On March 11, 2021, President Biden signed into law the American Rescue Plan Act to support the American economy and provide $1.9 trillion in relief funds. We dug into the COVID relief bill and what businesses need to know and do.
FFCRA Tax Credits Continue
The Families First Coronavirus Rescue Plan Act (FFCRA) and the requirement employers provide emergency paid sick leave and emergency family and medical leave expired at the end of 2020. Around the same time the FFCRA ended, Congress passed an extension of the tax credit for employers who volunteered to provide emergency leave through March 31, 2021.
The American Response Act extends that tax credit to employers who opt to continue providing FFCRA leave from the end of March to September 30, 2021.
As a refresher, FFCRA-related emergency paid sick leave, and emergency paid family, and medical leave is provided for reasons including:
- Acquiring an immunization/vaccination for COVID-19
- Recovering from an illness, injury, disability, or injury related to the COVID-19 immunization
- Waiting on test or diagnoses results for COVID-19
Additionally, there is a non-discrimination rule to ensure that employers consistently implement the leave.
Employers should also note that if they voluntarily provide sick leave, the American Rescue Act allows employers to voluntarily provide an additional ten days of FFCRA paid sick leave, starting April 1, 2021. This is not a requirement.
What Should Businesses Do?
- Review your current sick leave and family and medical leave practices.
- Consult with your legal counsel regarding state or local laws with paid sick leave requirements.
- If you’re not already, determine if your business will want to voluntarily provide emergency paid sick leave to your employees.
- Consult your legal counsel on how best to implement the leave in a consistent, uniform manner.
- Continue to monitor for future updates about FFCRA leave through the Biden Administration.
Small Business Relief
Food and Beverage Businesses. The American Rescue Plan provides $25 billion to the Small Business Administration for a program targeted to support restaurants and other food and beverage businesses. The grants are available for up to $10 million and can be applied to payroll, mortgage, rent, utilities, and food and beverage expenses.
Paycheck Protection Program (PPP). The Act provides $7 billion to the PPP to help small businesses with the possibility of 100% loan forgiveness. The bill also provides an expansion to certain nonprofit organizations, and some businesses may be eligible for a second loan from this program.
Economic Injury Disaster Loan (EIDL) Advance Program. Businesses with less than 10 employees will be given priority. $15 billion in funds will be distributed to the EIDL Advance program to help businesses experiencing revenue losses resulting from COVID-19. Businesses could receive assistance to help cover financial and operating costs that would otherwise have been if not for the pandemic.
Shuttered Venue Operators Grant (SVOG) Program. This assistance program, which will receive $15 billion in funding, is geared for businesses like live venues, theaters, performing arts centers, museums, etc. Those businesses that qualify for SVOG could also qualify for loans under the PPP.
What Should Employers Do?
- Consult with your legal counsel to determine if your business may qualify for one of the above programs.
Update 3/16/21: The Department of Labor (DOL) published new guidance for state agencies on how to implement the American Rescue Plan Act unemployment provisions. The DOL’s letter confirms the waiver of interest extension on outstanding state trust fund loans, the complete funding of Extended Benefits, the first week of Unemployment Compensation from the start of 2021, and the Short Time Compensation benefits or Work Sharing. It also provides states with guidance on eligibility dates and coordinating benefits for regular and COVID-related unemployment insurance programs that operate at the same time and where people might qualify for more than one program at varying times.
The American Rescue Plan Act extends and increases the previous unemployment benefits that were provided under the CARES Act and the previous stimulus package (expiring this month). There are a few provisions to note:
- Unemployment benefits will remain at $300/week. The benefits are available until September 6, 2021.
- The first $10,200 of unemployment received during 2020 will be untaxable for households that have an income of less than $150,000.
- The Pandemic Unemployment Assistance (PUA) has been extended for those who are self-employed or gig workers and might not otherwise receive state unemployment benefits.
What Should Employers Do?
