The American Rescue Plan and Employers

Written by: Justin Shadel, HCM Advisor, TPC / The Payroll Company

On March 11, 2021, President Joe Biden signed the American Rescue Plan into law. The new law includes changes to the tax credits related to FFCRA, extended unemployment benefits, extended COBRA requirements, additional individual stimulus checks, and much more.

As an employer here is what you need to know regarding these components:

Emergency Leaves under the FFCRA

• The Families First Act Coronavirus Response Act’s (FFCRA) opt-in or opt-out tax credit provisions have been extended through September 30, 2021.
• In addition to the six reasons for leave set forth in the FFCRA, the new law added two provisions that will fall under reason number 3. Therefore, employers will also receive tax credits for providing leave to employees who are:

• 1. obtaining an immunization related to COVID-19 or recovering from any injury, disability, illness, or condition related to such immunization; or
  2. 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.
• Starting on April 1, 2021, the paid sick leave time and dollar amounts paid under the FFCRA for both the Emergency Paid Sick Leave (ESPL) and the Emergency Family and Medical Leave (EFMLA) will reset. This means that employees who previously took 80 hours of emergency paid sick leave under the FFCRA will be eligible for an additional 80 hours to use between April 1, 2021, to September 30, 2021. Additionally, employees that took 10 weeks of EFMLA (as well as two weeks of ESPL) will receive an additional 12 weeks of EFMLA, if eligible.
• Employers may now also offer EFMLA for all FFCRA-qualifying reasons for leave (i.e., those previously only offered for emergency paid sick leave), including the newly added reasons above, and receive a tax credit. Previously under the FFCRA, EFMLA was only available for leave needed to care for a child whose school was closed or whose caregiver was unavailable due to COVID-19.
• With the time resetting, the dollar amount of the EFMLA leave cap has been increased to $12,000 in total, up to $2,000 from the original $10,000.
  1. Once an employee exhausts the 2 weeks under EPSL, they would then qualify for an additional 12 weeks under EFMLA for a total maximum of 14 weeks of leave.
  2. All EFMLA leave is paid at 2/3 of the employee’s regular rage of pay, regardless of the qualifying reason for taking EFMLA.
• The tax credit is only available to employers who uniformly provide leave to all employees, without discriminating against certain categories of workers.

Unemployment Insurance

• The three unemployment programs (Federal Pandemic Unemployment Compensation, Pandemic Emergency Unemployment Compensation, and Pandemic Unemployment Assistance) have been extended to September 6, 2021.
• The Federal Pandemic Unemployment Compensation provides for a supplemental weekly benefit of $300 per week for each week of unemployment between March 14, 2021, and September 6, 2021.
• The Pandemic Emergency Unemployment Compensation extends PEUC by providing for up to 53 weeks of additional unemployment benefits to eligible individuals who have exhausted the unemployment benefits available under state law.
• The Rescue Plan provides eligible individuals up to 79 weeks of Pandemic Unemployment Assistance benefits.

COBRA

• Subsidizes 100% of premiums for eligible COBRA recipients for continuation coverage for workers who are laid off or have reduced hours from April 1, 2021, to September 30, 2021. The COBRA Subsidy is for employees and their family members who lost health insurance due to the involuntary termination (or reduction in hours) of their employment.
  • COBRA subsidies are not available to those who are eligible to enroll in another group health plan, a flexible spending arrangement, a qualified small employer health reimbursement arrangement, or Medicare.
  • The availability of the COBRA subsidy does not extend the availability of COBRA continuation coverage itself.
  • Former employees would also be allowed to elect subsidized COBRA even if they had earlier declined the COBRA option, or had enrolled in COBRA and then dropped it. The subsidy would not apply to employees who voluntarily terminated their employment or who qualify for another group health plan.
• Employers and group health plans will be required to provide several new notices to those who become eligible for COBRA continuation coverage.

When deciding if your organization will opt-in or out of the emergency leaves under the FFCRA, you may want to consider the following factors:

• Since the emergency leave amounts are resetting, all employees will be eligible to take additional emergency leave, regardless of the hours they have taken previously.
• Employers will continue to get a dollar for dollar tax credits for the amount of leave employees take under the FFCRA.
• Employers must opt-in or out of the entire FFCRA emergency leave parameters. Employers cannot pick and choose which leaves or reasons they would like to allow employees to take.

Please keep in mind that this information is effective as of March 15, 2021, but further clarification and interpretation from the DOL and/or IRS may be released in the coming weeks.