Congress passed the American Rescue Plan Act of 2021 (“Rescue Plan”) on March 10, 2021 and President Biden signed it into law on March 11, 2021.
The Rescue Plan extends the Families First Act Coronavirus Response Act’s (“FFCRA”) tax credit through September 30, 2021. Since January 2021, covered employers (those with fewer than 500 employees) have not been required to provide FFCRA leave to employees. Instead, the employers have been able to choose to provide FFCRA leave to employees and continue to obtain tax credits to offset costs associated with providing the leave.
Effective April 1, 2021, the Rescue Plan also makes modifications to the FFCRA:
1. Covered Reasons for Sick Leave: In addition to the six reasons for leave set forth in the FFCRA, employers will also receive tax credits for providing leave to employees who are: (i) obtaining an immunization for COVID-19 or recovering from any injury, disability, illness or condition related to that immunization; or (ii) 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.
2. Reset of Paid Sick Leave Clock: With respect to employees who previously took 10 days of emergency paid sick leave under the FFCRA, the Rescue Plan permits an employer to provide such employees with an additional 10 days of leave.
3. Emergency Family and Medical Leave Tax Credit Expansion: Previously, tax credits taken by employers to cover the cost of providing emergency FMLA leave was only available if the employee was unable to work (in person or remotely) because the employee had to care for his or her child whose school or place of care was closed or was unavailable due to the public health emergency. Now, employers may 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). The Rescue Plan also removes the two-week waiting period on emergency FMLA leave and raises the aggregate cap on emergency FMLA leave from $10,000 to $12,000.
4. Non-Discrimination Rules: The Rescue Plan includes new non-discrimination rules for employers that opt to voluntarily provide FFCRA leave and obtain the tax credits. Specifically, the Rescue Plan does not allow the tax credits for any employer who discriminates with respect to leave: (1) in favor of highly compensated employees (as that term is defined in Section 414(q) of the Internal Revenue Code); (2) in favor of full-time employees; or (3) on the basis of employment tenure.