The US House of Representatives had passed President Biden’s American Rescue Plan Act of 2021 (ARPA, H.R. 1319) on Saturday, February 27, 2021, by a single-party vote of 219-212.  The Senate quickly took up the measure in order to ensure ultimate passage and signing before unemployment benefits run out the weekend of Saturday, March 13, 2021.  It is now law.

Since the bill spends well over a trillion dollars more than Republicans deem necessary at this time on multiple initiatives the GOP objects to, the Senate has decided in the spirit of providing swift relief to move ahead without bipartisan support, which means they must meet strict rules under a process called budget reconciliation that allows them to pass the measure with just 50 votes.  The Senate parliamentarian ruled the $15 federal minimum wage provision of the House’s bill would not meet budget reconciliation rules and needs to be left out.  The other major changes negotiated by the Senate to secure the 50 votes needed were:

  • Increasing federal COBRA subsidies from 85% to 100% to last from April 1, 2021, through September 30, 2021
    • Employers will front these subsidies, then claim them as full tax credits (similar to how FFCRA paid leaves worked)
    • These will only be for reduction of hours or involuntary termination of employment situations
    • We’ll have a separate, more detailed alert for you on this provision
  • Changing the pandemic unemployment benefit from the House’s proposed $400 per week through Sunday, August 29, to instead stay at the current $300 per week through Monday, September 6, 2021
  • Making the first $10,200 of unemployment benefits received in 2020 non-taxable income for households that earned less than $150K
  • Limiting the $1,400 stimulus checks (which now include adult dependents like college students) to exclude about 12 million adults and 5 million children with higher incomes that qualified the first two rounds
    • $75K/$150K$112,500 single/married/head-of-household thresholds remain, but the phaseouts are more rapid, completely phasing out at $80K/$160K/$120K instead of the previous $100K/$200K/$150K
  • Making student loan balances partially or fully forgiven during calendar years 2021 through 2025 non-taxable income
    • Note this bill does not actually provide student loan forgiveness, it just paves the way for any forgiveness granted the next 5 years to be non-taxable

With the Senate passing the bill on Saturday, March 6, 2021, by a single-party vote of 50-49, it went back to the US House of Representatives to approve the changes made by the Senate.  House Democrats accepted the Senate’s changes Wednesday, March 10, 2021, by a single-party vote of 220-211.  The president intends to sign it into law before pandemic unemployment benefits start to expire on Saturday, March 13, 2021.

Other notable provisions of the bill include:

  • Extending the voluntary FFCRA paid leave tax credits through September 30, 2021 (with some notable tweaks)
  • Extending the Employee Retention Credit (ERC) through December 31, 2021
  • Allowing employers the option to decide whether to allow employees to contribute up to $10,500 in their daycare FSA for 2021
  • Expanding several personal tax credits, including the child tax credit, for 2021 (with an eye toward making some of the changes permanent)
  • Enhancing public Marketplace tax credits through 2022 (but seems inevitable Congress will extend this beyond 2022 when people get used to the lower insurance premiums)
    • Reminder: the federal public Marketplace and some state-run Marketplaces currently have a special enrollment period open through May 15, 2021
    • Employers are allowed to include qualifying event language in their cafeteria plan recognizing new eligibility to enroll in the public Marketplace as a reason to drop medical coverage mid-year upon attesting intent to secure that coverage
    • There is also special permission this year for an employer to decide whether they want to allow employees to drop medical coverage this year upon attesting to having or immediately securing other comprehensive medical coverage
  • More PPP loan funding and expanded eligibility for some non-profits
  • $182 billion to education and child care & development providers
  • Almost $6 billion in additional social program funding and $25 billion for emergency rental assistance
  • Over $55 billion in COVID-19 testing, supplies, and vaccine efforts
  • $30 billion for transit costs, $8 billion for airports, $3 billion in aerospace manufacturer payroll support, $1.5 billion Amtrack support, and $15 billion for airline workers
  • $25 SBA grants for restaurants

Notably, the bill provides federal workers some COVID-related leave protections but does not otherwise extend FFCRA-like paid leave requirements.

IMA will continue to monitor regulator guidance and offer meaningful, practical, timely information.

This material should not be considered as a substitute for legal, tax and/or actuarial advice. Contact the appropriate professional counsel for such matters. These materials are not exhaustive and are subject to possible changes in applicable laws, rules, and regulations and their interpretations.