On March 11, 2021, President Biden signed into law H.R. 1319, the American Rescue Plan Act (the “Act”). While the bulk of this legislation was targeted elsewhere, there are still several key areas of importance for businesses.
Employee Retention Credit Extended through 2021
The updated 70% of the first $10,000 in wages per employee per quarter is extended from June 30, 2021 to December 31, 2021. This results in a maximum credit of $28,000 per employee in 2021. Remember, to qualify an employer must experience a 20% drop in revenue compared to the same quarter in 2019 or be subject to a full or partial suspension of operations due a government order. In addition, the Act also provides for a category of “Severely Financially Distressed Employers”, which are those that have less than 10% of the revenue of the same quarter in 2019. These employers are not subject to the 70% cap and can claim up to the full $10,000 per employee per quarter.
FFCRA Paid Sick Leave and Family Leave Extended
The prior March 31 end date has been extended through September 30, 2021. As a reminder, the year end extension allowed employers to voluntarily participate and collect the credits, however it did not extend the benefit beyond the original CARES Act limits (80 hours in the case of paid sick leave). The Act now resets this limit effective for the period of April 1 – September 30, meaning employers can offer an additional 80 hours of COVID related Sick Leave during that period. Additionally, the Act also provides additional eligible reasons for the leave, including waiting for COVID test results, time off to get a vaccine, and time to recover from the effect of a vaccine. Again, participation in 2021 is still voluntary, but given this reset it makes sense for employers to take advantage of this credit in 2021.
COBRA Subsidy for COVID related Job Losses
Not receiving as much press is this part of the act which now provides a 100% subsidy for up to six months for anyone who has lost coverage due to involuntary termination or reduction in hours due to COVID. This subsidy will be fully reimbursed to employers as a credit against Medicare payroll taxes.
The Act also requires that employees with job losses since November 2019 who failed to elect COBRA or who elected and let coverage lapse are to be given a “second chance” to elect COBRA. Employers will be required to send a new notice (yet to be provided) and allow 60 days from receipt to elect COBRA. Any election would be prospective only, and not retroactive. Additionally, this does not expand the 18 months of COBRA, even if in the middle of the subsidy period.
Our key message here is you need to be talking with your benefit broker/provider to be prepared both for the required notices as well as applying the subsidies/taking the credits.
PPP Expansion/EIDL Advances
The Act also provided an additional $7B in PPP funding and expanded non-profit eligibility, bringing the total PPP funding to over $813B. As reported previously, there are additional eligibility requirements to meet in order to take a 2nd PPP draw.
Also, an additional $15B in Economic Injury Disaster Loan (EIDL) Advance monies were applied. Priority funding is being targeted at small employers with less than 10 employees.
While most of these changes are extensions/modifications to existing programs, the FFCRA extension (including the reset of the 80 hour eligibility) and the 6 month COBRA subsidy (with the requirement to send notices and allow for re-enrollment) are significant. Like other legislation, we will be waiting for specific guidance on how to implement the changes. However, especially with the COBRA changes, now is the time to be in contact with your benefits provider to fully understand how they intend to comply with the changes.
With the FFCRA leave extension, the opportunity to offer a fresh 80 hours of leave is welcome and one we advise our employers to take advantage of starting April 1.
As always, please reach out if you have any questions. The CTCS Group is here to help.
Chris Thomas, SHRM-SCP is the Principal Consultant with The CTCS Group in Canton, GA. The CTCS Group is focused on providing HR Leadership, Behavioral Assessments, and Consulting to help small businesses grow and thrive. You can subscribe to this blog or request a free consultation at www.thectcsgroup.com.
Disclaimer: The information and recommendations provided in this document should not be considered legal advice and should not substitute for legal advice where the facts and circumstances warrant. Recommendations are provided based on good faith assessment and interpretation of the available legal and regulatory resources.