There are several components that every employer needs to be aware of and a brief overview is provided below. Please call us for additional information and to discuss your specific situation.
Emergency Paid Sick Leave and/or Emergency Paid FMLA leave
In March of 2020, the Families First Corona Virus Response Act (FFCRA) was signed into law. Employers with fewer than 500 employees quickly put in place policies, leave forms, and associated process to provide their employees Emergency Paid Sick Leave and/or Emergency Paid FMLA leave while maintaining records to qualify the private employers for the associated tax credits and public employers to reduce their portion of social security tax contributions. While these provisions were envisioned to sunset at the end of the year, the virus was not substantially under control and in December of 2020 the Consolidated Appropriation Act (CAA) was signed into law which allowed employers to voluntarily continue these offerings, the key being all provisions as offered under the FFCRA had to be continued. The CAA extension of the FFCRA was envisioned to end this month. However, as the virus and associated impacts are still being realized, the American Rescue Plan Act (ARPA) was passed on March 11, 2021.
Again, this is voluntary. However, it is not a simple extension to what we already know. There are a few changes/improvements for employees and potential disqualification for employers.
A. Emergency Paid Sick Leave
- Leave can be used by an employee who is seeking or awaiting the results of a diagnostic test for or a medical diagnosis of COVID-19 after an exposure or at the employer's request.
- Leave can be used by an employee is who obtaining a COVID-19 vaccine; or
- The employee is recovering from any injury, disability, illness, or condition related to a COVID-19 vaccine.
- Beginning April 1, a “new allotment” of up to 80 hours are provided to eligible employees (using the same calculation as provided in FFCRA).
- If the paid sick leave is for any other reason than the employee's own symptoms, quarantine or isolation, the amount of tax credit an employer can receive is limited to two thirds of the employee's regular rate of pay and capped at $200 a day.
B. Emergency Paid Family and Medical Leave
- Expands the reasons to take leave to include the qualifying reasons to take paid sick leave, including the additional reasons outlined above.
- Eliminates the requirement that the first 10 days of expanded family and medical leave is unpaid.
- Increases the aggregate cap for tax credits from $10,000 to $12,000 per employee.
C. Employers are disqualified from receiving FFCRA payroll tax credits if the employer:
- Fails to comply with the FFCRA, including its anti-retaliation provisions; or
- Discriminates in favor of highly compensated employees, full-time employees, or employees on the basis of employment tenure with respect to leave.
Extending Unemployment Insurance Benefits
The Rescue Plan extends unemployment assistance to individuals who become unemployed or are unable to work due to COVID-19, including:
- Extending the Pandemic Unemployment Assistance Program to provide unemployment benefits to individuals who are ineligible for regular or extended benefits under state law (e.g., self-employed individuals, independent contractors, workers with limited work history) for a total of 79 weeks through September 6, 2021.
- Extending the Federal Pandemic Unemployment Compensation program, providing both individuals who regularly qualified for unemployment benefits and those who qualify for PUA $300 per week of unemployment until September 6, 2021.
- Extending the Emergency Unemployment Compensation program, which will provide federal funding for up to 53 weeks of additional unemployment benefits until September 6, 2021; and
- Exempting the first $10,200 of unemployment benefits from federal income taxes for households with gross income of less than $150,000.
Free or Extended COBRA coverage
Free COBRA coverage must be offered based on the likelihood of loss of coverage that occur from April 1, 2021 through September 30, 2021, on account of a covered employee’s reduction in work hours or termination of employment (other than voluntary). In addition, free COBRA coverage also must be offered to the following types of qualified beneficiaries and other individuals:
- Qualified beneficiaries who are enrolled for COBRA coverage as of April 1, 2021, on account of a covered employee’s prior reduction in hours or termination of employment (other than voluntary) and prior election of COBRA coverage.
- In addition, it appears that free COBRA coverage must be offered to qualified beneficiaries who are in a regular COBRA coverage election and can elect COBRA coverage with an effective date that is retroactive back to April 1, 2021 or before.
If any of the above information does apply, the offer of free COBRA coverage must be made effective as of April 1, 2021. However, free COBRA coverage does not have to be extended past the end of what would have been the normal expiration date for the underlying COBRA coverage period (e.g., 18 months from the date of a covered employee’s termination of employment or reduction in work hours).
The Department of Labor is required to issue model notices for employers to use, which we will provide once they are published. It is important to note that the financial relief for these offerings is not simple. Please consult with your broker, insurer, or tax professional to understand your specific situation.
Increased Limits for Dependent Care
A Dependent Care Assistance Program (DCAP), which can also be a Dependent Care Flexible Spending Account (DCFSA), are programs where employees make pre-tax contributions under a cafeteria plan for child or elder care expenses. These would normally cap at $5,000 (or $2,500 if married filing separately). Under the ARPA, for 2021 only, that is increased to $10,500 (or $5,250 if married filing separately).
This assistance applies to plan years that begin after December 31, 2020, and before January 1, 2022.
Plans are not required to adopt this change but may do so if desired. To do so, a plan amendment may be required. Please consult with your provider or broker for more information.
As additional information becomes available, we will share and, as always, if we can help you with these topics or other HR related matters just give us a call.