President Joe Biden signed into law the American Rescue Plan on March 11, 2021. The Plan features COVID-19-related legislation, including additional relief to workers and employers via tax credits, expanded federal unemployment benefits, and aid for small-business. See below for the key components that employers should be aware of.
What Employers Need to Know
Extension Of FFCRA Tax Credits
The Plan extends the tax credit for voluntary provision of leave through September 30, 2021, and makes related changes including the following:
- The Plan extends the tax credits available for employers who voluntarily provide FFCRA leave from March 31, 2021, to September 30, 2021.
- Qualified Family Leave covered wage increases from $10K to $12K per employee.
- Increases the number of days of paid leave for self-employed from 50 days to 60 days.
- Provides that the tax credits are available for paid sick leave and paid family leave provided for the additional following qualifying reasons:
- the employee is obtaining immunization (vaccination) related to COVID-19;
- the employee is recovering from any injury, disability, illness, or condition related to such vaccination; or
- the employee is seeking or awaiting the results of a diagnostic test or medical diagnosis for COVID-19 (or their employer has requested such a test or diagnosis).
- Adds non-discrimination rules to provide that no tax credit is available if the employer, in determining the availability of the paid leave, discriminates against highly compensated employees, full-time employees, or employees on the basis of tenure with the employer. This is to ensure that voluntarily provide leave is done consistently and uniformly, without discriminating against certain categories of workers.
- Re-sets the 10-day limit for the tax credit for paid sick leave under the FFCRA beginning April 1, 2021. As a result, an employer could voluntarily provide an additional 10 days of FFCRA paid sick leave beginning April 1, 2021, and would be eligible for a tax credit for doing so. Keep in mind – employers are not required to do so.
The American Rescue Plan provides funding for over $15 billion intended to boost, enhance, expand, and improve nationwide COVID–19 vaccine distribution and administration, including activities related to the distribution of ancillary medical products and supplies related to vaccines, including the support of efforts to increase distribution and access, especially in underserved areas, to increase vaccine confidence and to fund more research, development, manufacturing, and procurement of vaccines and related supplies. Additional funding will be allocated to COVID-19 testing, tracing, etc.
Small Business Relief – including Restaurants, Bars and Others
The Plan includes an additional $50 billion to fund small businesses with a carve-out for a $28.6 billion grant program to fund restaurants and bars and other venues that had to close during the pandemic. The bill adds to the Paycheck Protection Program (PPP) with an additional $7 billion to cover more nonprofits and digital media companies. This means employers may be eligible for a second PPP loan if they meet certain criteria. The bill incorporates $15 billion to the Economic Injury Disaster Loan Advance Grants Program intended to provide economic relief to businesses currently facing a temporary loss of revenue due to the COVID-19 pandemic.
The bill will also provide financial assistance to individuals and families, schools, and state and local governments.
Unemployment Benefits Extended
The finalized plan retains the $300 per week unemployment benefit. This version signed into law extends these benefits until September 6 and the Plan includes the addition of a provision making the first $10,200 in unemployment received in 2020 non-taxable for households with incomes under $150,000.
The Plan provides for an extension of Pandemic Unemployment Assistance (PUA) for self-employed and gig workers and other workers who do not qualify for state unemployment benefits, and Pandemic Emergency Unemployment Compensation (PEUC), which gives people who have been unemployed long term additional weeks of state benefits.
The federal government will send $1,400 stimulus checks on top of the $600 payments issued in December. Individuals who earn $75,000 per year and couples who earn $150,000 will receive the full $1,400-per-person benefit, however; persons earning more than $80,000 and couples earning more than $160,000 will not be eligible.
Tax Credits And Benefits
Child tax credit – increased to $3,000 for those ages six through 17 and to $3,600 for those under age 6. The new bill lowers those thresholds to $75,000 and $150,000, respectively. Another key provision makes the credit fully refundable – meaning that those who pay little or no taxes will still be able to take full advantage of the credit. Recipients can receive monthly installments (which would facilitate paying monthly living expenses) or a lump sum.
Earned Income Credit – the amounts have increased and the minimum age to claim the credit is reduced to 19. No upper age limit is imposed under the Plan.
Employee Retention Credit – the expiration date is extended through December 31, 2021. It also includes provisions for certain start-up businesses that were established after February 15, 2020, and if their revenue declined by 90% compared to the same calendar quarter of the previous year (with an ERC capped at $50,000 per quarter) that otherwise would not have qualified for the ERC.
100% COBRA subsidy through September – the government will subsidize 100 percent of COBRA premiums for laid-off workers and covered relatives, allowing them to stay on their company-sponsored health plan through September 2021. Employers can claim a refundable tax credit against their Medicare payroll tax liability for the cost of the premiums. The assistance is no longer available once an individual becomes eligible for coverage under another group health plan or Medicare.
Affordable Care Act – the Plan expands on the Affordable Care Act eligible classes of those who are entitled to help with the cost of their insurance. Consumers would be able to receive assistance if their premiums exceed 8.5% of their incomes rather than the current income cutoff of $51,000. The bill provides over $24 billion to shore up childcare facilities that have been hit particularly hard by the pandemic. It provides help to childcare workers making less than $12 per hour.
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