Last week, President Biden signed into law the American Rescue Plan Act of 2021, a sweeping $1.9 trillion COVID-19 relief package. The new law provides national aid in a range of forms, including money for vaccination programs, school funding, loans and grants for small businesses, and the enhancement of multiple tax credits intended to reduce poverty rates.
Many American workers have been following this legislation in anticipation of stimulus checks, available in amounts up to $1,400 for eligible individuals, and the extension of federal pandemic unemployment assistance that was set to expire on March 14, 2021.
Employers and leave administrators, on the other hand, have been watching like hawks since the Biden administration revealed the American Rescue Plan framework to find out where the cards would fall on the bill’s emergency paid leave provisions. And now that the American Rescue Plan Act is law, we have answers for you.
No mandatory FFCRA leave in 2021
Drumroll, please: The new law does not reinstate the Families First Coronavirus Response Act (FFCRA) paid leave mandate. In other words, this legislation does not require any employer to provide emergency paid leave to employees in 2021. To be clear, it also does not expand employer coverage under the FFCRA, so if your business is still too large (a private employer with 500+ employees at the time of leave) to be covered by the FFCRA, consider it business as usual on the emergency paid leave front: you’re not required to provide it under federal law, nor will the government foot the bill.
Tax credits for FFCRA-compliant leave expanded and extended
What the American Rescue Plan Act does do is expand and extend paid leave tax credits for FFCRA-covered employers. If your organization qualifies as a covered employer under the FFCRA, the new law provides more options and more opportunities to recoup the cost of voluntarily providing eligible employees with emergency paid leave. Specifically, with respect to leave beginning April 1, 2021, the law:
- Extends FFCRA emergency paid leave tax credits for FFCRA-covered employers that voluntarily provide compliant paid leave through September 30, 2021
- Increases the amount of wages for which an employer may claim the paid family leave tax credit from $10,000 to $12,000 per employee
- Allows employers to claim the paid family leave tax credits for leave taken for any of the existing FFCRA qualifying emergency paid sick leave reasons, meaning leave for the following reasons now qualify for both the emergency paid sick leave and paid family leave tax credits:
- Employee is subject to a federal, state, or local quarantine or isolation order related to COVID-19
- Employee has been advised by a health care provider to self-quarantine due to concerns related to COVID-19
- Employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis
- Employee is caring for an individual who is subject to a qualifying quarantine or isolation order or has been advised by a health care provider to self-quarantine due to concerns related to COVID-19
- Employee is caring for their son or daughter whose school or place of care has been closed or childcare provider is unavailable, due to COVID-19 precautions
- Employee is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor
- Expands the tax credit-qualifying leave reasons to include:
- Seeking or awaiting the results of a diagnostic test for, or a medical diagnosis of, COVID-19 where the employee has been exposed to COVID-19 or the employee’s employer has requested such test or diagnosis
- Obtaining immunization related to COVID-19
- Recovering from any injury, disability, illness, or condition related to the COVID-19 immunization
- “Refills” the two-week (up to 80 hours) emergency paid sick leave entitlement for each eligible employee effective April 1, 2021, thus allowing employers to claim tax credits for additional leave taken by employees who previously used FFCRA-covered emergency paid sick leave prior to April 1, 2021
Can state and local government employers claim credits for qualifying leave?
The FFCRA tax credit provisions that are in effect through March 31, 2021 contain an explicit exclusion prohibiting the following entities from claiming the emergency paid leave tax credits: “the Government of the United States, the government of any State or political subdivision thereof, or any agency or instrumentality of any of the foregoing.” For that reason, even though most public employers were required to comply with the FFCRA in 2020, they could not benefit from the refundable tax credits… until now.
The new law changes the source of the tax credit beginning April 1, 2021, creating a new section of the Internal Revenue Code that permits the credit to be applied against what is known as the “hospital insurance tax.” The relevant section does not explicitly exclude state and local government employers from claiming the credit; rather, it limits the exclusion to certain federal employers.
As a result, all signs point to state and local government employers being able to recoup the cost of emergency paid leave using these new tax credits. We are watching closely for IRS guidance on this point and will update this blog if necessary, as this is an important consideration for many impacted employers grappling with the question of whether to voluntarily extend emergency paid leave for their employees.
What employers should do
Now that there are clear guidelines governing what leave qualifies for federal tax credits after March 2021 and how long those tax credits are available, employers are better positioned to make choices about extending paid leave offerings and shaping associated pandemic policies and plans. If you have questions about whether your business is FFCRA-covered, or whether paid leave you are providing to employees qualifies for tax credits, you should connect with your attorneys or tax professionals right away. Also, be sure to check the IRS website for updated FFCRA tax credit FAQs reflecting the change in law.
What ReedGroup is doing
ReedGroup is working with its clients interested in establishing or continuing company emergency leave plans to ensure the needs of their workforces continue to be met during the pandemic. We encourage any ReedGroup clients with questions about ReedGroup’s pandemic-related products and services to reach out to their Account Executive to discuss their objectives and options.
Stay tuned for updates from ReedGroup’s compliance team by subscribing to our blog and webinar email alerts.
If you’re looking for assistance managing claims or to ensure compliance across your organization, ReedGroup has solutions for you. Check out our offerings here.
Information provided on this blog is intended for general educational use. It is not intended to provide legal advice. ReedGroup does not provide legal services. Consult an attorney for legal advice on this or any other topic.