Summary of the American Rescue Plan Act (“ARPA”)
The new American Rescue Plan Act (“ARPA”) was signed into law on March 11, 2021. ARPA is a 628-page document that impacts a number of different industries, sectors, and entities. Below is a summary of the provisions that most directly impact our readership.
FFCRA Leave and Tax Credits Extended and Expanded, No Longer Mandated
While the mandated requirement for employers with fewer than 500 employees to provide paid leave for eligible reasons under the Families First Coronavirus Response Act (“FFCRA”) expired on December 31, 2020, ARPA extends tax credit incentives for employers with fewer than 500 employees to voluntarily continue to offer the paid leave through September 30, 2021. The Consolidated Appropriations Act, 2021 had previously extended the tax credits through March 31, 2021 for voluntarily providing COVID-related qualified leave.
ARPA also resets the amount of Paid Sick Leave (“PSL”) and Expanded Family and Medical Leave (“EFML”) effective April 1, 2021. There is no carryover of unused FFCRA time; employees who used all their time or none of the time prior to March 31, 2021, are now returned to full availability of time if the employer opts to offer it. It also increases the amount of Expanded Family and Medical Leave (“EFML”) to 12 weeks from the previous 10-week limit. Even employees who previously used FFCRA paid leave before March 31, 2021 can be eligible for PSL and EFML under ARPA between April 1, 2021 and September 30, 2021. Self-employed persons are eligible for up to 60 days, up from 50 under the original law.
Covered employers who choose to offer leave are entitled to 100% tax credits for all qualified paid leave wages paid between April 1, 2021 and September 30, 2021. However, tax credits cannot be applied if the wages paid were also claimed under a PPP loan.
In addition, ARPA expands the qualifying reasons for PSL and EFML. In addition to the original six reasons (listed in the Table below), employees can also be eligible for paid leave if:
- The employee is obtaining immunization related to COVID-19;
- The employee is recovering from any injury, disability, illness or condition related to such immunization; or
- The employee is seeking or awaiting the results of a diagnostic test for, or a medical diagnosis of, COVID-19 or their employer has requested a COVID-19 test or diagnosis.
|Paid Sick Leave (“PSL”)||Expanded FML (“EFML”)|
|#1 I am subject to a Federal, State, or local quarantine or isolation order related to COVID-19.|
100% of the regular rate of pay,
for up to 10 days
(up to $5,110 in total)
2/3 of the regular rate of pay,
up to $200 / day
for up to 12 weeks
(up to $12,000 in total)
|#2 I have been advised by a health care provider to self-quarantine related to COVID-19.|
|#3 I am experiencing COVID-19 symptoms and am seeking a medical diagnosis.|
|#4 I am caring for an individual subject to an order described in #1 or self-quarantine as described in #2.|
2/3 of regular rate of pay
up to $200 / day
for up to 10 days
(up to $2,000 in total)
|#5 I am caring for my child whose school or place of care is closed (or childcare provider is unavailable) due to COVID-19 related reasons, and no other person is available to provide care.|
|#6 I am experiencing a substantially similar condition specified by the U.S. Department of Health and Human Services.|
|I am unable to work because I am obtaining a COVID-19 vaccine.|
100% of regular rate of pay,
for up to 10 days
(up to $5,110 total in total)
|I am unable to work because I am recovering from an illness, injury or condition related to such vaccine (side effects).|
|I am unable to work because I am seeking or waiting for the results of a diagnostic test or awaiting a medical diagnosis, or because my employer has requested the test or diagnosis.|
Both types of leaves are now available for all the reasons listed above. This is a significant change from FFCRA, which only allowed EFML for reason 5.
PSL granted to an employee for reasons 1-3 in the Table above or the new qualifying reasons must replace 100% of the employee’s wages up to a maximum benefit of $511 per day (up to $5,110 in total). PSL granted to an employee to care for others (reasons 4-6 in the Table) must replace at least two-thirds of the employee’s wages up to a maximum benefit of $200 per day (up to $2,000 in total). EMFL leave granted for all reasons must replace at least two-thirds of the employee’s wages up to a maximum benefit of $200 per day, or up to $12,000 in total.
ARPA includes non-discrimination provisions that prohibit employers from favoring highly compensated employees, full-time employees, or employees with more tenure when granting paid leave.
The DOL is expected to release updated guidance in the coming weeks. Until additional information is provided, it is presumed that exemptions for health care workers, first responders, and employers under 50 remain in place. Updates will be shared as they become available.
COBRA Premium Subsidy
Effective April 1, 2021, through September 30, 2021, the federal government will pay 100% of COBRA premiums for Assistance Eligible Individuals (“AEI”) – including their covered family members — who lost benefits coverage due to a reduction in hours or involuntary termination other than for gross misconduct.
Employers with more than 20 employees or those who have self-insured plans will be responsible to pay the COBRA premiums between April 1 and September 30, 2021, for AEIs who have elected coverage, then receive 100% reimbursement through payroll tax credits. For employers with fewer than 20 employees who have fully insured plans subject to state continuation laws, the insurer will be responsible to pay the premiums and claim the credit.
