By: Leah K. Sell, Esq.
Several provisions of the American Rescue Plan Act (ARPA) of 2021 went into effect on April 1, 2021. These April regulatory changes may bring relief to employees and tax credits to employers, as everyone continues to cope with the COVID-19 global pandemic.
Families First Coronavirus Response Act – Paid Leave
The Families First Coronavirus Response Act (FFCRA) was first enacted one year ago on April 1, 2020. FFCRA provided two types of leave for reasons related to COVID-19, Emergency Paid Sick Leave (EPSL) and Emergency Family Medical Leave Expansion Act (EFMLEA). Most employers with less than 500 employees were required to provide both types of paid leave to employees, with limited exceptions. Employers were able to take a dollar-for-dollar tax credit for all eligible leave provided under FFCRA.
FFCRA’s mandatory paid leave requirement ended on December 31, 2020. However, for employers who chose to continue to provide the leave, tax credits remained available through March 31, 2021. The ARPA continues these tax credits from April 1, 2021 through September 30, 2021 and makes significant changes to both types of FFCRA leave.
Is Paid Leave Required?
No, the mandate to require leave under FFCRA expired on December 31, 2020. To date, this requirement has not been extended by Congress. Therefore, providing paid leave under federal law is voluntary.
State or local law, however, may require employers to provide paid leave. Employers should consult with local employment counsel to understand jurisdictional requirements and if voluntarily providing FFCRA will meet any local requirements.
For What Reasons Can an Employee Take Leave?
The ARPA adds three reasons to the original six for which an employee can take paid leave under EPSL. These three new reasons include time to (i) obtain the COVID-19 vaccine, (ii) recover from the COVID-19 vaccine, and (ii) obtain COVID-19 testing and results.
Perhaps the most significant change under the ARPA is the expansion of the reason for receiving EFMLEA benefits. As of April 1, 2021 the reason for EFMLEA is expanded to all nine of the same reasons covered by EPSL.
How Much Paid Leave is Provided under the ARPA?
Employees are eligible to take up to a maximum of 10 days for EPSL between April 1, 2021 and September 30, 2021.
EFMLEA leave is now paid for the entire twelve weeks. However, the leave still runs concurrently with FMLA, so if an employee has exhausted their FMLA leave they would not be eligible for any additional time off under EFMLEA.
The amount of pay available will range from 100% to 2/3 of the employee’s regular base rate (or minimum wage if higher) for EPSL depending on the reason for the leave, and 2/3 of the employee’s regular base rate (or minimum wage if higher) for all reasons under EFMLEA.
If an Employer Voluntarily Provides Paid Leave, Can They Claim A Tax Credit?
Yes, so long as the employer, employee, and leave remain eligible under the ARPA-revised version of FFCRA, the employer will continue to be able to take a dollar-for-dollar tax credit for leave provided until September 30, 2021.
While the requirement that paid leave expired on December 31, 2020, Congress approved an extension of the tax credit for employers who voluntarily continued to provide FFCRA through March 31, 2021. ARPA provides a similar provision, allowing any employer who voluntarily provides the paid leave under the new FFCRA provisions of the ARPA, to also take a dollar-for-dollar tax credit for leave provided during April 1, 2021 through September 30, 2021.
It is important that employers follow required documentation and record keeping procedures to claim the tax credits. Under the ARPA, employers must also be cautious not to run afoul of new anti-discrimination provisions which prevent favoring fulltime, salary, or tenured status employees in providing paid leave. Employers who only provide paid leave to one group of employees risk the loss of the tax credits and could face other claims of discrimination.
What If an Employer Does Not Want to Provide the Paid Leave?
Providing paid leave under federal law after December 31, 2020 became voluntary. If an employer chooses not to provide FFCRA paid leave as of January 1, 2021, when the paid leave mandate ended, there would be no penalty.
All employers should clearly communicate their COVID-19 leave policy, regardless of whether they choose to provide the paid leave or not. Safety regulations, including OSHA’s duty of care, require employers to provide flexible leave policies that encourage employees to stay home when sick and quarantine as necessary.
COBRA Premium Assistance Subsidy
The ARPA also provides a new COBRA premium assistance subsidy to qualified employees or former employees. However, participation in this subsidy by employers (and applicable insurers) is not voluntary. Proper notice and assistance must be provided by employers (and insurers) beginning on April 1, 2021. A tax credit for employers (or insurers) is available for eligible subsidies that are provided.
What is the Premium Assistance Subsidy?
The Premium Assistance is a subsidy that pays for the full premium cost of COBRA for Assistance Eligible Individuals (AEIs) during the April 1, 2021 to September 30, 2021 period.
Who Is Eligible for the Premium Assistance Subsidy?
All AIEs are eligible for the premium assistance subsidy beginning on April 1, 2021. An AEI is (i) a qualified individual employee under COBRA (ii) who is eligible for COBRA due to the employee’s involuntary termination of employment (except for termination due to gross misconduct) OR a reduction of hours (iii) whose is qualified for COBRA during the period beginning on April 1, 2021 and ending Sept. 30, 2021 and (iv) the individual elects COBRA.
AEIs include employees who become eligible for COBRA during the April 1, 2021 to September 30, 2021 period AND employees who became eligible for COBRA prior to that period and who continue to remain eligible for any portion of that period. For example, if someone were terminated in December 2020, and otherwise qualified as an AEI, they could elect COBRA and the subsidy during the April 1, 2021 to September 30, 2021 period because their 18 months of COBRA eligibility would not have expired.
Who Pays for the Premium Assistance Subsidy?
AEIs who elect COBRA and the Premium Assistance during April 1, 2021 to September 30, 2021 do not pay for the COBRA premium. The premium is paid in full by the entity to whom the premiums are otherwise payable to, this may be the employer or the insurer depending on the type of coverage and the plan size. The same entity that pays the premium is then able to take a tax credit for the subsidy.
What Notice Obligations Do Employers Have ?
Employers have to provide eligible employees with notice of their ability to elect the Premium Assistance subsidy. These notices must be provided to both newly qualifying employees and individuals who were previously provided with COBRA notices but may remain COBRA eligible and may now be eligible for the subsidy as well. Employers also have to provide AEIs who elect the subsidy with notice prior to the time when their subsidy is due to expire. The Department of Labor provided model notices for employers.
Employers should carefully consider additional obligations triggered by these April regulatory changes or any updates that may be necessary to take advantage of the tax credit opportunities.
If you have any questions regarding the employment changes under the ARPA, or any other employment related legal issue, please contact Leah K. Sell.
Leah Sell is an Associate with Leech Tishman, and a member of the firm’s Employment & Labor Practice Group. She is based in the firm’s Pittsburgh office and can be reached at 412.261.1600 or email@example.com.
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