The American Rescue Plan Act of 2021 (ARPA) was signed into law on March 11, 2021, by President Joseph Biden. The ARPA makes several important changes to the benefits first created in the Families First Coronavirus Response Act (FFCRA). These changes become effective April 1, 2021, and employers must determine how the ARPA affects their business or organization, whether they will voluntarily extend FFCRA leave to their employees under the ARPA, and if so what changes they need to make to their policies and practices.
The tax credit is extended through September 2021.
Under the FFCRA, employers received a tax credit for Emergency Paid Sick Leave (EPSL) and Emergency Family and Medical Leave (EFMLA) provided to employees through December 31, 2020. The Consolidated Appropriations Act allowed employers to continue to provide EPSL and EFMLA leave on a voluntary basis through March 31, 2021, and to receive a tax credit for such leave. Under the ARPA, tax credits will now be available to employers voluntarily offering EPSL and EFMLA from April 1, 2021, to September 30, 2021. These tax credits still apply only to employers with fewer than 500 employees.
A tax credit, up to a cap of $511 a day, is allowed at the employee’s regular rate of pay if the employee is on leave because of coronavirus quarantine, self-quarantine or has symptoms. 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, up to a cap of $200 a day. Notably, as to EFMLA leave, the ARPA eliminates the 10-day unpaid waiting period, so the cap for reimbursable tax credit for EFMLA has been increased to $12,000 (from $10,000). This tax credit may also be increased based upon amounts paid under collectively bargained agreements.
The reasons for FFCRA leaves are expanded.
Under the FFCRA employees were eligible for EPSL leave for the following reasons: (1) when quarantined or isolated subject to federal, state, or local quarantine or isolation order; (2) when advised by a health care provider to self-quarantine because of COVID-19; (3) when the employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis, (4) when caring for another person who is isolating or quarantining on government or doctor’s orders; (5) when caring for a child whose school or place of care is closed due to COVID-19; and (6) is experiencing any other substantially-similar condition specified by the Secretary of Health and Human Services, in consultation with the Secretaries of Labor and Treasury. EFML was only available when needed due to closure of a child’s school or daycare. Starting April 1, however, ARPA expands the existing list of qualifying reasons for EPSLA leave to include the following: an employee that is (a) seeking or awaiting the results of a diagnostic test for, or a medical diagnosis of, COVID-19 because they have been exposed or because their employer has requested the test or diagnosis, or (b) obtaining a COVID-19 vaccination or recovering from any injury, disability, illness, or condition related to the vaccination. Notably, the ARPA expands the qualifying reasons for which EFML could be taken to incorporate all of the qualifying reasons under the EPSL. Again, however, employees are eligible for these leaves only if their employer voluntarily decides to offer it.
The amount of leave available is expanded.
Beginning April 1, 2021, full-time employees may be eligible for a new bank of up to 80 hours of EPSL, while part-time employees may be eligible to a prorated amount. Thus, if the employee used all 80 hours in the past, they will be eligible for a new bank of 80 hours if their employer voluntarily chooses to provide such leave. Unfortunately, the law is not clear as to whether employees are eligible for a new 12-week bank of EFMLA, but we anticipate guidance from the Department of Labor on this issue soon. However, the law does provide that employees can take the 80 hours of EPSL in addition to their EFMLA, resulting in a total of 14 weeks of paid leave.
Under the ARPA, the tax credit for EPSL and EFMLA leave is available only to those employers who provide leave to all employees without discriminating against certain categories of workers. Therefore, to receive the tax credit, employers may not discriminate (1) in favor of highly compensated employees, (2) full-time employees or (3) on the basis of the employment tenure of the employee.
A new COBRA obligation is imposed on employers.
In addition to the changes on voluntarily provided FFCRA leave, the ARPA includes a binding provision concerning Consolidated Omnibus Budget Reconciliation Act (COBRA) rights. Under the ARPA, employees who lost health coverage because of an involuntary termination, or reduction in hours, may now receive a 100% COBRA premium subsidy for premiums due between April 1, 2021 through September 30, 2021. Employees who left a job voluntarily are not eligible for the subsidized coverage. For more information on the COBRA subsidy, please see our previous alerts here and here from our Employee Benefits practice group.
If you have questions about ARPA, please contact: Jarad M. Lucan at email@example.com, Peter J. Murphy at firstname.lastname@example.org, Tyler J. Bischoff at email@example.com or Sheridan L. King at firstname.lastname@example.org.