By: Sally A. Piefer and Samantha J. Wood
Last week, the American Rescue Plan Act of 2021 (ARPA) was signed into law. This is a large and detailed piece of legislation that has several components that directly affect employers.
FFCRA Leave Expansion/Extension
Like the prior COVID-19 stimulus/relief bill that was discussed here, the ARPA allows employers covered by the FFCRA to continue to voluntarily provide paid FFCRA leave and receive the tax credit associated with such leave through September 30, 2021.
If you recall, the leave provisions of the FFCRA covered all employers with fewer than 500 employees, and provided two buckets of leave:
- Emergency FMLA (EFMLA), which provided paid leave for employees who were unable to work (or telework) because they need leave to care for a child (under age 18) if the child’s elementary or secondary school or place of care had been closed or if the child care provider was unavailable because of a public health emergency.
- Emergency Paid Sick Leave (EPSL), which provided limited paid sick leave to employees who were unable to work (or telework) because of leave needed for any of the following reasons:
- The employee is subject to a quarantine or isolation related to COVID-19;
- The employee had been advised by a health care provider to self-quarantine due to COVID-19;
- The employee was experiencing symptoms of COVID-19 and seeking a medical diagnosis;
- The employee was caring for an individual subject to a state, federal or local quarantine or isolation related to COVID-19;
- The employee was caring for their child if the child’s school or place of care had been closed, or the child care provider was unavailable due to COVID-19 precautions; or
- The employee was experiencing any other substantially similar conditions specified by the Secretary of HHS in consultation with the Secretary of the Treasury and the Secretary of Labor.
To benefit employers, the FFCRA provided a refundable tax credit equal to 100% of the qualified sick leave wages paid by the employer – subject to the FFCRA’s maximum payments.
In December 2020, the COVID-19 stimulus/relief bill was passed to allow employers to voluntarily continue granting employees EFMLA and any remaining EPSL, and receive the associated tax credit through March 31, 2021.
Now, the ARAP extends and expands the leave and associated tax credits for voluntarily providing paid leave through September 30, 2021. The notable expansions are as follows:
- While the prior stimulus bill only allowed employees to use the remainder of their EPSL, the ARPA provides that employers may grant employees (and receive the associated tax credit for providing) a new ten-day bank of EPSL beginning on April 1, 2021.
- While the FFCRA and the prior stimulus bill allowed employees to take EPSL for six reasons (as delineated above), the ARPA allows EPSL to be taken for two additional reasons: (a) to obtain a COVID-19 vaccine; and (b) to recover from any adverse reactions to the vaccine.
- While the EFMLA was previously only available to employees who were unable to work or telework due to a COVID-related closure of a child’s school or childcare, the ARPA now allows EFMLA to be taken for all of the qualifying uses of the EPSL.
- While the FFCRA originally provided that the first two weeks of EFMLA were unpaid, ARPA has deleted that unpaid two-week provision and will allow the entire twelve weeks of EFMLA to be paid.
- The ARPA provides that employers may not claim the tax credits for providing EPSL or EFMLA if it only provides the leave to highly compensated employees, full-time employees, or employees with a certain tenure.
Mandatory Subsidies for COBRA Premiums
The ARPA also requires employers to pay for up to 6 months of the COBRA premiums at 100% of the monthly premium. Specifically, this subsidy applies to any employee who was involuntarily terminated (other than for gross misconduct) or whose hours were reduced and whose COBRA period includes any period of time between April 1, 2021 and September 30, 2021. Employees who voluntarily leave employment are not eligible for the subsidy.
Former employees who did not originally elect COBRA coverage are also entitled to the assistance and a new special election period. The subsidy will cover not only group health coverage, but also group dental and vision coverage, and will only apply to premiums between April 1, 2021 and September 30, 2021.
The ARPA also permits employers to decide whether they will allow an eligible former employee to switch from the coverage they had in effect at the time of the involuntary termination to a lower cost group health plan option. Eligible individuals are prohibited from opting into a higher cost group plan option.
Employers will be allowed to treat the subsidy as a credit against their share of Medicare taxes. If the credit exceeds the amount of tax owed in any quarter, the excess will be refundable.
Employers are required to provide notice of the right to elect fully subsidized COBRA to all eligible individuals. The notice contains several specific pieces of information. The Department of Labor (DOL) has been charged with preparing 2 model notices, which should contain all of the required language. The model notices are supposed to be available by April 10, 2021. In addition, employers will be obligated to provide written advance notice when the subsidy is scheduled to expire.
While we wait for the DOL forms, you should begin to identify which COBRA beneficiaries became eligible for COBRA due to an involuntary termination (other than misconduct) or reduction in hours during the last 18 months (29 months for individuals eligible for COBRA due to a disability) to determine who will be eligible for the new notices. Employers should also contact their group health plans to determine whether the employer will be responsible for issuing the new COBRA notices or whether the plan will assume those responsibilities. Now may also be a good time to review any contracts you have which transfer the obligation to provide COBRA notices so that your business is fully protected in the unfortunate event that a notice is not timely provided.
Extended Federal Unemployment Insurance Assistance
The ARPA also extends several unemployment insurance programs and initiatives through the week ending September 6, 2021, including:
- The Pandemic Unemployment Assistance Program, which provides benefits to independent contractors, business owners, self-employed workers, and similar workers who do not qualify for regular state unemployment benefits;
- Most states cap unemployment at 26 weeks. The CARES Act added an additional 13 weeks and the December 2020 Consolidated Appropriations Act (CAA) added an additional 24 weeks. ARPA now extends benefits to 53 weeks, which means that an eligible person can receive up to 79 weeks of unemployment benefits – the original 26 weeks plus 53 weeks of federal extension.
The program which provides an additional $300 per week in benefits for each person receiving unemployment benefits, in addition to what s/he is receiving through regular state unemployment benefits.