US President Joe Biden signed into law the $1.9 trillion American Rescue Plan Act of 2021 (ARPA, the Act) on March 11, 2021. ARPA follows from weeks of negotiations in Congress and attempts to facilitate the country’s recovery from the impact of the COVID-19 pandemic.
Included in the Act are several provisions that impact workplaces small and large. Employers should be mindful of the employment-specific changes put into effect by ARPA and accordingly update their policies and practices to comply with these changes. A summary of the major employment-specific provisions follows below.
VOLUNTARY PAID LEAVE PROGRAMS
Under the previously passed Families First Coronavirus Response Act (FFCRA), companies with fewer than 500 employees were required to provide paid leave under the Emergency Paid Sick Leave Act and the Emergency Family and Medical Leave Act to employees who were unable to come to work for a number of COVID-19 related reasons. FFCRA provided employers a refundable tax credit, which would offset for employers the costs of providing the paid leaves.
The requirement to provide paid leave expired for employers with fewer than 500 employees at the end of last year. But employers could still voluntarily choose to provide FFCRA paid sick or paid family leave to employees and receive refundable tax credits for costs related to providing the leave through March 31, 2021.
With the passage of the American Rescue Plan Act of 2021, employers should note the following additions and changes:
The previously enacted Coronavirus Aid, Relief and Economic Security (CARES) Act created three major unemployment insurance programs: Pandemic Emergency Unemployment Compensation (PEUC), Pandemic Unemployment Assistance (PUA) and Federal Pandemic Unemployment Compensation (FPUC). The Consolidated Appropriations Act of 2021 created a fourth program – the Mixed Earner Unemployment Compensation (MEUC). ARPA makes important changes to each of these programs:
In addition to the unemployment benefit changes outlined above, ARPA also provides a waiver of federal taxes on the first $10,200 in unemployment benefits received in 2020 for those individuals who earn less than $150,000.
Short-Time Compensation (STC) programs allow employers to reduce workers’ hours instead of laying off workers, and workers whose hours are reduced become eligible for prorated unemployed benefits. Under the CARES Act, states can receive 100% reimbursement from the federal government for unemployment benefits paid out under STC programs. Participation in STC programs are an alternative to layoffs for employers who are facing a reduction in the amount of work available. Before implementing a STC program, employers must submit a plan for approval to the appropriate state workforce agency. ARPA extends the 100% reimbursement to states for unemployment benefits paid under STC programs through September 6, 2021, and thereby encourages states to adopt this program.
EMPLOYEE RETENTION CREDIT
The Employee Retention Credit was introduced under the CARES Act (and later updated and expanded under the Consolidated Appropriations Act) to help those employers who were experiencing financial distress or business closure because of COVID-19. It is a payroll tax credit, which provides a refundable tax credit to eligible employers based on the amount of qualified wages they paid to certain employees. The tax credit is designed to encourage employers to keep their employees on the payroll. Under the CARES Act, the tax credit was capped at $5,000 per employee for 2020. The Consolidated Appropriations Act expanded the credit to those payments of qualified wages, which were made between January 1, 2021, through June 30, 2021, and increased the maximum available credit to $7,000 per employee per quarter.
ARPA now extends this tax credit for two additional quarters through the end of 2021. In addition to the extension, the Act also expands its applicability to certain employers. Before ARPA was signed into law, employers whose operations were fully or partially suspended because of government orders or those employers who experienced a significant decline in their gross receipts because of the pandemic were eligible for a tax credit. The Act now expands the eligibility to include a (1) recovery startup business (employers who began business after February 15, 2020, have gross annual receipts of up to $1 million and are otherwise ineligible under the eligibility test) and (2) severely financially distressed employers (companies with gross receipt reductions of more than 90% as compared to the same quarter in 2019).
Consolidated Omnibus Budget Reconciliation Act (COBRA) coverage allows employees to continue to remain covered under their employer’s health insurance for up to 18 months after coverage is lost because of a reduction in work hours or the employee’s involuntary termination of employment. Prior to ARPA, workers and dependents assumed full responsibility for payment of premiums. ARPA now provides up to six months of 100% subsidized COBRA coverage to those who are eligible for COBRA because of an involuntary termination from employment or a reduction in work hours. The premium subsidy will last from April 1, 2021, through September 30, 2021, and sponsors of group health plans will be subject to new notice requirements. Employers will receive reimbursements for the subsidy through a payroll tax credit.