- Make a note of the September 6 end date and adjust your transition plans accordingly.
Multiemployer Union Penions
Under the American Rescue Plan Act, there are no surcharges for employer contributions, no employer PBGC premiums, and withdrawal penalties. Those multiemployer plans that are categorized as “critical and declining” will be given a lump sum by the U.S. Treasury to pay benefits through 2051. There are restrictions on how this money can be used, and the rules around this provision are subject to change.
What Should Employers Do?
- If your business contributes to one of these plans, regularly request annual estimates of each plan’s withdrawal liability.
Other Tax Credits and Benefits
The ERC has been extended through December 31, 2021, and expanded to include some start-up businesses that might not have previously qualified. Those particular businesses have an ERC capped at $50,000/quarter.
Update 4/27/21: The IRS published Notice 2021-20 in March 2021 to expand the retention credit to December 31, 2021 and to revise the definition of eligible employers. Thus, employers that are eligible can claim credit for paying qualified wages to employees. Notice 2021-23 was published April 2, 2021, to provide further guidance for eligible employers on how to handle the first two quarters of 2021.
Notice 2021-20 provides guidance for qualified wages between March 12, 2020 and January 1, 2021. Notice 2021-23 states that eligible employers may claim Employee Retention Credit (ERC) for qualified wages paid in the first and second quarters of 2021.
Employers who received a PPP loan may also retroactively claim the Employee Retention Credit. Employers who choose to do this must file Form 941-X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund for the applicable quarter(s) where qualified wages were paid. Any expenses that are eligible for PPP can’t be included in the ERC application.
The Expansion and Extension
At the end of 2020, Congress passed an appropriation act the extended the Employee Retention Credit (ERC) through June 30, 2021. Called the Consolidated Appropriations Act (CAA), it also expanded the ERC credit rate from 50% to 70% of qualified wages and opened up eligibility by:
- Decreasing the required year-over-year gross receipts decline from 50% to 20%
- Allowing employers to use previous quarter gross receipts to determine eligibility
- Increasing the creditable wages limit from to $10,000 per quarter (calendar year), as opposed to $10,000 total
- Changing the 100-employee eligibility to employers with 500 or less employees
The American Rescue Plan Act changed the extension date from June 30, 2021 to December 31, 2021.
For the first two quarters of 2021, employers Notice 2021-23 also expands eligibility to universities or colleges that have a main function to provide medical or hospital care, as long as they meet the other eligibility requirements.
Notice 2021-23 expands the employee retention credit to 70% of qualified wages that an employer pays in a calendar quarter. The maximum credit for qualified wages paid to an employee is $7,000 for each of the first and second quarters, totally a max of $14,000.
For small eligible employers, be sure to read pages 14-16 of Notice 2021-23 for specific information on calculating the average quarterly wages for the 70% advance rule, calculations for seasons workers. Small employers aren’t eligible for advanced payments of the ERC if they came into existence in 2021, but they can claim the retention credit on Form 941.
Additional Resource: Notice 2021-23
Child Tax Credit.
Individuals who earn more than $75,000 or joint returns of $150,000 or more are phased out of the law’s child tax credit. The credits are fully refundable, so those individuals or families who pay little to no tax can still take advantage of this credit either through monthly payment or lump sum.
The bill also temporarily increases the credit amount as follows:
- Per child ages six through 17: $3,000
- Per child under the age of six: $3,600
COBRA Premiums: COBRA Premium Assistance Under ARPA (5/18/21)
On May 18, 2021, the IRS published Notice 2021-31 to help employers implement the COBRA subsidy provisions outlined in the American Rescue Plan Act. It answers 86 questions about issues that might have come up about the COBRA premium assistance including eligibility, involuntary termination, reduction of hours, coverage of COBRA premium assistance that includes the beginning, end, as well as extensions, and calculating COBRA premium assistance credit, and includes claiming the COBRA premium assistance credit.
