The American Rescue Plan Act (ARPA) is the latest of the bills enacted by the federal government to assist those impacted by the pandemic. Although this version of support does not greatly impact HR departments compared to other plans, there are COBRA subsidies and extensions that do affect you. Here is an outline to bring you up to speed on the American Rescue Plan Act.
Optional Extension Of Sick and Family Leaves
An extension to the Families First Coronavirus Response Act (FFCRA) includes optional participation in the Emergency Paid Sick Leave (EPSL) and Emergency Family and Medical Leave (EFMLA) for employers as of April 1, 2021. The extension is marked to end September 30, 2021. These tax credits are only available to employers with fewer than 500 employees and include caps. Employers must follow the original provisions of the FFCRA which includes you:
- Can’t deny EPSL or EFMLA to an employee if they’re otherwise eligible
- Can’t terminate them for taking EPSL or EFMLA
- Must continue their health insurance during these leaves
The extension also provides the following changes for employees:
- EPSL can be applied when getting the COVID vaccine and recovery from potential side effects
- Employees are now covered during the period they take and wait for results from a COVD-19 test, whether it is due to potential exposure or at the request of your company
- A new bank of leave on April 1 is available for full-time employees of 80 hours and part-time employees for a prorated amount
Leave must be granted in an equitable manner ensuring highly compensated employees or full-time employees are not favored and that there is no discrimination based on an employee’s tenure.
Emergency Family and Medical Leave (EFMLA) Changes
The American Rescue Plan Act now entitles employees to apply for EFMLA for any reason, in hand with the original childcare issue. Changes also include:
- Removal of the 10-day unpaid waiting period
- An increase to the reimbursable tax credit cap to $12,000 for all, while the daily cap of $200 is unchanged
- As noted above for sick and family leave, inconsistencies in granting leave won’t be tolerated and can lead to discrimination claims
Clarity from the government on whether employees are entitled to a new 12-week bank of EFMLA is yet to be provided.
Reasons for Using EPSL and EFMLA
Employees qualify for EPSL or EFMLA based on the same criteria. This includes when an employee is under quarantine or isolation based on either federal, state, or local orders or when advised by a healthcare provider. This requires employees to be:
- Experiencing symptoms of COVID-19 and seeking a medical diagnosis
- Awaiting the results of a diagnostic test
- Obtaining a COVID-19 vaccination or recovering from any injury, disability, illness, or condition related to the vaccination
- Caring for another person who is isolating or quarantining on government or doctor’s orders
- Caring for a child whose school or place of care is closed due to COVID-19
In most cases, it is in the best interest of both employees and employers to exhaust EPSL first, because it has a higher tax credit. However, in cases where it is used to care for others, EFMLA might be best.
Tax Credit Review
There are no changes to the tax credits available with the introduction of ARPA, other than an increase in the aggregate cap for EFMLA. As well, you can claim a credit for your share of Medicare tax on the employee’s wages and the cost of maintaining the employee’s health insurance when they are on leave.
The creation of Consolidated Omnibus Budget Reconciliation Act (COBRA) subsidies is another aspect you should understand. Although the COBRA subsidy doesn’t apply during FFCRA leaves, since employees can maintain their health insurance on the same terms as if they were working, there are other considerations including:
- Those enrolled in your group health plans might lose coverage if their work hours are reduced or you terminate them. In this case, they can continue coverage under COBRA, but premiums are very high so many won’t be able to afford the coverage.
- Under ARPA there is a 100% COBRA subsidy when an employee’s work reduction or termination was involuntary. In this case, the subsidy applies for up to six months of coverage during the ARPA coverage period as long as the employee’s COBRA period doesn’t expire earlier.
- Group plans under federal COBRA rules require you to pay the COBRA premium and receive reimbursement through a refundable payroll tax credit.
- If you have less than 20 workers, you should be exempt from the federal COBRA rules. However, keep in mind your group medical insurance plan might be subject to a state’s mini-COBRA law. If that is the case, the subsidy is administered by the carrier who will be reimbursed by the government.
Your job is to work with your group health plan carriers and vendors to decide how you want to administer the new subsidy provision. Just remember that employees terminated before April 1, 2021, but are still in their COBRA election window are included. Check in after April 10 to learn more about federal plans designed to allow model notices to tailor make your plans.
About The Author
Ingrid is the Content Marketing Manager at Paypro, managing both inbound and outbound marketing initiatives for the company. She has 15+ years’ of extensive marketing communications experience, leveraging brand awareness and strategic partnerships to increase sales revenue for a diverse group of B2B brands.