COBRA-eligible individuals may elect COBRA coverage up to 60 days after April 1, 2021, even if they previously waived or discontinued COBRA. The election does not have to be retroactive to the beginning of COBRA eligibility to be eligible for the premium subsidy. However, ARPA does not extend the COBRA coverage period.
An AEI may be allowed by the employer to enroll in any plan offered, but the subsidy cannot exceed the premium for previously-enrolled coverage.
An AEI loses eligibility for a subsidy once he or she becomes eligible for other group health plan coverage or Medicare. Coverage by an excepted benefit such as non-health coverage, limited health benefits, specific disease or illness coverage, or supplemental health benefits does not impact eligibility.
- Employers must send notices to all AEIs who are eligible for premium subsidies as well as to any AEI whose eligibility for COBRA is ending before September 30, 2021. Model notices and expected guidance from the DOL and IRS will be shared as soon as they are available.
Dependent Care FSA Expansions
ARPA increased the annual election maximums for Dependent Care Flexible Spending Accounts (“FSA”) for 2021, retroactive to January 1, 2021. The limit for filers who are married filing jointly increased from $5,000 to $10,500. The limit for individuals who are single or married but filing separately increased from $2,500 to $5,250.
The limit increases are optional for employers. Employers need to determine the impact that doubling the deferral limit might have on their plans, including any imbalanced benefit to highly-compensated workers.
- Applicable employers (those that offer an FSA) will need to decide if they will allow expanded provisions. If so, they will need to notify employees before April 1, 2021 and submit a Plan Amendment by the last day of the plan year.
ARPA increased the amount of the Affordable Care Act (“ACA”) subsidies and capped the cost of premiums at 8.50% of an individual’s household income. This subsidy is retroactive to January 1, 2021. Persons who are currently enrolled in an Exchange Plan are able to claim an extra subsidy immediately.
Extension and Expansion of Employee Retention Tax Credit
The Employee Retention Tax Credit (“ERTC”) allows qualifying employers to claim a credit for wages paid to workers they retained on their payroll during the pandemic if they were fully or partially shut down by government order or had a drop in gross receipts of more than 20% from the same quarter in 2019.
ARPA expands the Employee Retention Tax Credit to 70% of qualified wages for each employee for each calendar quarter. Wages are limited to $7,000 per employee per quarter, for a maximum total tax credit of up to $28,000 per employee for the year. ARPA also extends the covered period to December 31, 2021.
Unemployment Benefits Extended
ARPA extended the $300 / week increase under the federal Pandemic Unemployment Assistance (“PUA”) and Pandemic Emergency Unemployment Compensation (“PEUC”) programs as well as the $100 / week increase under the Federal Pandemic Unemployment Compensation / Mixed Earners Unemployment Compensation (“MEUC”) program through September 6, 2021.
For workers who received unemployment compensation in 2020, the first $10,200 is now tax-free for households with less than $150,000 in income. Anyone who received unemployment in 2020 and who has already filed their 2020 tax returns should file an amended return.
Please note that each state administers its own unemployment insurance program, so individual state websites are the best source for updated information. Some states require separate applications to be made for Federal programs in addition to State programs. For a master link to all 50 states go to Unemployment Benefits Finder.
ARPA only made slight changes to the PPP Loan program, which had already been significantly modified by the Consolidated Appropriations Act (“CAA”) passed on December 27, 2020. ARPA provides for an additional $7.25 billion available for loans and expands loan eligibility to certain non-profits, Internet news publishers, labor organizations, social and recreational clubs, and fraternal benefits societies.
Restaurant Revitalization Fund
A fund of $28.6 billion has been established for grants to be administered by the SBA. This will include restaurants, food stands, food trucks, food carts, caterers, bars, brewpubs, etc. Eligibility for the grants is primarily based on the size of the restaurant. Restaurants with more than 20 common-ownership locations, as well as publicly-traded companies and government-operated businesses, are ineligible. Priority is given to applicable businesses owned by women, veterans, or socially and economically disadvantaged individuals.
These grants may be used to cover all types of business-related expenses, including payroll, rent, maintenance, supplies and other crucial costs. Any grants received from the Restaurant Revitalization Fund will not be treated as taxable income.
Shuttered Venue Operators Program
ARPA amended the Shuttered Venue Operators Grant (“SVOG”) program, which now includes over $16 billion in grants to shuttered venues. SVOGs are administered by the SBA’s Office of Disaster Assistance. Eligible applicants may qualify for grants equal to 45% of their gross earned revenue, with the maximum amount available for a single grant award of $10 million. For additional information, go to SVOG Portal.
Economic Injury Disaster Loans
ARPA provides an additional $15 billion for Economic Injury Disaster Loans for small businesses, small agricultural co-ops, and most private non-profit organizations. The SBA provides priority funding for employers with fewer than 10 employees. For additional information, go to EIDL Portal.
Pension Plan Relief
ARPA provides substantial financial support for underfunded pension plans, with eased funding rules for single-employer defined benefit pension plans and additional federal funds for troubled union-managed multiemployer pension plans with no repayment obligations.