President Biden signed the American Rescue Plan Act (ARPA) into law on March 11, 2021. There are several provisions affect employers and businesses.
- Assistance-eligible individuals (employee, former employee, covered spouse, or covered dependent) who have lost employer provided health benefits may have 100 percent of their COBRA premiums subsidized for the period beginning April 1, 2021, and ending September 30, 2021. An individual is eligible if they elect COBRA due to involuntary termination or reduction of hours.
- Individuals who have not elected COBRA as of April 1, 2021, are eligible for the subsidy, as are individuals who elected but ended COBRA coverage before April 1. They may elect COBRA starting April 1, 2021, so long as they are still within their coverage period.
- Employers must inform covered individuals of the availability of the subsidy beginning on April 1, 2021. The DOL will issue model notices soon.
- Employers may take a quarterly tax credit against their Medicare taxes for the subsidy, and they should consult a tax expert before filing.
- A dependent care assistance program (DCAP), which can also be a dependent care flexible spending account (DCFSA), are programs where employees make pre-tax contributions under a cafeteria plan for child or elder care expenses. These would normally cap at $5,000 (or $2,500 for separate married returns). Under the ARPA, for 2021 only, that is increased to $10,500 (or $5,250 for separate married returns).
- This assistance applies to plan years that begin after December 31, 2020, and before January 1, 2022.
- Plans are not required to adopt this change but may do so if desired. To do so, a plan amendment may be required. Employers should consult with their providers or brokers for more information.
Changes to Emergency Paid Sick and Family Leave
- Tax credits are extended to through September 30, 2021, for employers that voluntarily provide paid sick leave and paid family leave under the Families First Coronavirus Response Act (FFCRA).
- The following reasons qualify for taking emergency sick or family leave. These are in addition to the current reasons.
- the employee is obtaining immunization (vaccination) related to COVID-19;
- the employee is recovering from any injury, disability, illness or condition related to such vaccination; or
- the employee is seeking or awaiting the results of a diagnostic test or medical diagnosis for COVID-19 (or their employer has requested such a test or diagnosis).
- ARPA adds rules that state no tax credit is available if the employer discriminates against highly compensated employees, full-time employees, or employees on the basis of tenure with the employer when determining if the employee is eligible for emergency paid leave.
- The Act also resets the 10-day limit for the tax credit for paid sick leave under the FFCRA beginning April 1, 2021. In other words, employers may voluntarily provide an additional 10 days of FFCRA paid sick leave beginning April 1, 2021, and would be eligible for a tax credit for doing so.
- The Department of Labor (DOL) will be releasing further guidance soon.
- The Act extends the $300 unemployment benefit to September 6, 2021.
- The first $10,200 in unemployment benefits received in 2020 are non-taxable for households with incomes under $150,000.
Small Business Benefits
- ARPA provides $25 billion for restaurants and other food and drinking establishments. These grants are available for up to $10 million for those eligible and can be used to pay expenses like payroll, mortgage, rent, utilities, and food and beverages.
- ARPA adds another $7 billion to the current Paycheck Protection program, $15 billion to the Economic Injury Disaster Loan (EIDL) Advance program (primarily focused on employers with 10 or fewer employees), and additional funding to the Shuttered Venue Operators Grant (SVOG) program for shuttered live venues, theaters, performing arts venues, etc.
- Contact your bank or a Small Business lender for more information.
We will keep you updates as we get more information. Give us a call if you have questions.