The American Rescue Plan: What Employers Need to Know
March 14, 2021
Congress recently passed “The American Rescue Plan” (“Rescue Plan”), a $1.9 trillion package intended to provide economic relief necessitated by the COVID pandemic. Among its many provisions are those that will allow employers to voluntarily provide continued leave for employees under the Families First Coronavirus Response Act, (FFCRA), in exchange for a payroll tax credits. Employers are not obligated to provide continued leave, but if private employers choose to provide continued leave and adhere to all FFCRA requirements, they may claim payroll tax credit for the cost of such paid leave. Much of the FFCRA benefits remain the same, but these significant changes will take effect April 1, 2021:
- Extension of FFCRA Benefits
The mandatory provisions of the FFCRA expired on December 31, 2020. Congress then passed the “Consolidated Appropriations Act, 2021” (the “Relief Bill”), which allowed employers to continue to provide FFCRA paid leave through March 31, 2021, on a voluntary basis, in exchange for a payroll tax credit for private employers.
The Rescue Plan further extends FFCRA paid leave, on a voluntary basis, through September 30, 2021. It remains unclear whether employers will have the option to offer either Paid Sick Leave or Emergency Family and Medical Leave (EFMLA) on a standalone basis, however, guidance from the I.R.S. is expected to clarify this issue.
- Refreshes the Bank of Paid Sick Leave
This new extension, unlike the provisions in the Relief Bill, refreshes the ten (10) day bank of Paid Sick Leave available to each employee under the FFCRA. This means employers can claim the payroll tax credits for up to ten (10) days of Paid Sick Leave that is offered to employees on or after April 1, 2021, even if the employee had already exhausted all or part of his or her FFCRA Paid Sick Leave prior to that date. The new bank of ten (10) days of Paid Sick Leave will not be available until April 1, 2021. There is no refreshing of the EFMLA bank.
- Additional Qualifying Reasons for Paid Sick Leave and Paid Family Leave
Effective April 1, 2021, use of both Paid Sick Leave and EFMLA under the FFCRA has been expanded to include the following additional qualifying reasons:
(a) the employee is seeking or awaiting the results of a diagnostic test for, or a medical diagnosis of, COVID-19 and such employee has been exposed to COVID-19 or the employee’s employer has requested such a test or diagnosis; or
(b) the employee is obtaining a COVID-19 vaccination; or
(c) the employee is recovering from any injury, disability, illness, or condition related to a COVID-19 vaccination.
- Increase in Tax Credits
The amount of tax credits that an employer may claim for employers using Paid Sick Leave
under the FFCRA is capped at $511 per day or $200 per day, depending on the reason for the absence. The tax credit available for the new qualifying reasons listed above will each be capped at $511.
Additionally, the maximum amount of EFMLA tax credit an employer can claim has been increased from $10,000 to $12,000 per employee.
These increases in tax credits become effective April 1, 2021.
- Non-Discrimination Rules
Employers who choose to voluntarily provide FFCRA leave must now do so in a uniform manner that applies to all employees, regardless of compensation level, full or part-time status, or tenure status.
- “COBRA” Subsidies
Employees laid off for reasons related to the COVID-19 pandemic will have 100% of the premiums for continuation coverage provided under any employer-provided medical, dental or vision plan subsidized until September 30, 2021. This is generally known as “COBRA” coverage. However, unlike COBRA itself, a federal law applicable only to employers with twenty or more employees, the subsidy mandate applies to any continuation coverage, including continuation coverage mandated by State “mini-COBRA” laws applicable to employers with fewer than twenty employees.
Employers bear initial responsibility for subsidizing the
laid-off employees’ continuation coverage premiums. However, employers may
claim a refundable tax credit against their Medicare payroll tax liability for
the cost of the premiums they subsidize.
 State and local government public employers are excluded from this tax credit.