On March 11, 2021, President Biden signed into law the “American Rescue Plan Act of 2021”, a $1.9 trillion omnibus COVID-19 relief package covering a wide range of economic matters from agriculture food supply chains to school funding to vaccine distribution.
Like the stimulus package enacted in December 2020 [Click here to see our 12.29.20 e-alert], critical provisions of the new law from an employment perspective include extensions of tax credits under the Families First Coronavirus Response Act (“FFCRA”), federal unemployment benefits under the Coronavirus Air, Relief and Economics Security (“CARES”) Act, and forgivable loans under the Paycheck Protection Program (“PPP”). One hot button issue for employers that did not make it into the final version of the bill was a House-proposed increase in the federal minimum wage to $15 per hour by 2025.
In this e-alert, we have highlighted some parts of the American Rescue Plan Act that are of interest to employers.
FFCRA Paid Leave Tax Credit Extension
Under the American Rescue Plan Act, employers with fewer than 500 employees may continue to voluntarily provide emergency paid sick leave, and emergency family and medical leave benefits established under FFCRA (the law continues to be inapplicable to employers with 500 or more employees). As you may recall, the mandate that employers provide such paid leave ended December 31, 2020, with the expiration of the initial law passed last Spring. If employers voluntarily provide FFCRA benefits to eligible employees, they will continue to receive dollar-for-dollar reimbursement in federal tax credits (up to $200 or $511 per employee per day, as applicable, depending on the reason for leave) through September 30, 2021.
In addition, employers who voluntarily provide FFCRA benefits under the new legislation should note the following (effective after March 31, 2021):
the COVID-related reasons for reimbursable leave have been extended to cover time off for the employee to be vaccinated and recover from any vaccination-related injury or illness and time off where the employee is awaiting the results of a COVID-19 test or medical diagnosis where the employee has been exposed to COVID-19 or the employer has requested such test or diagnosis (previously, time off awaiting test results or diagnosis was only covered where the employee was experiencing symptoms);
employees who previously only qualified for 10 days of sick leave for reasons such as where the employee is unable to work because of an order or health care provider advice to quarantine or caring for a family member subject to quarantine, may now qualify for an additional 12 weeks of paid leave (consistent with the paid family leave portion of the law) – this leave is on top of the usual 10 days;
an employer may receive an additional tax credit for up to 10 days for paid sick leave for an eligible employee, even if it previously took a tax credit for paid sick leave for the same employee prior to April 1, 2021; and
the maximum tax credit benefits for paid family leave will be increased to $12,000 per employee (from the current $10,000 maximum); additionally, the first two weeks of paid family leave now must be paid if the employer chooses to provide these benefits.
Further, employers should be aware that, under the new law, they must not discriminate in favor of highly compensated employees, full-time employees, or employees with more tenure.
Unemployment Insurance Benefit Extension
The new law amends the CARES Act to extend the Pandemic Emergency Unemployment Compensation program (providing additional weeks of coverage for the long-term unemployed) and the Pandemic Unemployment Assistance program (providing benefits to gig workers and others not traditionally eligible for unemployment compensation) through September 6, 2021.
The law also continues the $300 per week of additional federal payments for all individuals covered under existing state unemployment compensation eligibility requirements and the CARES Act (which had been set to expire March 14) through September 6, 2021.
Finally, the American Rescue Plan Act provides for exemption from federal taxes for the first $10,200 in unemployment payments for households earning less than $150,000.
Like December’s bill, the American Rescue Plan Act provides additional funding for the PPP, which provides forgivable loans for covered employers who maintain payroll and headcount during the pandemic. The Act allocates $7.25 billion in new money for the PPP and extends coverage to certain nonprofit entities and internet publishing organizations that previously had been excluded.
Provisions for Certain Industries
The American Rescue Plan Act provides certain industry-specific relief, including new grants for restaurants and other food and drinking establishments and assistance for certain shuttered venue operators such as live performing arts organizations, movie theaters, and museums. Employers in these industries should consider their eligibility under these new programs.
The American Rescue Plan Act also includes a panoply of other provisions of interest to employers and employees, including:
- dedication of $86 billion to ensure that pensioners in certain struggling multi-employer pension plans continue to receive their retirement benefits through 2051;
extension of the Employee Retention Credit (ERC) through December 21, 2021, and expansion of the ERC to certain start-up businesses previously excluded;
- a third direct stimulus payment for qualifying Americans (up to $1,400 for those earning up to $75,000 and $150,000 for those filing jointly, and an additional $1,400 per dependent); and
a subsidy for the full cost of continuing health insurance under COBRA for qualified individuals who have lost coverage due to a layoff or involuntary termination or reduction of hours, effective April 1 through September 30, 2021.