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Legal Alert: Employers and the American Rescue Plan Act of 2021

Krugliak, Wilkins, Griffiths & Dougherty Co., L.P.A.

The American Rescue Plan Act of 2021 (“Rescue Plan”) was signed into law last week.  While the stimulus payments and other direct aid to individuals and businesses and local governments have received the most attention, this far-reaching legislation also addressed some employer related matters, including an additional (voluntary) extension of the Families First Coronavirus Response Act (FFCRA).

As addressed in previous Legal Alerts, the employee leave requirements, both the Emergency Paid Sick Leave (EPSL) and the Emergency Family Medical Leave (EFMLA), expired on December 31, 2020.  In late December, on the event of that December 31 expiration, legislation passed which did not extend the FFCRA obligations, but, rather, gave employers the option to voluntarily provide EPSL and EFMLA leave to their employees and continue to receive a tax credit for the paid leave until March 31, 2021.

The Rescue Plan takes the same approach.  It does not extend the FFCRA mandate or, more accurately, resurrect the mandatory nature of the original FFCRA which expired on December 31, and the Rescue Plan does not extend to which employers the FFCRA applies (which for private employers, means employers with less than 500 employees).  However, for any covered employer (less than 500 employees for private employers), the Rescue Plan allows for a voluntary offering of EFMLA and EPSL until September 30, 2021.  In short, all covered employers who voluntary provide EPSL or EFMLA leave through September 30, 2021, will continue to qualify for the tax credits associated with those leaves. Employers are not required to provide EPSL or EFMLA in 2021, but employers who choose to do so will be eligible for tax credits on wages paid for such leave.

Here is a synopsis of the Rescue Act provisions affecting employers:

  • Employers are not required to provide either EPSL or EFMLA leave.  That mandated ended on December 31, 2020. However, if a covered employer voluntarily provides EFMLA or EPSL to qualifying employees, they can still receive the tax credits for EPSL or EFMLA wages paid from April 1, 2021 to September 30, 2021. 
  • As with the original mandatory FFCRA leaves through December 31, 2020, and the voluntary extension of those leaves through March 31, 2021, in order to receive the tax credit, the employee leave is required to be given for a qualifying reason as defined by the FFCRA.  However, those qualifying reasons EPSL have been expanded to include employees who needs time off to: (1) receive a COVID-19 vaccination; (2) recover from a sickness or injury resulting from or related to the receipt of a COVID-19 vaccination; (3) seek or wait for the results of a COVID-19 test due to COVID-19 exposure; and (4) seek or wait for the results of a COVID-19 test due to the request of the employer.   EFMLA qualifying reasons have been also been expanded to include all of the reasons that EPSL can be utilized including (1) being  subject to a quarantine or isolation order, (2) being told to self-quarantine by a healthcare provider (if the employee is experiencing symptoms of COVID-19 and is seeking a medical diagnosis), (3) caring for an individual who is subject to a quarantine or isolation order or has been advised to self-quarantine, and (4) caring for a son or daughter whose school or place of child care is closed due to COVID-19. 
  • The Rescue Plan also expanded the amount of leave available to employees if covered employers voluntarily extend the leave through September 20, 2021.  Employers can apply for an receive a tax credit for up to ten days of EPSL beginning  April 1, 2021, even if  the employee completely or partially exhausted some of his or her  available EPSL  prior to April 1, 2021.
  • The tax credit for EPSL leave remains capped at the employee’s regular rate of pay up to a maximum of $511 per day if the EPSL is needed for one of the new reasons explained above or because of the employee’s own symptoms, quarantine or isolation and capped at two-thirds the employee’s regular rate of pay up to a maximum of $200 per day for any other EPSL qualifying reason.

However, the Rescue Plan raised the caps related to EFMLA.  The EFMLA cap has been raised to $12,000 from the previous $10,000.  Employers can take a total tax credit of up to $12,000 per employee.  The available credit per employee is still capped at two-thirds the employee’s regular rate of pay up to a maximum of $200 per day for all EFMLA leave regardless of the reason for the leave, be it one of the new reason explained above or any other EFMLA qualifying reason and capped at $511 per day cap when the wages are paid under the EPSL provisions.  The first two weeks of EFMLA no longer need to be unpaid.

  • The Rescue Plan also provided a full (100% of the premium cost PLUS 2% administrative cost of COBRA) COBRA subsidy for employees and dependents who lose coverage as a result of involuntary terminations or reductions in hours. This applies to both newly qualified employees and qualified employees and dependents who are still within their COBRA maximum coverage period – even those who had not previously elected coverage.  Under the Rescue Plan. Employers would pay the COBRA premium and be reimbursed (including the administrative fee) in the form of a refundable payroll tax credit.  The subsidy would be effective for coverage periods beginning  April 1, 2021, through September 30, 2021.

In short, the Rescue Plan provides special COBRA enrollment rights for the following individuals who are not enrolled for COBRA coverage as of April 1, 2021: (1)  an individual who previously had the right to elect COBRA coverage on account of a covered employee’s prior reduction in work hours or termination of employment (other than voluntary), and (2) an individual who was previously covered due to a valid COBRA election of coverage, but subsequently had that coverage discontinued before April 1, 2021.  The statute requires the Department of Labor to issue a model notice for employers to use within 30 days.  Please look for communications from your plan administrators and COBRA administrators to ensure compliance.

  • Neither the DOL nor the IRS has issued any guidance related to these provisions of the Rescue Plan.  If and when that becomes available, KWGD will attempt to pass on any relevant information. 

If you have any questions regarding this issue, please call Michael J. Bogdan (mbogdan@kwgd.com) at (330) 497-0700 or any of the attorneys in Krugliak, Wilkins, Griffiths & Dougherty’s Labor & Employment Law Practice Section. 

NOTE: This general summary of the law should not be used to solve individual problems since slight changes in the fact situation may require a material variance in the applicable legal advice. 

 
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