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What the American Rescue Plan Act Means for Employers

March 19, 2021

Cleveland, Ohio

On March 11, 2021, President Biden signed into law the American Rescue Plan Act (“ARPA”). The ARPA contains a $1.9 trillion budget and has several provisions that directly affect employers.

Increase Wages Eligible for Family Leave Credit
The amount of wages eligible for the family leave credit increases from $10,000 to $12,000 per employee and removes the two-week waiting period for Emergency FMLA.
 
Paid Leave
ARPA extends Families First Coronavirus Response Act (“FFCRA”) tax credits through September 30, 2021 to employers with less than 500 U.S. employees who voluntarily offer paid emergency sick and family leave as initially required under FFCRA. ARPA additionally provides tax credits for paid leave to the employee for receipt of the COVID-19 vaccine, recovering from complications due to the vaccine, and the employee awaiting results of a COVID-19 test or diagnosis. Employers will be denied the tax credit if the employer discriminates in providing paid leave in favor of highly compensated employees, full-time employees or on the basis of employment tenure.

Further, as of April 1, 2021, employers may receive a tax credit for voluntarily offering an additional 10 days (up to 80 hours) of paid sick leave beyond the 10 day-limit previously provided. Employers may also offer emergency FMLA leave and receive a tax credit for all of the qualifying reasons for leave stated in the FFCRA and the new reasons for leave stated above. Previously, under the FFCRA, emergency FMLA leave was only available for those who needed to care for a child whose school was closed or whose caregiver was unavailable due to COVID-19. The ARPA raises the maximum tax credit limit for emergency FMLA from $10,000 to $12,000 per employee. 

100% COBRA Subsidy
ARPA provides a 100% subsidy of COBRA premiums from April 1, 2021, through September 30, 2021, for employees and their family members who lost health insurance due to the involuntary termination (or reduction in hours) of their employment. Eligible individuals may elect subsidized COBRA even if they initially declined COBRA or enrolled in COBRA and then discontinued it. The subsidy is not available for employees who voluntarily terminated their employment or who qualify for another group health plan. Employers will be required to cover the COBRA premiums and receive a refundable payroll tax credit. Within 60 days of April 1, 2021, a notice of a special enrollment period must be sent to all eligible participants who have not yet elected COBRA coverage or who have elected COBRA coverage but then discontinued it.
 
Dependent Care Assistance Programs (DCAP)
The annual limit for DCAP elections in 2021 has increased temporarily from $5,000 to $10,500 per year (and from $2,500 to $5,250 for those married filing jointly). Employers may amend their plan to allow the increase if the amendment is adopted by the last day of the plan year. 
Unemployment
The ARPA extends three unemployment programs through September 6, 2021:
  • Pandemic Emergency Unemployment Compensation (“PEUC”)
  • Pandemic Unemployment Assistance (“PUA”)
  • Federal Pandemic Unemployment Compensation (“FPUC”)/Mixed Earners Unemployment Compensation (“MEUC”)
Both the PEUC and PAU are continued at the current rate of $300 per week boost to unemployment benefits, and the MEUC is continued at the current rate of $100 per week boost. 

Employee Retention Credit
The employee retention credit implemented under the CARES Act is extended to December 31, 2021. This allows qualifying employers to claim a credit for wages paid to workers the employer retains on their payroll during the pandemic. 

Small Business and Pension Plan Relief
Additional grants up to $10 million are available to restaurants and other food and beverage establishments through the Small Business Administration (“SBA”). The Paycheck Protection Program was funded with an additional $7 billion. The Shuttered Venue Operators Grant which provides emergency assistance for eligible venues affected by COVID-19 is available through the Small Business Administration. Also, an additional $15 billion will be available for Economic Injury Disaster Loans through the SBA, with priority funding for employers with less than 10 employees. Lastly, the ARPA includes the Butch Lewis Emergency Pension Plan Relief Act of 2021 available for certain single and multiemployer plans. 

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