The American Rescue Plan Act and How It Affects Employers
Employment-related highlights of the recently enacted American Rescue Plan Act of 2021 (ARPA) include extended federal paid leave, COBRA premium subsidies, and expanded unemployment benefits. Below is a detailed summary highlighting these provisions.
Extended Paid Leave
The ARPA further extends paid leave that was initially created by the Families First Coronavirus Response Act (FFCRA) on April 1, 2020. As noted in our earlier blog post, the FFCRA provided expanded paid and unpaid family and medical leave broader than the Family and Medical Leave Act of 1993 (FMLA) and paid sick leave to certain employees affected by COVID-19. FFCRA mandatory leave provisions expired on December 31, 2020, but were extended as voluntary options through March 31, 2021. The ARPA further expands and extends FFCRA paid leave from April 1, 2021 through September 30, 2021 (Extended Period), as follows:
- Employers with fewer than 500 employees may choose to provide the paid leave – it is not mandatory for any employers.
- If employers choose to provide paid sick leave (EPSL) or paid FMLA (EFML) under the ARPA, they may be entitled to tax credits for leave in the Extended Period.
- Employees get a new entitlement of up to 80 hours or 10 days of EPSL to use in the Extended Period – regardless of whether they’d used any or all of their earlier EPSL allotment as of April 1, 2021.
- Eligibility reasons for EPSL include the FFCRA’s initial reasons but are expanded to include: (a) obtaining COVID-19 vaccines; (b) recovering from an injury, disability, illness, or condition related to COVID-19 vaccination; and (c) seeking or awaiting the results of a COVID-19 test or diagnosis because either the employee has been exposed to COVID or the employer requested the test or diagnosis.
- EFML tax credits are increased to $12,000 per employee’s paid family leave wages (instead of $200/day and $10,000 total/employee).
- For up to 10 days’ EPSL, employees should be paid amounts equal to 100% of pay (max $511 per day) or 2/3 of pay (max $200 per day) depending on their reason for leave. As of Day 11 (when EFML begins), employees receive 2/3 of their pay up to $200 per day.
- Unlike earlier, certain state and local government employers and 501(c) federal government entities will be tax-credit eligible.
- Employers are prohibited from discriminating in favor of highly compensated employees, full-time employees, or employees on the basis of employment tenure, e.g., cannot offer different levels of EPSL or EFML leave on those grounds.
- If employers choose to take tax credits for ARPA-provided leave, they should generally comply with FFCRA paid leave mandates, regulations, and other guidance as if it were 2020 when providing the leave.
Questions remain regarding provision of any new allotment of EFML, application toward regular FMLA allotments, and whether employers can choose to provide less than all of the types or amounts of non-mandatory EPSL and EFML. We look forward to receiving guidance from the U.S. Department of Labor (DOL).
COBRA Premium Subsidies
As noted in our recent blog post, the ARPA subsidizes certain COBRA premiums. COBRA allows employees and their families who would otherwise lose their group health coverage due to certain life events to continue their group health coverage, known as COBRA continuation coverage. The ARPA provides a 100% premium subsidy for individuals whose reduction in hours or involuntary termination of employment makes them eligible for COBRA continuation coverage during the Extended Period (including mini-COBRA).
Within 60 days after April 1, 2021, employers’ plan administrators must provide certain notice to “assistance eligible individuals,” which includes certain former employees who separated throughout the pandemic. Fortunately, on April 7, 2021, the DOL issued guidance with model notices and forms to assist in this regard. Employers and their plans will be reimbursed by a new tax credit applied against employers’ shares of Medicare hospital insurance tax. Businesses should consult with their tax and benefits specialists for further details and guidance.
The ARPA extended expanded unemployment benefits with $300 weekly supplements through Labor Day (September 6, 2021) beyond the March 31, 2021 prior expiration date.
Williams Parker has launched a multidisciplinary task force of lawyers across the firm to advise on issues arising from COVID-19. This team is closely monitoring legal developments and guidance from federal, state, and local government and public health officials. For the latest updates, please visit our website.