Just as the COVID-19 virus has evolved and mutated over time as a means of survival (with its UK, South African and Brazilian variants just to name a few), so too have Congress’ relief efforts to prop up and stimulate the economy. The American Rescue Plan Act (ARPA) of 2021 marks the latest evolution which has some differences from its predecessors.
So what are some of the employer-related ARPA provisions?
There are several. ARPA provides for a second extension of time off that was initially established under the Families First Coronavirus Response Act (FFCRA). This latest extension, like the first one offered under the Consolidated Appropriations Act of 2021 (CAA), remains a voluntary option for employers. However, there are changes. First, the time off that is available for Emergency Paid Sick Leave purposes resets to having upwards to 10 days of such time available for the time taken between April 1st and September 30th 2021. Second, there are now additional reasons enumerated that this time can be used for (such as to get a COVID-19 vaccination, to deal with the side effects of getting vaccinated, or for time to seek or wait for results of a COVID-19 test). Third, when it comes to the Expanded Paid Family Leave provisions of the Act, it also eliminates the requirement that the first 10 days of Expanded Paid Family Leave be unpaid. In other words, it will further allow for the emergency paid sick leave to be available for other reasons. As a result, the aggregate tax credit cap for such emergency family leave has been expanded from $10,000 to $12,000. (In case you are wondering, the time available for Expanded Paid Family Leave purposes does not reset under ARPA, as employees just have the chance to use any available/remaining time until September 30th.)
Another major and new feature rolled out under ARPA is that of COBRA subsidies. This marks the first time since the American Recovery and Reinvestment Act of 2009, that COBRA subsidies have been established. In this latest rollout under ARPA, employers are on the hook to subsidize 100% of the COBRA health insurance premium to those deemed “Assistance Eligible Individuals” who elect COBRA coverage during the period of April 1, 2021, through September 30, 2021, in response to involuntary termination or reduction of hours. The allocations are ultimately “reimbursable” through being able to take a payroll tax credit (which has become almost a customary practice for many employers these days – at least those under 500 employees – with the advent of the FFCRA back in 2020 that had set a similar practice). Certainly, more details will be forthcoming from the Internal Revenue Service and Treasury Department on that front. But as these subsidies undoubtedly affect the past or current decision making of some qualified beneficiaries regarding their COBRA options (for instance who may have not sought COBRA coverage back in 2020 or earlier in 2021 for COBRA continuation coverage that would have extended into this April 1st – September 30th window or those who are currently contemplating whether to elect COBRA coverage at the present time), there is also a need to issue updated COBRA notices with the law establishing a deadline of May 31, 2021, to do so. The US Department of Labor is charged with providing model notices for those purposes though employers are best served to work with their broker or Third Party Administrator (TPA) on these requirements since (as the plan sponsor) the employer is ultimately responsible.
For employers with Dependent Care Assistance Programs, the dollar thresholds have been increased under those plans for plan years starting in 2021. Specifically for the 2021 plan year, the maximum limits are $10,500 for couples filing jointly or single/head of household (which is an increase from the original $5,000 figure; and $5,250 for individuals and those married filing separately (which is an increase from the $2,500 figure). These increases are not automatic and require plan document amendments which are due before the end of the year.
Employee Retention Tax Credits (ERTC) are likewise extended but (again) we also have something new with the establishment of additional categories of credits for “Recovery Startup Businesses” and “Severely Financially Distressed” businesses that actually have larger tax credit opportunities. For companies that meet the standard of being “severely financially distressed” (defined as having experienced a 90% decline in receipts between 2019 and 2021), there is an ability to take a tax credit on 100% of the qualified wages against certain payroll tax obligations (which is a departure from the 70% qualified wage threshold available for those companies that experienced a 20% decline in receipts which had been originally set forth in the CAA). For businesses that started up after February 15, 2020, there is a credit of up to $50,000 per quarter. However, unlike the other categories eligible for the ERTC’s, there is not an obligation to show any decline in receipts or suspended operations. Rather, these specific startup businesses just need to have less than $1 million in average gross receipts for the year to be eligible.
The final major employer component under the ARPA is the extension of supplemental Pandemic Emergency Unemployment Compensation benefits (PEUC – in the amount of $300 per week) and Pandemic Unemployment Assistance for the self-employed and “gig” workers on claims filed through September 6th. Additional funding has also been established to combat the pervasive challenges with unemployment compensation fraud that many states have encountered during the pandemic.
Of course, ARPA has funding to combat the virus itself with added funding to stimulate vaccination programs and COVID-19 testing throughout the country. Hopefully, this latest legislation will mark the final step to getting businesses back on track under the eventual “new normal”. However, should COVID-19 mutate and surge once more, you can expect COVID-19 relief legislation to mutate as well.
EANE Members can access the recording of our March 19, 2021, What Businesses Need To Know About The American Rescue Plan Act of 2021 Webinar in the Member Webinar Archive under the “COVID-19 webinars” section.
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