The IRS and DOL recently issued joint guidance enabling small and midsize employers to begin taking advantage of two new refundable payroll tax credits which are designed to immediately and fully reimburse them, dollar-for-dollar, for the cost of providing Coronavirus-related leave to their employees. This relief to employees and small and midsize businesses is provided under the Families First Coronavirus Response Act.
You can access the joint guidance here and we have summarized it for you below.
Complete Coverage for Emergency and FMLA Paid Sick Leave for Workers.
Under the Act, employers with under 500 (other than those employers with fewer than 50 employees who qualify for an exemption) are required to pay up to 80 hours of paid sick leave for COVID-19 related issues and provide expanded paid childcare leave under FMLA when employees’ children’s schools are closed or childcare providers are unavailable.
Under the joint guidance:
- Employers will receive 100% reimbursement for paid leave pursuant to the Act.
- Health insurance costs to continue coverage for eligible employees on emergency paid leave or expanded paid FMLA leave are also included in the credit.
- Employers face no payroll tax liability.
- Self-employed individuals receive an equivalent credit.
- Reimbursement will be quick and easy to obtain.
- An immediate dollar-for-dollar tax offset against payroll taxes will be provided to reimburse employers for leave granted under the Act.
- Where a refund is owed, the IRS will send the refund as quickly as possible. To take immediate advantage of the paid leave credits, businesses can retain and access funds that they would otherwise pay to the IRS in payroll taxes.
- If those amounts are not sufficient to cover the cost of paid leave, employers can seek an expedited advance from the IRS by submitting a streamlined claim form that will be released next week.
- Small Business Protection
Employers with fewer than 50 employees are eligible for an exemption from the requirements to provide leave to care for a child whose school is closed or childcare is unavailable in cases where the viability of the business is threatened.
The agencies provided that requirements of the Act are subject to a 30-day non-enforcement period for good faith compliance efforts.
Health and Retirement Plans
- The pandemic and the Act are causing unusual circumstances for employer and employees which can have a disruptive or other impact on employee benefits.
- Remember that your plan document will always control, and it can be amended to accommodate certain circumstances in benefits and administration that your company is currently facing.
- We encourage you to reach out to your health and retirement plan brokers and administrators, and to us, if you have questions about the impact of COVID-19 related HR decisions on, or optional changes to, benefits related to your health (including life insurance) or retirement plans.
More Guidance Expected
We anticipate more guidance coming from Federal and State agencies in the coming days and weeks in response to the Act and other COVID-19 related legislation and rules, including the exemption from the Act for employers with fewer than 50 employees.