On March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 (ARPA, or the “Act”), which created certain additional benefits for employees about which employers should be aware.
Extension of FFRCA Credits
The Families First Coronavirus Response Act (FFCRA), originally passed into law on March 14, 2020, required companies with fewer than 500 employees to provide paid leave to employees who were unable to come to work for a number of COVID-19 related reasons. Employers were then entitled to claim tax credits against any amounts paid to employees for this leave. The FFCRA’s mandatory paid leave requirements ended on December 31, 2020.
While the ARPA does not require employers to offer any additional leave, it did extend (through September 30, 2021) the refundable tax credits available for those employers who voluntarily choose to provide COVID-related leave to their employees for the above-referenced FFCRA reasons. The tax credits continue to be available only for employers with fewer than 500 employees. In addition, the ARPA expanded certain provisions of the FFCRA, as detailed below.
Paid Sick Leave Eligibility Expanded
Pursuant to ARPA, in addition to the original FFCRA reasons for leave, covered employers may now also offer paid leave to employees and receive tax credits for the following reasons:
- Obtaining a COVID-19 immunization;
- Recovering from an injury, disability, illness or condition related to the immunization; or
- Seeking or awaiting the result of a COVID-19 test or diagnosis when the employee has either been exposed to COVID-19 or the employer has requested the test or diagnosis.
Paid Sick Leave Count Starts Fresh for Employees
Beginning April 1, 2021, the ARPA allows an employer to receive another tax credit if it provides up to 80 hours of paid EPSL leave to an employee, even if the employer previously took a tax credit for that employee in the prior year or in the first quarter of 2021. In other words, employers can again provide paid sick leave to employees and receive a tax credit for those who may have used FFCRA leave last year, and who again find themselves with a qualifying need for leave. Notably, the ARPA does not allow for a second tax credit for employers to offer additional paid Emergency Family Medical Leave (EFML) to employees who have previously exhausted that leave entitlement under the FFCRA.
Family Leave Eligibility Expanded
For those employees who have not already exhausted their EFML, the ARPA expanded the allowable reasons for taking such leave. Under the FFCRA, employers were required to provide and entitled to a tax credit for up to ten weeks of paid EFMLA to employees who were unable to work (or telework) because of the need to care for a child whose school or place of care was closed or unavailable because of the public health emergency. Under the ARPA, employers can now claim tax credits for providing up to twelve weeks of paid family leave arising from any of the six qualifying reasons previously provided for in the FFCRA and the additional three reasons added under the ARPA as described above. Note, however, that there is some uncertainty as to whether EFML taken pursuant to the ARPA may be counted against an employee’s allotment of traditional FMLA. Since the ARPA extends the tax credit, but not the mandatory nature of the leave requirement, it remains an open question whether employers would be entitled to count that leave against an employee’s traditional FMLA allotment. Hopefully the Department of Labor (DOL) will issue clarifying regulations on this point shortly.
Non-Discrimination Provision Based on Certain Categories
The ARPA also implemented a non-discrimination rule, which prohibits employers from discriminating in the administration of their leave to only allow FFCRA/ARPA leave for (1) highly compensated employees, (2) full-time employees or (3) on the basis of the employment tenure of the employee. Thus, employers who chose to voluntarily provide FFCRA/ARPA leave must not discriminate on these bases in terms of determining who is eligible for the leave. The ARPA also provides that an employer will lose the tax credit if it “fails to comply with any requirement” of the EPSL or the EFMLA, which may mean that employers cannot choose to provide leave for some, but not all, qualifying reasons or to some, but not all, employees. This is another area we will be looking to the DOL to clarify.
Employer Retention Tax Credit (ERTC)
The ERTC encourages businesses to keep employees on their payroll by providing tax incentives to employers who retain their employees on payroll during a suspension of operations or a significant decline in gross receipts as a result of COVID-19. The ARPA extends the ERTC, which was originally passed under the CARES Act and extended by the Taxpayer Certainty Disaster Tax Relief Act, through the end of 2021. Tax benefit eligibility depends on an employer’s size, the impact of the pandemic on the employee’s ability to provide services, and the impact on operations because of government mandates or reductions in quarterly gross receipts.
Unemployment Insurance
Three federal unemployment insurance programs, which were set to expire in March or April of 2021, were also extended under the ARPA until September 6, 2021:
- Pandemic Unemployment Assistance (PUA): provides benefits for people who do not qualify for regular state unemployment benefits, including independent contractors, business owners, self-employed workers and people who have used all regular and any extended unemployment insurance benefits.
- Pandemic Emergency Unemployment Compensation (PEUC): provides benefits for those who have exhausted their state unemployment insurance benefits.
- The ARPA also provides $300 per week in benefits for each person receiving unemployment benefits, in addition to what they would otherwise receive through PUA, PEUC or regular state unemployment benefits.
COBRA Subsidy
The ARPA also includes a provision impacting an employer’s responsibility to provide fully subsidized COBRA benefits for up to six months to certain employees. Additional information about this obligation can be found here.
Opinions and conclusions in this post are solely those of the author unless otherwise indicated. The information contained in this blog is general in nature and is not offered and cannot be considered as legal advice for any particular situation. The author has provided the links referenced above for information purposes only and by doing so, does not adopt or incorporate the contents. Any federal tax advice provided in this communication is not intended or written by the author to be used, and cannot be used by the recipient, for the purpose of avoiding penalties which may be imposed on the recipient by the IRS. Please contact the author if you would like to receive written advice in a format which complies with IRS rules and may be relied upon to avoid penalties.
