On March 11, 2021, President Biden signed the American Rescue Plan Act (ARPA), which took full effect on April 1, 2021. The ARPA is set to expire on September 30, 2021. Along with providing another round of stimulus checks to qualifying citizens, this $1.9 trillion package of legislation revives several policies that were in effect under the Families First Coronavirus Response Act (FFCRA), which expired December 31, 2020. The ARPA is new law. It has similar characteristics to the FFCRA but ultimately provides a new framework for employers to navigate in response to paid leave requests due to COVID-19 related reasons.
This alert provides a general overview of the new legislation based on the information currently available. Federal agencies such as the IRS and the Department of Labor are expected to issue clarifying guidance on these issues as the ARPA is implemented. Please contact your legal counsel for advice on your specific situation.
Paid Sick Leave
Under FFCRA, both public and private employers covered by the act were required to provide up to 80 hours of paid sick leave to employees for a qualifying reason. Qualifying reasons included where the employee:
- Is subject to a Federal, State, or local quarantine or isolation order related to COVID-19
- Has been advised by a health care provider to self-quarantine related to COVID-19
- Is experiencing COVID-19 symptoms and is seeking a medical diagnosis
- Is caring for an individual subject to an order described in (1) or self-quarantine as described in (2)
- Is caring for a child whose school or place of care is closed (or child care provider is unavailable) for reasons related to COVID-19; or
- Is experiencing any other substantially-similar condition specified by the Secretary of Health and Human Services, in consultation with the Secretaries of Labor and Treasury.
The ARPA adds three more qualifying reasons for leave where an employee is:
- Obtaining a COVID-19 vaccination
- Recovering from any injury, disability, illness or condition related to such immunization; or
- Seeking or awaiting the results of a diagnostic test for, or a medical diagnosis of, COVID-19, when such employee has been exposed to COVID-19 or the employer has requested such test or diagnosis.
Unlike FFCRA, the ARPA does not require employers to provide paid sick leave for any of the above reasons. However, if an employer chooses to voluntarily extend paid sick leave for COVID-19 qualifying reasons, tax credits are available to offset the cost to the employer. The tax credits are available to both public (excluding the federal government and federal agencies) and private employers, unlike FFCRA where only private employers were eligible for a tax credit to offset the cost of the paid leave.
Also of note, the ARPA “resets the clock” on the employee’s leave bank. Any time off taken due to a qualifying reason under FFCRA before April 1, 2021 does not count towards the employee’s ARPA leave. For those employers who voluntarily opt to offer paid sick leave under the ARPA, those employees will have a fresh leave bank of 80 hours to use for COVID-19 qualifying reasons. Time taken off by an employee for a FFCRA qualifying reason before April 1 will not count toward the employee’s new bank of ARPA leave.
If an employer chooses to opt-in to ARPA leave, it must obtain the required documentation in order to receive tax credits for doing so. Federal agencies are expected to release forms to help employers comply with these requirements.
Emergency Family and Medical Leave
FFCRA expanded the reasons an employee might be eligible for leave under the Family and Medical Leave Act (FMLA) to include circumstances where an employee was unable to report to work because the employee’s child’s school or daycare closed due to COVID-19. FFCRA provided up to 12 weeks of this expanded FMLA leave, the last 10 of which were required to be paid at two-thirds the employee’s regular rate of pay. The amount of tax credit an employer could receive under FFCRA was capped at $10,000 per employee. For a more comprehensive summary of the FFCRA’s expansion of the FMLA, please refer to our previous client alerts.
The ARPA further expands the FMLA, making employees eligible for protected FMLA leave for all of the reasons an employee would be eligible for Paid Sick Leave, above, including seeking a COVID-19 vaccine or recovering from a vaccine. Further, an employer may choose to make the first two weeks paid at two-thirds the employee’s regular pay and receive a tax credit for those payments. Previously, under FFCRA, an employer could not receive a tax credit for payments made during the first two weeks of these extended FMLA leave provisions. Finally, the total available credit has been raised from $10,000 to $12,000 per employee for payments under these provisions.
Again, adoption of the ARPA and its requirements on FMLA leave is a voluntary choice of the employer. There is no incentive for employers beyond the aforementioned tax credits. If an employer chooses to opt-in to ARPA leave, it must obtain the required documentation in order to receive tax credits for doing so. It is unclear if an employer may elect to offer the new ARPA 80 hours of paid sick leave without also opting into the new rules pertaining to expanded FMLA leave. Federal agencies are expected to release guidance and forms to help employers comply with these requirements.
Impacts on COBRA
The ARPA also creates a tax credit for COBRA premiums. Should an individual become eligible to continue health care coverage under COBRA during the effective date of the ARPA, the law requires that the employer pay COBRA premiums on behalf of an eligible individual.
Employers must provide notice to eligible individuals about their potential eligibility for assistance on paying these premiums. Federal agencies are expected to release forms in the coming weeks to assist employers in meeting the notice requirements.
Payroll tax credits are available to offset this cost for both public (excluding the federal government and federal agencies) and private employers. These credits may be available to be advanced “through the end of the most recent payroll period in the quarter.”
In general, an eligible individual is one who has lost their job “involuntarily” and opts to continue health plan coverage under COBRA. While not explicitly defined, “involuntarily” is generally interpreted as where the employee is willing and able to do their assigned work, but for whatever reason the employer has terminated them. Thus, if an employee is terminated due to a lack of funding or work, but is otherwise available to work, the employer may be required to make payments on premiums for continued health insurance coverage. Exceptions may apply if the employee was terminated due to gross misconduct. Employers are strongly encouraged to consult with benefits counsel if an eligible individual opts into COBRA coverage prior to September 30, 2021.
The ARPA builds on the FFCRA and provides a path for expanding paid sick leave to many employees. However, the ARPA’s leave requirements are voluntary—there is no mandate that an employer provide Paid Sick Leave or expanded Family Medical Leave. If an employer chooses to opt-in to ARPA, they will receive payroll tax credits for leave granted.
While the provisions pertaining to expanding paid sick leave and emergency FMLA are optional, the requirements for COBRA payments are not optional. All covered employers must comply with the requirement that premiums be paid for eligible individuals.
Federal agencies are expected to issue guidance on specific scenarios soon. Employers should consider the fiscal and practical impacts of opting-in to the ARPA’s provisions before doing so, and seek legal advice when determining how the ARPA applies to a particular employee’s situation.