The American Rescue Plan Act of 2021 (ARPA), which was signed into law by President Biden on March 11, 2021, both expands and extends the tax credits that employers may opt to receive under the Families First Coronavirus Response Act (FFCRA) for voluntarily providing paid COVID-19-related leave through September 30, 2021.
The FFCRA and the First Extension. At the beginning of the pandemic, Congress passed the FFCRA, which, among other things, imposed two leave mandates on employers with fewer than 500 employees: (1) a two-week emergency paid sick leave (“EPSL”) mandate for employees who are unable to work or telework due to six specific COVID-19-related reasons; and (2) a temporary expansion of coverage under the Family and Medical Leave Act (FMLA), to enable employees to take their twelve weeks of FMLA leave for school and child care closures associated with COVID-19 (EFMLA), including a ten-week paid leave component. Significantly, employers are reimbursed for the cost of the leave(s) through a tax credit. We detailed these leave mandates in our March 15, 2020 E-lert.
These mandates expired on December 31, 2020, but the stimulus bill passed by Congress on December 22, 2020 permitted covered employers to voluntarily allow its employees to use any remaining EPSL or EFMLA, and receive the corresponding tax credit, through March 31, 2021, as we discussed in our December 22, 2020 E-lert.
The New Expansion and Extension. Under ARPA, covered employers can continue to voluntarily provide EPSL and EFMLA through September 30, 2021 and receive the tax credit. There are some changes to the leave provisions, however:
• New bank of EPSL: The FFCRA provided 10 days of EPSL that could be used through December 31, 2020, and the stimulus bill extended that period until March 31, 2021. ARPA provides that employers may grant a new 10-day bank of EPSL starting on April 1, 2021.
• New Reasons for EPSL: Under FFCRA, employees could take EPSL for six reason self-isolation because of a COVID-19 diagnosis; (2) to obtain a medical diagnosis or care when experiencing COVID-19 symptoms; (3) because a health official or health care provider has recommended quarantine; (4) to care for a family member with COVID-19 or who is seeking diagnosis/care; (5) to care for a family member in quarantine; and (6) when a child’s school or childcare provider is unavailable because of COVID-19. ARPA adds two new reasons: to get a COVID-19 vaccine and to recover from adverse reactions to the vaccine.
• Expansion of EFMLA: Originally, EFMLA was only available – and the tax credits claimed – if the employee was unable to work or telework due to the COVID-related unavailability of a child’s school or childcare. Under ARPA, the family leave payroll tax credits may now be claimed for all of the qualifying uses of EPSL listed above. Moreover, FFCRA originally provided that the first two weeks of EFMLA were unpaid, with the remaining (up to) ten weeks paid at 2/3 the employee’s regular rate, up to $200 per day and a total maximum of $10,000. ARPA has deleted that unpaid two-week provision, meaning that the entire (up to) twelve weeks of EFMLA is paid. And, accordingly, the per-employee EFMLA tax credit limit has been increased to $12,000.
• New non-discrimination provision: Employers cannot claim the tax credits if the employer discriminates in favor of highly compensated employees or full-time employees, or discriminates on the basis of employment tenure with the employer, in providing EPSL or EFMLA.
The Department of Labor has been directed to issue “regulations or other guidance” to implement these new provisions. We also expect that the DOL will revise its extensive and detailed FFCRA Q&A to reflect these changes.
Although the FFCRA leave benefits are no longer mandatory, covered employers may wish to consider extending these benefits. Many employees will necessarily have to remain out of the workplace for the reasons covered by FFCRA, and under ARPA the employer is afforded the ability to take a tax credit if they grant EPSL and/or EFMLA.
Another point of interest is that many employers are providing or considering paid leave to get a vaccine to incentivize employees to become vaccinated. The expansion of paid leave to cover vaccinations would now seem to allow covered employers to receive a tax credit for this form of vaccine incentive.
Additionally, many states and local jurisdictions have enacted COVID-19 leave mandates that continue to apply. Thus, employers should ensure that they are in compliance with these other laws.
This is obviously a fast-moving and ever-changing situation, and we will continue to send out E-lerts on any significant developments. You may also wish to check our continually-updated FAQs frequently.