The American Rescue Plan Act is a new US law aimed at ameliorating the impacts of COVID-19 on employers and employees.
While the ins and outs might be a little tricky, you don’t have to worry. Read on for an easy breakdown of the top five things every employer and employee should know about the new legislation.
#1. Tax credits for employers who offer emergency paid sick leave and paid extended FMLA leave
Under last year’s Families First Coronavirus Response Act (FFCRA), employers with fewer than 500 employees were required to offer emergency paid sick leave and paid expanded FMLA leave to employees impacted by COVID-19. That requirement expired last December, but a federal tax credit was extended through March 31, 2021, for employers who voluntarily chose to keep providing the paid leave. The Rescue Plan Act continues those federal tax credits even longer through September 30, 2021, enabling employers to continue providing paid leave benefits to COVID-19 impacted employees if they choose to do so (it’s not mandatory).
Not only does the Rescue Plan Act extend the timeframe employers can receive the tax credit, but it also broadens the reasons employees can take paid leave. Starting March 31, 2021, employees can also take paid leave to obtain a COVID-19 vaccination, to recover from side effects related to the vaccine, or to seek or await results of a COVID-19 test or diagnosis. Employers may receive tax credits for up to 80 hours of paid leave per full-time employee from April 1 through September 30, 2021 (on top of any leave provided last year). The new law also increases the number of wages for which employers may claim tax credits for paid FMLA leave from $10,000 to $20,000.
Next Steps: Employers with less than 500 employees should seriously consider offering or extending paid emergency sick leave and paid extended FMLA leave to benefit COVID-impacted employees, encourage vaccination, and take advantage of the available tax credits under the Rescue Plan Act.
#2. Tax benefits for employers who keep employees on the payroll
By now, most employers are familiar with the Employee Retention Tax Credit, which provides tax benefits to encourage eligible employers to keep their employees on the payroll during the pandemic. The Rescue Plan Act extends this tax credit through to the end of 2021 and increases the amount of the credit from 50% to 70% of qualified wages and health benefits. Although eligibility depends on several factors including the employer’s size and the pandemic’s impact on the business, some employers will be able to access up to $33,000 per employee in incentives. The Rescue Plan Act even makes these incentives available to certain “Recovery Startup Businesses” that opened after February 15, 2020.
Next Steps: Eligible employers who have not yet claimed the employee retention tax credit could be leaving tens of thousands of dollars of tax benefits unclaimed. Employers are well-advised to discuss the tax credit with their financial advisors and attorneys to determine eligibility and next steps to claim available funds.
#3. More help for unemployed workers
The Rescue Plan Act extends three different types of federal unemployment benefits through September 6, 2021:
Pandemic Unemployment Assistance - This provides benefits for people such as independent contractors, business owners, self-employed workers, and others who do not qualify for their state unemployment insurance benefits for a variety of reasons including insufficient work history. These benefits were set to expire March 14, 2021, but have now been extended through September 6, 2021, by the Rescue Plan Act.
Pandemic Emergency Unemployment Compensation - This provides additional assistance to workers who have exhausted their state unemployment benefits. Under prior legislation, these benefits were to expire on March 14, 2021, but the Rescue Plan Act extends them through September 6, 2021.
Federal Pandemic Unemployment Compensation - This program provides a supplemental $300/week for each person receiving state unemployment benefits. The Rescue Plan Act extends the $300 payment, which was set to expire March 14, 2021, through September 6, 2021.
#4. Help for workers and dependents who lost group health coverage
Many business owners and workers are familiar with COBRA, the federal law that allows employees to continue their group health care coverage at their own expense after they lose their job. When most people think of COBRA though, they think “prohibitively expensive.” Under the Rescue Plan Act, however, COBRA benefits are now within financial reach for many employees and their dependents who lost health coverage during the pandemic because they couldn’t afford COBRA.
Here’s how it works: Workers who lost their group health care coverage during the pandemic (and through September 30, 2021) because of an involuntary loss of employment or involuntary reduction in work hours will be eligible to receive up to six months of government-subsidized health coverage starting on April 1, 2021. The details are complex, but generally, the premium payments will be advanced by employers, their insurers, or a multi-employer plan, and then offset by a payroll tax credit or refund.
Next Steps: In order to comply with the new law, employers should revise all COBRA notices and send notice of the new subsidy to certain COBRA-eligible workers, current COBRA recipients, and their dependents by May 31, 2021. The Department of Labor is expected to issue a model notice very soon.
#5. Money for restaurants that took a hit from COVID-19
Finally, the American Rescue Plan Act creates a $28.6 billion dollar pool (the “Restaurant Revitalization Fund”) from which the government will make grants to eligible restaurants, restaurant groups, breweries, and tasting rooms that have been impacted financially by the pandemic. For more information on the Restaurant Revitalization Act, check out this guest blog post from Funding Circle.