On March 11, 2021, President Biden signed the American Rescue Plan Act (ARPA) into law which became effective on April 1, 2021. The ARPA contains key provisions impacting employers and employees. We have set forth a few questions and answers below regarding some of these specific issues. Please keep in mind that guidance governing these topics is not fully developed and may continue to change.
Q: Does the ARPA require employers to provide paid sick leave to its employees?
A: No. After December 31, 2020, the paid leave provisions of the Families First Coronavirus Response Act (FFCRA) were no longer mandatory for employers. However, those employers with less than 500 employees who elected to continue providing the paid leave provisions of the FFCRA could do so and continued to receive a tax credit for payments made through March 31, 2021. Under the ARPA, employers can continue to provide paid sick leave under the FFCRA on a voluntary basis and receive the tax credit for leave paid through September 30, 2021. Even if an employer did not voluntarily extend the FFCRA after December 31, 2020, they can do so now with an effective date of April 1, 2021.
Q: Did the American Rescue Plan change the eligibility criteria for the FFCRA?
A: Yes. Initially the FFCRA identified six criteria under which an employee was eligible to receive paid sick leave under the FFCRA. The ARPA expands the criteria for providing paid sick leave. In addition to the original six reasons, an employee may now be eligible for paid sick leave when: (1) an employee is obtaining a COVID-19 vaccination; (2) when an employee is suffering or recovering from side effects related to the COVID-19 vaccination; and (3) when an employee is seeking or waiting the results of a COVID-19 test if the employee has either been exposed to COVID-19 or the employer has requested the COVID-19 test.
Q: Did the ARPA make changes to the Emergency Family Medical Leave Act (EFMLA) portion of the FFCRA?
A: Yes. Under the original version of the FFCRA, the first two weeks of EFMLA were unpaid. Under the ARPA, all 12 weeks of EFMLA are paid. Due to this change, the maximum tax credit allowable for an employer based on an individual employee’s use of EFMLA has increased from $10,000 to $12,000. In addition, the reasons for allowing EFMLA have now been expanded from caring for children under 18 who do not have school or childcare due to a reason related to COVID-19, to any of the included criteria under which an employee can utilize paid sick leave under the FFCRA.
Q: What if employees have already utilized time under the FFCRA? Are they eligible for additional time?
A: Yes. Employees’ bank of emergency paid sick leave resets as of April 1, and employees receive a new bank of up to 80 hours. If an employer continues to offer leave under FFCRA, an employer can claim a payroll tax credit to offset up to ten days of wages paid as qualified emergency paid sick leave, even if an employee previously exhausted their emergency paid sick leave entitlement. Eligibility for EFML depends on how much FMLA leave an employee has already taken during the 12-month measuring period that an employer uses for FMLA leave.
Q: Is it possible for an employer to lose its tax credit for payments made to employees under the FFCRA?
A: Yes. If an employer fails to implement paid leave under the FFCRA in a non-discriminatory manner, employers will potentially not receive the tax credit. FFCRA cannot be implemented in a manner to favor highly compensated employees, full-time employees, or based on seniority.
Q: Does the ARPA require employers to pay for employees’ health care if employees lose their jobs?
A: Potentially yes.If an employer is subject to the Consolidated Omnibus Budget Reconciliation Act (COBRA), the employer must offer 100% subsidized COBRA continuation coverage to certain eligible plan participants between April 1, 2021 through September 30, 2021. The ARPR provides that if an employee loses health care coverage due to an involuntary termination (other than for gross misconduct) or a reduction in hours worked and elects continuation coverage to be effective during the April 1, 2021, and September 30, 2021 timeframe, the employer must subsidize 100% of the cost of this coverage. Employers who provide subsidized coverage will be reimbursed through tax credits against their quarterly payroll. We are still waiting on further guidance regarding this provision from the Internal Revenue Service and the Department of Labor.
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