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Legal Alert

The American Rescue Plan Act of 2021: Key Implications for Employers

March 24, 2021

The American Rescue Plan Act of 2021 (ARPA) provides another round of COVID-19 relief to individuals and businesses as well as specific mandates for employers, effective April 1, 2021. Key implications for employers regarding the optional FFCRA leave provisions, extension of unemployment benefits, and COBRA subsidies are summarized below for your convenience.

Optional FFCRA Leave Extended and Expanded

The Families First Coronavirus Response Act (FFCRA) provided for emergency paid sick leave and expanded family and medical leave to employees absent from work for COVID-19 related reasons. Beginning January 1, 2021, employers had the option of providing FFCRA paid leave. Qualifying employers who elected to provide FFCRA paid leave could take a dollar-for-dollar payroll tax credit through March 31, 2021, for the wages paid.

The ARPA extends the availability of this tax credit for employers through September 30, 2021, and modifies eligibility and coverage in a few significant ways:

  • Expanded Coverage for Paid Sick Leave. Employees may now take paid sick leave to obtain a COVID-19 vaccine or to recover from side effects of the vaccine. The ARPA also expanded the qualifying reason for paid sick leave that relates to seeking a medical diagnosis of COVID-19. Paid sick leave is now available to employees seeking or waiting for a COVID-19 test result requested by an employer or following exposure to COVID-19. Employees no longer need to be experiencing symptoms of COVID-19 and seeking a medical diagnosis of COVID-19 from a health care provider to be eligible for paid sick leave under this qualifying reason.
  • Reset of Paid Sick Leave Clock. Employees who previously took paid sick leave are eligible for an additional 10 days of leave beginning on April 1, 2021. Unused leave from before March 31, 2021, does not roll over.
  • Increased Eligibility for Paid Expanded FMLA. Previously, expanded FMLA was only available to employees taking care of a child whose school or place of care was closed or unavailable due to COVID-19. Employees now may take expanded FMLA leave for any of the qualifying reasons provided in the FFCRA. There is no reset for the paid expanded FMLA. It remains capped at 12 weeks.
  • No Waiting Period for Paid Expanded FMLA. Employees are no longer subject to the 10-day (or 2 weeks) waiting requirement. The entire 12-week period of expanded FMLA is paid.
  • Increased Cap for Expanded FMLA. The limit on expanded FMLA has increased from $10,000 to $12,000 (because of the two additional weeks of paid leave). The daily limit of two-thirds of an employee's wages up to $200 per workday remains unchanged.
  • Non-Discrimination Rules. Employers are eligible for the tax credit only if they uniformly provide leave to all employees, without discriminating against certain categories of employees such as in favor of full-time employees or on the basis of tenure.

Additional guidance from the Department of Labor is anticipated. Maslon's Labor & Employment Group will provide updates as such guidance becomes available.

Extension of Unemployment Benefits

Much of the focus of the ARPA has been on the provisions affecting individuals and extending unemployment benefits. Under the new law:

  • The additional $300 weekly federal unemployment supplement will continue through September 6, 2021.
  • The Pandemic Emergency Unemployment Compensation (PEUC) is extended to 53 weeks, which means that eligible recipients of unemployment benefits can potentially receive up to 79 weeks of benefits (which includes 26 weeks from states) through September 6, 2021.
  • The Pandemic Unemployment Assistance (PUA) program is also extended through September 6, 2021, and the total number of weeks of benefits available to eligible individuals increases from 50 to 79 weeks. The PUA program covers the self-employed, independent contractors, part-timers, and others who are not eligible to receive regular unemployment benefits.
  • Taxpayers who made less than $150,000 in 2020 will be able to exclude up to $10,200 in unemployment benefits from federal income tax for the 2020 tax year.

COBRA Subsidies Available to Eligible Employees

Starting April 1, 2021, through September 30, 2021, the federal government will subsidize COBRA coverage for employees (and their covered family members) who lost group health coverage as a result of an involuntary termination or reduction in hours due to the pandemic. In sum, employers will pay an employee's COBRA premiums and will receive a payroll tax credit to cover the cost of the COBRA premiums. The law requires a special enrollment period and notice. A model notice and additional guidance is expected soon from the Department of Labor. Employers should contact their third party administrators or Maslon's Labor & Employment Group to help ensure compliance with the law's requirements.

We Can Help

The changing legal landscape of COVID-19-related obligations and tax credits is complicated. In addition to the ARPA, there is a patchwork of state and local legislation for employers to maneuver. Please contact Maslon's Labor & Employment Group if you need help navigating obligations and opportunities presented by laws such as the ARPA.

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