President Biden signed the $1.9 trillion American Rescue Plan Act of 2021 (the Act) into law on March 11, 2021. The Act will provide continued and wide-ranging economic relief to address the consequences of the coronavirus pandemic, including relief to individuals, businesses, and state and local governments. Employers should be aware of specific provisions of the Act that provide benefits to both employers and employees, including:
FFCRA Tax Credit Extension: Emergency Paid Sick Leave and Emergency Family and Medical Leave
As explained in more detail here, the provisions in the Families First Coronavirus Response Act (FFCRA) that required certain employers with fewer than 500 employees to provide Emergency Paid Sick Leave (E-PSL) and Emergency Family and Medical Leave (E-FMLA) to eligible employees expired at the end of 2020. The Consolidated Appropriations Act, 2021, which President Trump signed into law in December 2020, extended through March 31, 2021, the payroll tax credits available to employers that elect to provide E-PSL and E-FMLA leave benefits to employees on a voluntary basis. The American Rescue Plan Act extends the availability of the tax credits through September 2021, though employers still are not required to offer E-PSL and E-FMLA. The Act also leaves in place the FFCRA’s 500-employee threshold for triggering covered employer status, which means that employers with more than 500 employees may not opt to claim the tax credits by offering E-PSL and E-FMLA voluntarily.
The American Rescue Plan Act also makes some changes to how E-PSL and E-FMLA are administered, including the following:
- A new anti-discrimination provision prohibits employers from claiming the tax credits if, in making the leave available to some employees but not to others, the employers discriminate in favor of highly compensated employees, full-time employees, or employees with longer tenure.
- The Act expands the qualifying reasons for taking E-PSL and E-FMLA to include time spent getting a COVID-19 vaccine and recovering from the vaccination, and clarifies that any basis for receiving E-PSL is also a basis for receiving E-FMLA.
- The Act eliminates the initial two-week unpaid portion of E-FMLA and raises the maximum tax credit employees may receive per employee from $10,000 to $12,000.
- Effective March 31, 2021, each employee’s bank of available E-PSL will reset such that employers may choose to provide additional E-PSL to employees who previously exhausted all of their E-PSL.
The American Rescue Plan Act generally provides a 100% premium subsidy for COBRA coverage during the period April 1, 2021, through Sept. 30, 2021. Employers will be allowed a quarterly tax credit against the Medicare payroll tax equal to the premium amounts not paid by the assistance eligible individuals. If the credit amount exceeds the quarterly Medicare payroll tax, the excess will be treated as a refundable overpayment. The premium subsidy is not included in the assisted eligible individual’s taxable income.
The Act imposes several notice requirements on employers:
- Employers are required to provide notice of the availability of the subsidy to individuals who become eligible to elect COBRA during the period beginning on April 1, 2021, and ending on Sept. 30, 2021.
- Employers also are required to provide notice within 60 days after April 1, 2021, to each individual who previously declined or ceased COBRA coverage but whose maximum COBRA coverage period would not yet have ended by April 1, 2021 that such person is eligible for an extended election period to enroll/reenroll.
- In general, employers will be required to provide a notice of expiration of subsidy between 45 and 15 days before the date on which an individual's subsidy will expire, subject to certain exceptions.
The Department of Labor is required to issue a model notice and other guidance by April 10, 2021. In the meantime, employers may wish to compile a list of any individuals who will be required to be notified.
Extension of Federal Unemployment Benefits
The American Rescue Plan Act generally extends federal unemployment benefits provided by the CARES Act – previously set to expire on March 14, 2021 – through Sept. 6, 2021. Those benefits include:
- Pandemic Unemployment Assistance (PUA). The Act increases the total number of weeks of PUA benefits available to eligible individuals, including self-employed workers, freelancers, independent contractors, and part-time workers, from 50 to 79 weeks.
- Federal Pandemic Unemployment Compensation (FPUC). The Act continues the federal FPUC supplement of $300 per week for weeks of unemployment between March 14, 2021, and Sept. 6, 2021.
- Pandemic Emergency Unemployment Compensation (PEUC). The Act provides for 53 weeks of federal unemployment benefits to individuals who have exhausted state unemployment benefits. This is an increase in benefits from 13 weeks provided under the CARES Act and 24 weeks provided by the Consolidated Appropriations Act. Eligible individuals in many states can now receive up to 79 weeks of unemployment benefits.
In addition, the Act excludes the first $10,200 in unemployment benefits from gross income, and is therefore not taxable, for taxpayers whose adjusted gross income in 2020 was less than $150,000. Instructions for tax reporting are available from the Internal Revenue Service here. It’s unclear what individuals who have already filed their 2020 taxes should do to obtain the benefit of this relief.
We expect that further guidance on these important provisions will be forthcoming, so employers should stay tuned for further developments. In the meantime, feel free to contact a member of Taft’s Employment and Labor Relations Group.
Please visit our COVID-19 Toolkit for all of Taft’s updates on the coronavirus.