The American Rescue Plan: Key Provisions for Labor & Employment
Extension of CARES Act Unemployment Provisions
By: Leticia M. Kimble
The American Rescue Plan (the “ARP”) extends the unemployment benefits created by the March 2020 Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and the December 2020 Consolidated Appropriations Act which were set to expire after March 14, 2021. Under the ARP, unemployment benefits will continue for an additional six-months, expiring on September 6, 2021. Although the ARP maintains the current rate of $300 per week, it increases the number of weeks eligible individuals can apply for benefits from 50 to 79.
The ARP also creates a new federal tax waiver for taxpayers whose adjusted gross income was less than $150,000 in 2020. Eligible taxpayers do not have to pay federal taxes on the first $10,200 of unemployment benefits collected. This includes benefits collected in 2020.
With 4.1 million people reporting being out of work for more than six months in the latest jobs report, the ARP’s unemployment insurance provisions will be a welcomed source of relief for many individuals. Employers, however, are concerned they will face difficulties bringing employees back to work as the economy starts to reopen. Employers faced with employees refusing to return to work should consult with their attorney to determine the best way to document an employee’s refusal to return to a safe work environment.
Emergency Paid Sick Leave and EFMLA Extended and Expanded in ARP Act
By: Matthew Garrett-Pate
The Families First Coronavirus Response Act (“FFCRA”) established Emergency Paid Sick Leave (“EPSL”) and paid Expanded Family and Medical Leave (“EFMLA”), though both expired on December 31, 2020 and were only extended as to the tax credits available to employers. The ARP resolves ambiguities in the status of EPSL/EFMLA and represents a major expansion of the benefits available thereunder. Prior to ARP, questions remained as to the amount of leave available to employees since the bank of EPSL/EFMLA leave had not been renewed and, more recently, whether EPSL covered vaccine-related absences.
Employees will now receive 10 days of EPSL leave and 12 weeks of EFMLA each calendar year (the FFCRA did not contain annual renewals). Note that EFMLA now pays for all 12 weeks of leave, and not just 10 weeks as was provided under the FFCRA. These benefits are optional, and employers may choose to offer the benefits to take advantage of refundable tax credits or can opt to forego offering EPSL or EFMLA altogether. If an employer opts for the program, though, it must follow the retaliation prohibitions and other protections set forth in the FFCRA to collect the tax credit.
ARP also expanded EPSL to address employees’ need for leave to receive and recuperate from the vaccine. The addition of time off for vaccines and related illnesses was made in the third category of eligibility, which means vaccine-related sick leave will be paid at the higher cap of up to $511 per day. In another major shift, EFMLA will no longer apply only to employees with childcare trouble due to the pandemic, and instead will be available to employees under the same six COVID-19 related categories for which EPSL is offered. As a reminder, EFMLA is paid at up to $200 per day, max of $12,000 annually, and EPSL is paid at up to $200 or $511 per day, max of $5,110 annually, depending on the reason the employee is taking EPSL.
In addition to being able to claim refundable tax credits against certain employment taxes for EPSL/EFMLA wages paid to employees, employers can also increase the available tax credit in relation to certain health plan expenses.
Generally, ARP’s expansion of EPSL/EFMLA is a boon to employers due to the continued availability of tax credits offsetting paid leave wages. Employers may choose to implement either, both, or neither program. If employers opt to implement EPSL/EFMLA, it should be memorialized in a written policy and distributed to employees. For information relating to the tax credits available for EPSL/EFMLA, please contact your tax advisor or tax attorney. Our employment attorneys can answer questions about providing EPSL/EFMLA to employees under the expanded provisions in the ARP Act.
Individuals’ COBRA Premiums Paid by Government through Tax Credits
By: Leticia M. Kimble
Beginning April 1, 2021, the federal government will provide a subsidy of 100% of COBRA insurance premiums for employees who lost their jobs because of the pandemic. The subsidy will be available until September 30, 2021 and paid through a tax credit employers can claim against their quarterly payroll taxes. It is unclear whether the subsidy will be limited to major medical benefits or if it will extend to all medical coverage, as well as dental and vision. Future regulations are expected to clarify this point.
In addition to the federal subsidy, the ARP also creates a special 60-day enrollment period for eligible terminated employees who either have not elected COBRA coverage before April 1, 2021, or who have discontinued their COBRA coverage.
Employers will have to update their COBRA notices to include the new ARP provisions by May 30, 2021. Employers should expect the process for receiving the COBRA subsidy via tax credits to be complex. Successful employers will need to develop a comprehensive plan and carefully document their communications with eligible terminated employees and compliance with all applicable regulations.
Employee Retention Credit
By: Ricardo R. Rozen
The ARP incentivizes employers to retain their employees by extending the Employee Retention Credit (ERC). The ERC was set to expire in June 2021, but the ARP extended it until December 31, 2021. ERC allows eligible employers to claim a tax credit for paying qualified wages to employees (for most employers the amount of ERC is up to 70% of qualified wages and up to $10,000 per employee per quarter). Eligible employers include those who experience a full or partial shutdown due to COVID-19 or a qualifying decline in gross receipts (less than 80% for same calendar quarter in 2019). The ARP also extends the ERC to “recovery startup businesses” that began operations after February 15, 2020. We encourage you to discuss the ERC portion of the ARP with your accountant or tax advisors to determine if you qualify to claim the credit.
Please be sure to check out our COVID-19 Client Alert and Resource Center, https://www.raineslaw.com/covid-19, for further information about the American Rescue Plan as it becomes available.
If you have any questions or concerns about any of the information briefly summarized in this Business Bulletin or require any further information, please contact one of the following lawyers at Raines Feldman LLP:
Lauren J. Katunich
+1 (310) 730-4387
Beth A. Schroeder
+1 (310) 730-4397