- An assistance eligible individual (AEI) also includes a qualified beneficiary (e.g., spouse or child) if the AEI’s reduction in hours or termination results in the qualified beneficiary losing coverage.
- Someone who loses group health coverage because the covered employee’s termination was related to gross misconduct is not considered a qualified beneficiary can’t be an AEI.
- Someone could be an AEI more than once in the six-month period a subsidy is provided.
- Employers may require people to submit a self-certification about their eligibility status in terms of a reduction in hours or involuntarily termination. They may also request people to self-certify their eligibility status of other disqualifying plan coverage or Medicare. Employers must keep a record of these self-certifications.
- Only a reduction in hours or involuntary termination are considered qualifying events for COBRA premium assistance.
- People who lose health plan coverage that isn’t subject to COBRA aren’t eligible for COBRA premium assistance.
- The Notice states that the definition of involuntary termination depends on facts and circumstances, but is otherwise considered a result of a few things:
- For cause.
- An employer’s unilateral or independent decision to terminate employment where the employee was willingly working.
- The employee initiated the termination, like a constructive discharge, because of an employer’s actions that created a negative relationship for the employee.
- The employee participated in a window program, like a severance agreement to end employment in a certain time frame.
Calculating COBRA Premium Assistance Credit
- This amount is based on the premium the AEI would have been charged without the premium assistance and doesn’t include any subsidy amount the employer would have provided.
Claiming COBRA Premium Assistance Credit
- Government agencies are eligible.
- A premium payee will need to claim the credit on federal employment tax returns, e.g., Form 941. They will need to report the credit and the number of individuals who received COBRA premium assistance.
- If the premium payee doesn’t have any employment tax liability, they can still claim the credit on Form 941 for whichever quarter the payee was entitled to the credit.
- Third-party payers may be treated as premium payees for the need to claim the premium assistance under some conditions.
Updated with Model Notice Information (4/7/21)
Update 4/7/21: DOL released a new website, called COBRA Premium Subsidy, of resources for employers and employees to address the COBRA Premium Subsidy under the American Rescue Plan Act. The resources include Model Notices for continued coverage election and extended election periods that employers should use with their employees, FAQs, and more.
Model General Notice and COBRA Continuation Coverage Election Notice. The Act provides a 100% COBRA premium subsidy starting April 1, 2021, through September 30, 2021, for employees that have qualifying events or have been involuntarily terminated. Employers must send the subsidy along to the individual to pay for COBRA during this time. Update 4/17/21: The DOL published the Model General Notice and COBRA Continuation Coverage Election Notice that can be used for these individuals.
Model Notice in Connection with Extended Election Period. There is a provision under the American Rescue Plan Act where terminated employees who didn’t elect COBRA coverage by April 1, or elected for it and then discontinued it, may elect it again during a special enrollment period that starts on April 1 and ends 60 days after the COBRA notification date was sent. Update 4/7/21: These individuals and those who are currently enrolled in COBRA must be notified of the additional extended election of COBRA continuation coverage by May 31, 2021. Here is a Model Notice in Connection with Extended Election Period.
Model Alternate Notice. This notice must be used for insured individuals that qualify for the subsidy through a state-run continuation plan between April 1, 2021 through September 30, 2021.
Model Notice of Expiration of Premium Assistance. This Model Notice is for group health plans to send to Assistance Eligible Individuals within 15-45 days before their premium assistance ends. Plan Administrators must fill in the empty fields with the correct information.
Summary of COBRA Premium Assitance Provisions under the American Rescue Plan Act of 2021. Employers must provide the Summary of COBRA Premium Assitance Provisions under the American Rescue Plan Act of 2021 alongside the Model General Notice and COBRA Continuation Coverage Election Notice, Model Alternative Notice, and Model Notice in Connection with the Extended Election Period. The Summary includes eligibility information, deadlines, what to do if you become eligible for other health coverage, penalties, and the form to apply for the American Rescue Plan Premium Assistance and instructions on returning the form.
