FFCRA and Unemployment Changes Under the American Rescue Plan

ArentFox Schiff

Arent Fox

The American Rescue Plan of 2021 (the Rescue Plan) is a massive $1.9 trillion COVID-19 pandemic relief package that contains some key employment-related provisions.

The Rescue Plan provides additional benefits to employers and employees as vaccination rates increase and optimism about returning to the workplace is on the rise. Here is what you need to know about changes concerning the FFCRA and unemployment benefits.

FFCRA Changes

The Families First Coronavirus Response Act (the FFCRA) required covered employers with fewer than 500 employees to grant paid leave to employees for various COVID-related reasons. Beginning in January 2021, covered employers were not required to provide such leave, but they could obtain tax credits if they chose to provide the leave. These tax credits have been extended through September 30, 2021.

Moreover, effective April 1, 2021, eligible employers may also receive tax credits if they provide FFCRA leave to employees who are: (a) obtaining an immunization related to COVID-19 or recovering from any injury, disability, illness, or condition related to such immunization; or (b) seeking or awaiting the results of a diagnostic test for, or a medical diagnosis of, COVID-19, when such employee has been exposed to COVID-19 or the employer has requested such test or diagnosis.

Furthermore, effective as of the same date, employees who previously took 10 days of emergency paid sick leave under the FFCRA may be granted an additional 10 days of leave at the discretion of their covered employer.

Prior to the Rescue Plan, tax credits taken by employers to cover the cost of providing emergency FMLA leave was only available if the employee was unable to work (or telework) to care for their child whose school or place of care has been closed or was unavailable due to the public health emergency. Effective April 1, 2021, employers may now claim tax credits for emergency FMLA leave arising from any of the reasons set forth in the FFCRA (including the two expanded reasons described above). In addition, FFCRA’s two-week waiting period on emergency FMLA leave has been removed, and the Rescue Plan raises the aggregate cap on emergency FMLA leave from $10,000 to $12,000.

Finally, the Rescue Plan disallows the tax credits for any employer who discriminates with respect to leave: (a) in favor of highly compensated employees (as that term is defined in Section 414(q) of the Internal Revenue Code); (b) in favor of full-time employees; or (c) on the basis of length of service.

The Department of Labor will be issuing regulations or other guidance regarding these changes to the FFCRA.

Unemployment Compensation Changes

The Rescue Plan extends the unemployment benefits that were available under the CARES Act and the December 2020 Consolidated Appropriations Act, which were scheduled to expire after March 14, 2021. Those laws expanded existing unemployment benefits and created new benefits under the following three programs:

  1. The Federal Pandemic Unemployment Compensation (the FPUC)
  2. The Pandemic Emergency Unemployment Compensation (the PEUC)
  3. The Pandemic Unemployment Assistance (the PUA) 

Under the Rescue Plan, the three programs described above are extended through Labor Day, September 6, 2021. Moreover, under EPUC, there will be a supplemental weekly benefit of $300 per week for each week of unemployment between March 14, 2021, and September 6, 2021. The PEUC is extended by providing for up to 53 weeks of additional unemployment benefits to eligible individuals who have exhausted the unemployment benefits available under state law. With the latest extension under the Rescue Plan, eligible recipients in many states can now receive up to 79 weeks of benefits.

Finally, eligible individuals may now receive up to 79 weeks of PUA benefits, an extension from the 50 weeks of benefits provided previously.

The Rescue Plan waives federal taxes on the first $10,200 of unemployment benefits that an individual collected in 2020. However, it should be noted that the tax suspension only applies to taxpayers whose adjusted gross income in 2020 was less than $150,000.

The CARES Act and the Consolidated Appropriations Act provided incentives for states to waive waiting periods for benefits and encouraged the use of state short-time compensation (STC) programs. The Rescue Plan extends these incentives through September 6, 2021.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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