The American Rescue Plan Act of 2021
The American Rescue Plan Act of 2021 (the “Act”) was signed into law by President Biden on March 11, 2021. The Act is a $1.9 trillion economic bill designed primarily to provide relief to workers and employers affected by the COVID-19 pandemic.
Some of the economic relief administered through the Act is in the form of the third round of economic impact payments, or stimulus payments, to Americans meeting certain criteria. In addition to these payments, the Act implements and extends various employment related benefits summarized as follows:
Tax Credit Extension:
The original paid leave requirements of the Families First Coronavirus Response Act (the “FFCRA”) expired on December 31, 2020. Accordingly, employers no longer have an obligation under the FFCRA to offer emergency paid sick or emergency Family and Medical Leave Act (FMLA) leave to employees for absences related to COVID-19. Under the prior, second round of stimulus legislation, employers who voluntarily continued to provide leave under FFCRA after December 31, 2020, could obtain a tax credit for those payments through March 31, 2021. The Act extends the availability of these payroll tax credits through September 30, 2021, for those employers who voluntarily extend emergency paid sick leave. The Act also includes the following three additional, qualifying circumstances for which employers may receive tax credits for payments made to employees:
- Employee misses work to receive a COVID-19 immunization;
- Employee misses work while recovering from an injury or illness related to a COVID-19 immunization; or
- Employee misses work while awaiting the results of medical testing related to COVID-19.
Beginning April 1, 2021, the Act removes the 10-day period by which the employee may have received unpaid emergency FMLA leave, concurrently with emergency paid sick leave, thereby resulting in a possible total of 14 weeks paid leave (now a full paid 12 weeks pursuant to emergency FMLA and 10 days, or 2 working weeks, pursuant to emergency paid sick leave) and raises the covered wages cap from $10,000 to $12,000.
Because an employer may voluntarily opt in to extend emergency paid sick leave effective April 1, 2021, an employee’s unused 10 days of emergency paid sick leave terminates on March 31, 2021, and an additional 10 days may be granted to the employee through September 30, 2021.
The emergency FMLA tax credit was previously available to the employer if the employee was unable to work due to the closure or unavailability of the employee’s child’s school or daycare. Under the Act, the employer may now claim tax credits for emergency FMLA leave arising from the six reasons previously prescribed for emergency paid sick leave and the three, new qualifying reasons set forth above. Finally, the Act includes non-discrimination rules to provide that no tax credit will be available if, in the determination of availability of paid leave, the employer discriminates against highly paid employees (or those who are full-time or tenured), thus, compelling employers make the decision regarding paid leave in a uniform manner.
Extended Unemployment Benefits:
The Act extends three federal unemployment insurance benefits first created by the CARES Act:
- The Pandemic Unemployment Assistance (“PUA”) Program, designed for those workers traditionally not eligible for unemployment (e.g. independent contractors, gig workers), was set to expire on March 14, 2021. The Act extends the PUA program through September 6, 2021, and increases the total number of eligibility weeks from 50 weeks to 79 weeks.
- The Pandemic Emergency Unemployment Compensation (“PEUC”) Program, designed to provide additional weeks of unemployment insurance benefits for those workers who have exhausted their state unemployment benefits, was also set to expire on March 14, 2021, and is extended through September 6, 2021. Eligibility weeks are increased from 24 weeks to 53 weeks.
- The supplement to weekly unemployment benefits in the amount of $300 per week authorized under the Federal Pandemic Unemployment Compensation (“FPUC”) Program was set to expire on March 14, 2021. The Act does not increase the weekly amount as was proposed by the House, but rather extends the additional unemployment payments of $300 per week under FPUC through September 6, 2021.
The Act is retroactive with respect to the receipt of these benefits. Under the Act, recipients of unemployment benefits who earn less than $150,000 each year are not required to include the first $10,200 of unemployment benefits as income for the 2020 tax year.
Relief for Small Businesses:
An additional $28.6 billion has been earmarked under the Act for a new Small Business Administration (“SBA”) program, known as the Restaurant Revitalization Fund, focused on supporting hard-impacted restaurants and other food and drinking establishments which are not publicly traded companies.The Act sets forth a formula for the calculation of “pandemic-related revenue loss” for eligible entities. The amount of a grant made to an eligible entity is to be equal to the entity’s pandemic-related revenue loss not to exceed $5,000,000 per physical location up to $10,000,000. The Act provides an additional $7 billion for the Paycheck Protection Program (“PPP”), bringing PPP funding to approximately $814 billion and makes eligible certain 501(c)(3) nonprofit organizations and 501(c)(6) organizations for first and second draw loans. Both the SBA and PPP bills provide that funds may be used for payroll costs, rent and mortgage payments, maintenance expenses, paid sick leave, and other qualifying costs.
Employee Retention Credit:
The Employee Retention Credit was originally enacted under the CARES Act and allows employers to claim a fully refundable payroll tax credit for paying qualified wages to employees for those employers whose business operations were fully or partially suspended due to COVID-19 or those that experienced a significant decline in gross receipts. The ability to claim this credit has been extended to the third and fourth quarters of 2021 and includes certain start-up businesses which were not previously eligible.
The Act subsidizes 100% of COBRA insurance premiums for employees, and their covered relatives, who were laid off for reasons related to COVID-19, thereby allowing those employees to remain on their company-sponsored health plan. The subsidy begins April 1, 2021, and ends September 30, 2021 (or earlier if the employee becomes eligible for coverage under another group health plan or Medicare). By May 31, 2021, employers’ COBRA notices must include information about the availability of the subsidy. Notice must be sent to employees who involuntarily left beginning November 1, 2019. The Department of Labor is directed to provide model notices within 30 days of the enactment of the Act.
Items Not Included in the Act:
While we have highlighted the important components of the Act which directly affect employers, it is important to note three items which were not included in the Act but are expected to develop in subsequent legislation:
- $15 per hour federal minimum wage. The provisions governing the increase in federal minimum wage were removed from the version signed by President Biden.
- Elimination of the tip credit. The provisions to raise minimum wages, although removed, included language to phase out the tip credit.
- Paid leave. Mandatory paid leave for employee absences related to COVID-19 remains a pressing issue for the Biden administration which was not fully met under the Act. Instead, the Act extends FFCRA permitting employers to voluntarily offer paid leave and claim a tax credit for doing so.
Contact a member of Barrett McNagny's Labor and Employment team listed below with any questions regarding The American Rescue Plan Act of 2021.