COBRA Premium Assistance under the American Rescue Plan Act of 2021 FAQs. The document defines the temporary COBRA premium assistance, which plans it applies to, how to tell who is eligible for COBRA premium assistance, how long assistance will last, who is eligible for the additional election opportunity, how states aren’t impacted by the premium assistance, how to apply for premium assistance and how long you have to apply for it, how it will be provided to you, if you will receive a refund if you are considered an Assistance Eligible Individual, switching coverage options if you use another COBRA plan or individual market health insurance plan, enrolling other family members, if you are responsible for administrative fees, and what happens when your COBRA coverage ends on or before September 30, 2021. It also answers questions about employer notice requirements and what information must be included on the notices.
The coverage could also end early for these individuals if they reach their maximum coverage period before September 2021 or become eligible for another group health plan or Medicare.
The Department of Labor will be publishing model notices within 30 days after the American Rescue Plan Act was enacted.
In addition to the new information, the DOL has General FAQs on COBRA Continuation for Employers and Advisors, as well as for Workers to help both audiences understand COBRA, who pays for it, what continued coverage means, who is eligible, other options, and more.
What Should Employers Do?
- NEW: Determine if you will add the COBRA Subsidy Information to the COBRA General Election notice or provide the Model General Notice and COBRA Continuation Coverage Election Notice in addition to the COBRA General Election Notice.
- NEW: Identify the individuals that should be notified of the additional opportunity to elect COBRA coverage. Notify qualifying individuals of the additional opportunity to elect COBRA coverage by May 31, 2021.
- NEW: The Summary of COBRA Premium Assistance under the American Rescue Plan Act of 2021 must be provided alongside the Model General Notice and COBRA Continuation Coverage Election Notice, Model Alternative Notice, and Model Notice in Connection with the Extended Election Period.
- Updated: The Model Notice of Expiration of Premium Assistance must be provided at least 15 to 45 days before the expiration date of the premium assistant.
- Review your current COBRA notification process and information.
- Review and identify any individuals who had a qualifying event in 2020 and could be eligible and elect for COBRA during the subsidy period.
- Consult with your legal counsel on your plan of action to identify these individuals, your notices, and procedures to ensure compliance with these changes.
- Whether as an amended or separate document the following information must be provided: the forms necessary to establish the individual’s eligibility for COBRA premium assistance, name, address, phone number to contact the plan administrator, extended election period description, information about the option to enroll in different coverage.
- Notify individuals when their subsidy will end before September 30, 2021.
- Monitor the DOL for the release of the Model Cobra Notice.
Over $15 billion in the American Rescue Plan Act will go towards improving and expanding the distribution and administration of the COVID-19 vaccine across the county. Initiatives to promote vaccination, increase access, development, manufacturing and more also fall within this effort.
What Should Employers Do?
- There continue to be no workplace requirements regarding vaccinations.
- Employers should review their current policies and procedures when it comes to a workforce that is partially vaccinated.
- Seek your legal counsel to ensure that any changes you make to your policies are procedures that meet with federal, state, and local requirements.
The federal government will be sending up to $1,400 in stimulus checks to individuals making less than $75,000 (or $150,000 for those filing jointly).
What is Not Included in the Relief Package
During much debate, a few provisions were eliminated from the final version of the legislation. It is worth noting what items don’t make the cut so that employers aren’t surprised if these issues come back to the forefront in future legislation.
- $15 minimum wage
- Phasing out tip credits were initially part of the legislation but were ultimately eliminated.
COBRA Premium Subsidy Website
President-elect Biden Announces American Rescue Plan (January 20, 2021 Press Release)
Remarks by President Biden on the American Rescue Plan and Signing of Executive Orders (January 22, 2021 Press Release)
Remarks by President Biden at Signing of the American Rescue Plan (March 11, 2021 Press Release)