Employment Implications of President Biden’s $1.9 Trillion American Rescue Plan

Posted on | by Anthony Troia
President Biden has signed into law the American Rescue Plan Act of 2021 (“Rescue Plan”), a $1.9 trillion COVID-19 relief package that is intended to provide continued economic relief to individuals, businesses, and state and local governments during the COVID-19 pandemic. Here, we summarize several key employment provisions of the Rescue Plan that all home care providers should be aware of.
Extension of the FFCRA Payroll Tax Credit for Employers with Less than 500 Employees
As employers know, the federal Families First Act Coronavirus Response Act’s (“FFCRA”) provided up to 12 weeks of paid job protected leave to employees that work for companies with less than 500 employees. Employers who met this coverage criteria (i.e., having less than 500 employees) were eligible to take a tax credit until December 31, 2020 for providing the FFCRA leave. As the FFCRA leave provisions were to expire, the Trump Administration announced that it would continue to provide payroll tax credits for employers who voluntarily chose to provide paid leave per FFCRA to their employees. That extension of the tax credits was slated to end on March 31, 2021.
Now, the Rescue Plan extends FFCRA tax credits for covered employers (again, those with less than 500 employees) that voluntarily grant FFCRA leave to their employees, through September 30, 2021. The tax credits are intended to offset certain costs associated with providing the leave.
The Rescue Plan also makes certain modifications to the FFCRA, all of which are effective on April 1, 2021 and, again, applicable to employers that are covered by the FFCRA:
  1. Covered Reasons for Sick Leave: In addition to the six reasons for leave set forth in the FFCRA, employers will also receive tax credits for providing leave to employees who are: (i) obtaining an immunization related to COVID-19 or recovering from any injury, disability, illness or condition related to such immunization; or (ii) seeking or awaiting the results of a diagnostic test for, or a medical diagnosis of, COVID-19, when such employee has been exposed to COVID-19 or the employer has requested such test or diagnosis.
  2. Reset of Paid Sick Leave Clock: With respect to employees who previously took 10 days of emergency paid sick leave under the FFCRA, the Rescue Plan permits an employer to provide such employees with an additional 10 days of leave.
  3. Emergency Family and Medical Leave Tax Credit Expansion: Previously, tax credits taken by employers to cover the cost of providing emergency FMLA leave was only available if the employee was unable to work (or telework) to care for their child whose school or place of care has been closed or was unavailable due to the public health emergency. Now, employers may claim tax credits for emergency FMLA leave arising from any of the reasons set forth in the FFCRA (including the two expanded reasons described above). The Rescue Plan also removes the two-week waiting period on emergency FMLA leave and raises the aggregate cap on emergency FMLA leave from $10,000 to $12,000.
  4. Non-Discrimination Rules: The Rescue Plan includes new non-discrimination rules for employers that opt to voluntarily provide FFCRA leave and obtain the tax credits. Specifically, the Rescue Plan disallows the tax credits for any employer who discriminates with respect to leave: (1) in favor of “highly compensated employees”; (2) in favor of full time employees; or (3) on the basis of employment tenure.
Employers in New York State are reminded of New York’s own paid COVID sick leave, which is in some respects more generous to employee than the FFCRA. For employers covered by the FFCRA, they are required to comply with both the FFCRA and the New York State paid COVID sick leave. However, unlike larger employers that are not FFCRA-covered employers in New York that have less than 500 employees can take credit for providing paid COVID sick leave to offset some of the costs associated with providing the paid leave benefit.
Unemployment Insurance
The Rescue Plan also extends the unemployment benefits that were made available under the Cares Act and the Consolidated Appropriation Act, both of which were scheduled to expire after March 14, 2021. The Rescue Plan extends the following unemployment benefit programs through September 6, 2021, as follows:
  1. The Unemployed Will Continue to Receive a $300 Weekly Supplement. Individuals receiving at least $1 in weekly underlying state unemployment compensation benefits will be eligible for a $300 weekly federal supplement through weeks of unemployment ending September 6.
  2. Pandemic Unemployment Assistance Continued. The American Rescue Plan further extends the Pandemic Unemployment Assistance (PUA) program under Section 2102 of the CARES Act, which provides unemployment insurance benefits for individuals, such as independent contractors and gig workers who typically do not qualify for unemployment compensation benefits. The PUA program was extended for weeks of unemployment ending September 6, and the maximum duration for receipt of PUA benefits has now been extended from 50 to 79 weeks (a possible total of 86 weeks of eligibility).
  3. Extended Pandemic Emergency Unemployment Compensation. The Pandemic Emergency Unemployment Compensation (PEUC) benefits established under Section 2107 of the CARES Act provided for an additional 13 weeks of state benefits after an individual exhausted all regular state benefits. The American Rescue Plan now extends this program to allow a total of up to 53 weeks of state benefits after individuals exhaust their regular state benefits, through weeks of unemployment ending September 6.
