ARPA)
Mar 17, 2021 | Written by: Share|
President Joseph R. Biden signed the American Rescue Plan Act of 2021 on March 11. The Act provides $1.9 trillion in relief funds across a broad range of areas. The following provisions are noteworthy for employers who will most certainly be faced with continuing obligations and decision-making as the pandemic continues to linger.
Family and Sick Leave Tax Credits
The preceding Families First Coronavirus Response Act (FFCRA) required employers with less than 500 employees to provide COVID-19-related paid family leave and paid sick leave and established corresponding tax credits. The employer mandate expired on December 31, 2020 but was extended on a voluntary basis to March 31, 2021 in the last stimulus package passed in December 2020. Like the December 2020 stimulus package, the American Rescue Plan Act (ARPA) does not require Families First Coronavirus Response Act (FFCRA) paid family leave and sick leave, but extends and expands tax credits for qualifying family leave and sick leave wages that an employer voluntarily pays between April 1, 2021, and September 30, 2021. The ARPA aims to incentivize employers to provide paid time off for existing FFCRA and new COVID-19-related reasons.
As noted in our earlier blog, the FFCRA contained two forms of leave: the Emergency Paid Sick Leave (EPSL) Act and the Emergency Family and Medical Leave (EFML) Expansion Act. Under the EPSL Act, employers with less than 500 employees had to pay sick leave of up to 80 hours to employees who required leave for certain pandemic-related reasons. Under the EFML Expansion Act, certain employees were eligible for an additional 10 weeks of family leave paid at two-thirds of their regular wages to care for a child whose school or place of care closed or whose child-care provider was unavailable because of COVID-19.
Under the ARPA, tax credits will continue to be available for leave time taken for the requalifying reasons set forth in the FFCRA and now for the following additional reasons:
- The employee is receiving a COVID-19 vaccine.
- The employee is recovering from complications due to the vaccination.
- The employee is waiting on the results of a COVID-19 test or diagnosis for coronavirus.
All of the prior and new reasons may now be used toward either sick leave or family leave.
Additionally, the ARPA resets the 80-hour/10-day limit for paid sick leave, the 12 weeks of family leave (now all 12 weeks can be paid at 2/3 of the employee’s regular wage, as opposed to 10 weeks paid in the prior act), and the corresponding tax credits beginning April 1, 2021. Therefore, any emergency sick or leave time an employee took before the renewal date will not count toward the cap following that date.
Finally, the ARPA expands tax credits for paid sick and family leave as follows:
- Increases family leave covered wages from $10,000 to $12,000 per employee.
- Restricts credits if the employer’s paid leave policies favor highly compensated employees, full-time workers or employees based on tenure.
- Allows for reimbursement of pension plan and apprenticeship contributions made by employers under a collective bargaining agreement that are allocable to employee paid sick and family leave.
Health Benefits for Workers
The ARPA includes a 100% COBRA premium subsidy for any employee or dependent who is a COBRA-qualified beneficiary (or will become one), resulting from an involuntary separation from employment or a reduction of hours. The COBRA premium subsidy is available to an eligible employee who is or will be enrolled in COBRA on or after April 1, 2021 and before September 30, 2021.
Further, a former employee, who would have otherwise been deemed eligible, who did not elect or dropped COBRA coverage prior to April 1 and would otherwise be within his/her 18-month COBRA coverage period between April 1 and September 30, 2021, is eligible for the COBRA premium subsidy.
The legislation includes requirements for employers to update COBRA notices describing the premium subsidy to all eligible employees. The Department of Labor will provide model notices within 30 days of enactment.
Employers will receive a credit for the premium subsidy through a tax credit against the employer’s quarterly taxes. If the credit exceeds the amount of payroll taxes due, the credit will be refundable when the employer submits its quarterly federal tax return (i.e., IRS Form 941).
The ARPA extends unemployment benefits until September 6, 2021 and provides an additional $300 payment per week.
The ARPA also extends the Pandemic Unemployment Assistance (PUA) program to September 6, capped at 79 weeks; the PUA program covers the self-employed, gig workers, part-timers, and others who are not eligible to receive regular unemployment benefits. There is also a new tax-free unemployment benefits allowance that gives recipients with an annual household income of less than $150,000 tax relief on the first $10,200 of benefits.
Employers who would like guidance on addressing the employer-related aspects of the ARPA may contact me at 908-735-5161.