The American Rescue Plan Act of 2021 (ARPA) includes a section which allows employers to voluntarily extend the emergency paid sick leave (EPSL) and emergency family and medical leave (EFML) provisions of the Families First Coronavirus Response Act (FFCRA) with tax credits through September 30, 2021, but with notable tweaks we’ll discuss below.
A section of the Consolidated Appropriations Act of 2021 titled the “COVID-related Tax Relief Act of 2020” had extended FFCRA emergency paid leave tax credit for January 1, 2021, through March 31, 2021, for qualifying employers that voluntarily extended FFCRA leaves for the original 80 hours of EPSL and 12 weeks of EFML.
- (i.e., anyone that had already used some or all of their 80 hours EPSL and/or 12 weeks EFML would not have a fresh 80 hours, and possibly a fresh 12 weeks, in 2021, but those who had some or all of those hours/weeks available could use them and the qualifying employer could claim a tax credit to pay for it)
ARPA establishes some new rules for the emergency paid leaves and tax credits, and these new rules will apply from April 1, 2021, through September 30, 2021
- Currently, employers claim the refundable credit against the employer’s share of Social Security taxes for paid emergency leave days through March 31, 2021
- ARPA will have the employer claim the refundable credit against the employer’s share of Medicare taxes for paid emergency leave days from April 1, 2021, through September 30, 2021
- Currently, the 80 hours of EPSL and 12 weeks of EFML allowances run from April 1, 2020, through March 31, 2021
- Since that represents an entire 12 months, ARPA would give employees a fresh 80 hours EPSL and possibly a fresh 12 weeks EFML starting April 1, 2021
- Currently, EPSL reason #3 is for an employee with symptoms who is seeking a medical diagnosis
- ARPA will expand EPSL reason #3 starting April 1, 2021, to also include an employee:
- “Exposed to COVID-19” seeking a diagnosis,
- Whose employer has requested a COVID-19 test or diagnosis,
- Is “obtaining immunization related to COVID-19,” or
- Is “recovering from any injury, disability, illness, or condition related to such immunization”
- ARPA will expand EPSL reason #3 starting April 1, 2021, to also include an employee:
- Currently, EFML is only able to be taken due to a child’s school or place of care being unavailable due to COVID-19
- ARPA is expanding reasons to take EFML to match all reasons to take EPSL
- This includes the expanded EPSL reason #3 terms discussed directly above
- This could be very burdensome to employers since you can request very little documentation from the employee for these emergency paid leaves which will be able to last up to 14 weeks (80 hours + 12 weeks)
- Currently, after the first 10 days of EFML, it then provides 2/3 pay to $200/day for all covered reasons for up to 10 weeks, to a cap of $10,000
- ARPA will pay the first two weeks of EFML and raises the cap to $12,000 as a result
- This resolves situations where someone uses their 80 hours of EPSL and when the need for EFML arises later, the first two weeks go unpaid if the employee has no access to other accrued paid leave
- Currently, the tax credits are not available to employers in the public sector (“the government of any State or political subdivision thereof, or any agency or instrumentality”)
- ARPA eliminates this exclusion, making non-federal governmental employers able to claim the tax credits starting April 1, 2021
The credits remain refundable and eligible for advancement if the total of credits claimed for the quarter exceeds the employer’s share of FICA taxes that quarter.
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.