The America Rescue Plan Act (ARPA) was enacted in March 2021 and provided nearly $2 trillion of relief for both individuals and businesses impacted by the COVID-19 pandemic. It also has important provisions that impact employers and extend paid benefits we’d seen come out throughout the pandemic.
Extension of Voluntary Paid Sick and Family Leave
Congress enacted the Families First Coronavirus Response Act (FFCRA) in March 2020. FFCRA required employers with less than 500 employees to provide them with short-term paid sick and family leave for various COVID-19-related reasons. Businesses were then able to receive tax credit reimbursements for the associated wages. The mandatory FFCRA paid leave ended on December 31, 2020, but the ARPA extended these tax credits through September 30, 2021, to employers that voluntarily provided paid family and sick leave after this period. Here are some more details of some of the extensions that the ARPA provides:
Paid Sick Leave
The ARPA grants employers a refundable tax credit for up to 10 days of qualified paid sick leave per employee for the period of April 1, 2021, to September 30, 2021. This tax credit is valid regardless of if an employee had previously taken qualified paid sick leave under the FFCRA and the Consolidated Appropriations Act (CAA) programs, but there is no carryover of unused days from the time before April 1, 2021.
The ARPA also extended the qualifying reasons for this paid sick leave. This is extended to reasons such as getting the COVID-19 vaccine, recovering from side effects of the vaccine, or waiting for the results of a COVID-19 test or diagnosis.
Paid Family Leave
The ARPA removed a previous requirement that the first two weeks of a family leave be unpaid. Employers are now able to choose to provide up to 12 (as opposed to 10) weeks of qualifying paid family leave per employee. The cap on refundable tax credits per employee for family leave was increased to $12,000 from the original $10,000.
The ARPA also extended qualifying reasons for paid family leave and are the same as that for paid sick leave.
COBRA Subsidy Extension
The Consolidated Omnibus Budget Reconciliation Act (COBRA) allows workers and their families who lose group health benefits for a qualifying reason to continue their health benefits generally for up to 18 months after a qualifying event. Employers usually have to cover the costs of the extended insurance premiums during the period covered by COBRA.
The ARPA now provides eligible employees (those who lost their insurance due to an involuntary reduction of hours of involuntary termination) a 100% employer subsidy for six months of health insurance premiums under COBRA. The subsidy period is from April 1, 2021, until September 30, 2021.
Employers should identify any employees who have lost their group health coverage for a qualifying reason on or after November 1, 2019. They then must notify these employees of the ARPA’s extended COBRA provisions.
Short-Time Compensation Programs and Employee Retention Credits
The ARPA also has provisions to encourage employers to implement short-time compensation (STC) programs instead of laying off employees. STC programs allow those employees facing a reduction in wages to collect a percentage of their unemployment compensation (UC) benefits to replace a portion of their lost wages. The ARPA extended the federal reimbursement provisions from the CARES Act to September 6, 2021. This allows states to get 100% reimbursed for unemployment benefits paid out to these STC programs.
The ARPA also encourages employers to keep their employees on their payroll through something called employee retention credits (ERC’s). ERC’s provide payroll tax credits to employers to cover qualified employee wages for those employees who were inactive because of the employer’s economic hardship. The ARPA extended these tax credits (capped at $14,000 per employee) through the end of 2021.
The ARPA also expanded the ERC program to allow “severely financially distressed” employers with more than 500 employees to claim ERC’s for all employees for the third and fourth quarters of 2021. To be categorized as “severely financially distressed,” the employer must have had gross receipts for a 2021 quarter of less than 10% of the gross receipts it had for the same quarter in 2019. Additionally, the ARPA allows “recovery start-up businesses” to be eligible for ERC’s during the third and fourth quarters of 2021. To be categorized as a “recovery start-up business,” it must’ve been started after February 15, 2020, and had up to $1 million in average annual gross receipts during this period. These businesses’ ERC’s are capped at $50,000 per quarter.
Long story, short: There are still a number of paid resources available to businesses as we are still working to combat COVID-19. We also recommend taking a look at your state-specific programs, as they may have extended their benefits as well. Don’t hesitate to reach out if you’d like more guidance on how to best utilize these resources in your business!