The American Rescue Plan Act (ARPA), just recently signed into law, offers many generous tweaks to federal programs for employers trying to take care of their staff, and for former employees. There are six in particular every employer should research on their own behalf and for the benefit of workers:

1. Paid Sick & Family Leave
2. COBRA Subsidies
3. Dependent Care FSAs
4. Employee Retention Credit
5. Short-Time Compensation
6. Unemployment Insurance

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

Ellen M. Bronchetti & Syed H. Mannan of McDermott Will & Emery have done an excellent job summarizing these updates in this article. I’m including their sections on Paid Sick & Family Leave as well as COBRA Subsidies almost in their entirety — as no amount of summarizing seems to do them justice. I’ve included additional information on the COBRA Subsidies from L. Renee Lieux of McNees Wallace & Nurick.

Homework: Fox Rothschild has a nice Guide For Employers to the American Rescue Plan Act — it’s a good place to start digging into all the provisions.

Paid Sick & Family Leave

Under the previously passed Families First Coronavirus Response Act (FFCRA), companies with fewer than 500 employees were required to provide paid leave 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 can 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.

This is a great value for staff and to employers, and helps keep customers and the community safer as well.

With the passage of the American Rescue Plan Act of 2021, employers should note the following additions and changes:

• Refundable Tax Credits Available through September 30, 2021: Employers who choose to voluntarily provide FFCRA paid sick or paid family leave may now receive refundable tax credits through September 30, 2021.

• Additional Covered Reasons for Providing Paid Sick Leave:
  Previously under the FFCRA, qualifying reasons for providing paid sick time were limited to if the employee is unable to work (or telework) because (s)he:
  (1) is subject to a federal, state or local quarantine or isolation related to Covid-19;
  (2) has been advised by a healthcare provider to self-quarantine;
  (3) is experiencing Covid-19 symptoms and seeking a diagnosis;
  (4) is caring for an individual who is subject to quarantine or is self-quarantining;
  (5) is caring for a child whose school or place of care is closed (or child care provider is unavailable) because of Covid-19; or,
  (6) is experiencing any other substantially similar condition specified by the US Secretary of Health and Human Services.
  
  ARPA expands on the list and now allows employers to provide leave to employees for three additional reasons:
  (1) obtaining a Covid-19 immunization;
  (2) recovering from an injury, disability, illness or condition related to the immunization; or,
  (3) seeking or awaiting the result of a Covid-19 test or diagnosis when the employee has either been exposed to Covid-19 or the employer has requested the test or diagnosis.

• Additional Covered Reasons for Providing Paid Family Leave: The scope of reasons for providing emergency family leave is now expanded. Originally, tax credits were available to employers for providing paid family leave only if the employee was unable to work (or telework) to care for a child whose school or place of care was closed or unavailable because of the public health emergency. Now, employers can claim tax credits for providing family leave which arises from any of the six qualifying reasons provided for in the FFCRA and the additional three reasons added under ARPA (noted above).

• Duration of Paid Sick and Family Leave for Receiving Tax Credits: ARPA allows employers to receive the tax credit for providing up to 10 days of paid sick leave beginning on April 1, 2021, even if the employer previously took a tax credit for providing paid sick leave to an employee for a covered reason before April 1, 2021. In addition, employers can receive a tax credit for providing up to 12 weeks of paid family leave. In other words, the clock sort of “re-sets” on sick and family leave.

• Amount of Tax Credits Available for Paid Sick Leave: Employers providing voluntary paid sick leave receive a tax credit, up to a cap of $511 a day, at the employee’s regular rate of pay if the employee is on leave because of coronavirus quarantine, self-quarantine or has symptoms. ARPA now includes the additional covered reasons (discussed above) for receiving tax credits at the employee’s regular rate of pay. For any other paid sick leave reason, the amount of tax credit available to an employer is calculated at two-thirds the employee’s regular rate of pay and capped at $200 a day.

• Amount of Tax Credits Available for Paid Family Leave: Employers providing paid family leave receive a tax credit, up to a cap of $200 a day, at two-thirds the employee’s regular rate of pay for leave which is due to any of the covered reasons for providing paid family leave. ARPA also removes the two-week waiting period (during which the leave was unpaid) for taking paid emergency family leave. The Act also increases the cap on the aggregate paid leave from $10,000 to $12,000, meaning employers can now take an additional $2,000 in tax credits per employee for providing qualifying leave.

• Addition of Non-Discrimination Rules: Employers who are voluntarily providing leave and receiving tax credits must also follow the new non-discrimination rule. The anti-discrimination rule makes the tax credit available only to those employers who provide leave to all employees without discriminating against certain categories of workers. Specifically, the tax credit is not available to those employers who discriminate (1) in favor of highly compensated employees, (2) full-time employees or (3) on the basis of the employment tenure of the employee.

Cobra Subsidies

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.

Employers must provide three notices to eligible former employees notifying them of the premium subsidy, the extended opportunity to elect coverage, and when the premium subsidy will be terminated.

In addition, employers may, at their option, allow former employees who are currently electing COBRA to elect coverage under a different plan offered by the employer as long as (i) the premium for the new coverage does not exceed the premium for the current coverage, (ii) the new coverage is not an excepted benefit, a QSEHRA, or a FSA, and (iii) the employee did not voluntarily terminate employment.

If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.