The newly enacted American Rescue Plan Act is likely to impact your business and its workforce. On par with the first COVID-19 relief bill, passed one year ago last week, the reverberations of this new law are hard to predict and difficult to quantify. There are, however, a few things we do know:
- 1.The new law provides a six-month COBRA subsidy and creates new notice obligations for employers (or their providers).
- 2.The federal paid leave mandate under the Families First Coronavirus Response Act (FFCRA), expired in 2020 and has not been revived.
- 3. Employers still need to be aware of state and local COVID-19 paid leave obligations, many of which continued beyond the expiration of the FFCRA mandate.
- 4. If an employer voluntarily provides qualified COVID-19-related emergency paid sick leave (EPSL) or paid family leave under the Emergency Family and Medical Leave Expansion Act (EFMLEA), then the employer can receive a federal tax credit designed to offset some of the cost.
The new law provides a 100% COBRA premium subsidy effective April 1 through September 30, 2021 for those who are involuntarily terminated and want to remain on their employer’s health insurance.
The program includes an 18-month look-back period, requiring employers to extend offers of subsidized COBRA coverage to other individuals who previously did not elect COBRA or who previously elected COBRA and dropped the coverage.
Practically speaking, depending on the structure of the employer-sponsored plan, this means that the employer, plan, or insurer must provide notice of the available subsidy to all COBRA-eligible individuals by May 30, 2021. If they elect the subsidized COBRA coverage, then the employer, plan, or insurer is required to pay the COBRA premium and claim the cost as a credit against its quarterly Medicare payroll tax.
Importantly, the bill does not extend the individual’s COBRA coverage period, so the subsidy will last through the earlier of: (i) September 30, 2021; or (ii) the end of the otherwise applicable COBRA coverage period. Individuals who qualify for COBRA for other reasons, such as a voluntary termination, do not qualify for the subsidy.
Under the American Rescue Plan, if an employer continues to voluntarily provide paid leave in 2021, the following new provisions apply:
Tax Credit Extension: through September 30, 2021
Additional EPSL: The new law resets the limit on the tax credit available for EPSL. As a result, an employer may voluntarily provide an additional 10 days (up to 80 hours) of EPSL beginning April 1, 2021.
Available EFMLEA: The new law permits employers to claim tax credits for the full 12 weeks of EFMLEA. This means that the first two weeks of leave are no longer required to be unpaid. The total cap for the EFMLEA tax credit increased from $10,000 to $12,000 per employee. The available credit per employee, however, is still limited to 2/3 the employee’s regular pay rate (max of $200 per day) and is available only for qualifying EFMLEA reasons (including the new leave reasons discussed below).
Remember, EFMLEA is not in addition to the 12 weeks of FMLA leave to which an employee would otherwise be entitled. If an employee has utilized all or some of their annual EFMLEA (or FMLA leave for other purposes), they will not be entitled to additional emergency family leave unless the FMLA leave year has reset. For example, if an employer uses the calendar year – a tax credit may be available for an additional round of qualifying EFMLEA benefits paid after January 1 and prior to September 30, 2021.
Although the bucket of available EFMLEA and FMLA leave time is the same, the tax credit is available only for the EFMLEA reasons for leave.
New Qualifying Reasons: In the new law, the EFMLEA reasons now include all of the EPSL qualifying reasons outlined in the FFCRA.
In addition to the reasons listed in the FFCRA, the new law includes the following new reasons:
- – The employee is obtaining immunization (vaccination) related to COVID-19.
- – The employee is recovering from any injury, disability, illness, or condition related to such vaccination.
- – The employee is seeking or awaiting the results of a diagnostic test or medical diagnosis for COVID-19 (or their employer has requested such a test or diagnosis).
New Non-Discrimination Rules: The new law adds non-discrimination rules disqualifying employers that fail to offer EPSL and/or EFMLEA to all employees regardless of their job category or seniority.
The non-discrimination provision applies separately to EPSL and EFMLEA. This means employers should be able to choose to provide one or the other category of paid leave and still receive the tax credit.
Other Tax Credits
The new law extends the employee retention credit (ERC) through December 31, 2021. It also now includes certain start-up businesses (with an ERC capped at $50,000 per quarter) that otherwise would not have qualified.
The additional tax credit benefits can be used to complement your existing leave policies. Likewise, the expanded eligibility categories may help reinforce your existing vaccine incentive programs. Be sure to consult with your Stanton Law attorney about properly documenting leave in order to claim the available tax credits.