  4. Extension of State Unemployment Programs. The act contains other unemployment compensation-related provisions, including extending federal funding for short-time compensation programs (popularly known as “workshare” programs) and, if states choose to waive the waiting week, providing 100% funding for a state’s first week of unemployment benefits during the typically unpaid one-week “waiting period” before benefits begin under most state laws.
  5. Taxability of UI Benefits. Although unemployment benefits are taxable, the Rescue Plan waives federal taxes on the first $10,200 of unemployment benefits that an individual collected in 2020. This tax suspension only applies to taxpayers whose adjusted gross income in 2020 was less than $150,000, which would cover most home care workers.
Employee Retention Credit
The Rescue Plan also expands the Employee Retention Credit (the “ERC”), which was originally passed in the Cares Act and then later extended by the Consolidated Appropriations Ac (CAA). The key changes to the ERC are as follows:
  1. The Rescue Plan extends the enhanced ERC through the end of 2021 (the CAA had previously extended the credit through June 30, 2021).
  2. The ERC provides a credit against payroll taxes based on qualified wages paid by an eligible employer.
  3. The Rescue Plan makes the following changes to the payroll credit that eligible employers may receive, prospectively, for the 3d and 4th quarters of 20201:
  4. While the credit continues to be refundable, it is now a credit against the employer’s 1.45% share of the Medicare tax, rather than a credit against the employer’s share of the Social Security tax.
  5. Employers are eligible for the ERC by experiencing (1) a full or partial suspension of operations due to certain COVID-19-related governmental orders or (2) a significant decline in gross receipts. This may be difficult to prove for the third and fourth quarters of 2021, as the State is in phases of reopening.
  6. In defining qualified wages, the Rescue Plan continues to distinguish between large employers that averaged more than 500 full-time employees during 2019 (2020 if the employer did not exist in 2019), and small employers under this threshold. For large employers, qualified wages continue to be wages paid to an employee who is not providing services due to the circumstances that caused the employer to be eligible for the credit (i.e., COVID-related business shut down or business loss). For small employers, the slightly modified qualified wages definition includes wages paid — without regard to whether the employee was providing services — during (1) the suspension period or (2) the calendar quarter for which the gross receipts test was met. Additionally, the Rescue Plan modifies what constitutes qualified wages for a “severely financially distressed” employer that experienced a greater than 90% decline in gross receipts. For such an employer, whether a large or small employer, qualified wages include any wages paid during the calendar quarter.
  7. The statute of limitations period for IRS assessment is extended from 3years to 5 years.
COBRA Subsidies
The Rescue Plan will subsidize 100 percent of the cost of premiums for COBRA continuation coverage for an employee or dependent who is a COBRA qualified beneficiary (or will become one) due to an involuntary termination of employment or a reduction of hours. Employees who voluntarily terminate employment are not eligible for the COBRA premium subsidy. The subsidy will begin on April 1, 2021 and extend through September 30, 2021. The Rescue Plan simply suspends the eligible individual’s obligation to make COBRA premium payments for up to 6 months.
This COBRA premium subsidy will be available to any eligible individual who is enrolled in COBRA (or will enroll in COBRA) on or after April 1, 2021, and before the subsidy ends on September 30, 2021. In addition, any former employee who fits the eligibility criteria and who did not elect COBRA coverage or dropped COBRA coverage prior to April 1 but would otherwise be within his or her 18-month COBRA coverage period between April 1 and September 30, 2021, is also eligible for the COBRA premium subsidy. The subsidy would terminate if the individual becomes eligible to enroll in another group health plan (other than excepted benefits coverage), a flexible spending arrangement, a qualified small employer health reimbursement arrangement or Medicare. Individuals who fail to notify their health plan that they are no longer eligible for the COBRA subsidy may face penalties.
The availability of the COBRA subsidy does not extend the availability of COBRA continuation coverage itself so if an individual’s COBRA coverage is set to expire, the Rescue Plan does not require it to be extended through the end of September.
The employer, multiemployer plan or insurer (for fully insured coverage), must provide subsidized COBRA coverage and pay or incur the COBRA premium cost. But the Rescue Plan provides that the entity may recover the cost of the coverage by claiming a credit against its quarterly Medicare payroll tax liability. The credit can be advanced under rules that will be set out by the Treasury Department. The credit would be refundable if the subsidy paid exceeds the taxes due.
The legislation also includes specific requirements for employers to update COBRA notices or send a separate notice describing the new subsidies (and the key terms) to all eligible individuals. Failure to provide such notice will be treated as a failure of the COBRA notice requirements. Federal agencies are directed to provide model notices for these purposes within 30 to 45 days of enactment.