An Employer’s Guide to the American Rescue Plan Act

U.S. Capitol Building

Last month, President Biden signed the American Rescue Plan Act of 2021 (“ARPA”).  It is the latest in federal COVID-19 relief legislation and includes another round of stimulus checks for qualifying individuals; measures on COBRA continuation coverage; multiemployer pension reform; and voluntary paid leave programs.  Here’s the most important pieces of the ARPA that employers should be aware of.

Voluntary Tax Credit Extension.   The ARPA extends the Families First Coronavirus Response Act’s (“FFCRA”) tax credit provisions through September 30, 2021.  As we reported here,  employers are no longer required to provide the emergency paid sick leave or emergency paid family and medical leave that was originally part of the FFCRA.  Instead, an employer can choose whether to provide FFCRA to employees and obtain tax credits associated with providing the leave.  However, the ARPA did make certain modifications that took effect April 1, 2021:

  1. Eligible Employers. Unlike the FFCRA, the ARPA expands eligibility for tax credits to state and local governments that provide sick leave for qualifying reasons.
  2. Covered Reasons for Sick Leave.  The ARPA expands the list of reasons for paid sick leave. Originally, the FFCRA set qualifying reasons for providing paid sick time to employees that were unable to work or telework because the employee: (1) was subject to a government quarantine or isolation order related to COVID-19; (2) had been advised by a healthcare provider to self-quarantine; (3) was experiencing COVID-19 symptoms and seeking a diagnosis; (4) was caring for an individual who is subject to quarantine order or is self-quarantining; (5) was caring for a child whose school or care facility is closed because of COVID-19; and (6) was experiencing any other substantially similar conditions specified by the Secretary of Health and Human Services, in consultation with the Secretaries of Labor and Treasury. 

    In addition to those reasons, paid sick leave is now available under the ARPA for leave taken (i) to obtain a COVID-19 immunization; (ii) to recover from an injury, disability, illness or condition related to the immunization; or (iii) to seek or await the result of a COVID-19 test when the employee has either been exposed to COVID-19 or the employer has requested the test or diagnosis.
  3. Reset of Paid Leave.  For employees that previously took ten (10) days of emergency paid sick leave, the ARPA “reset” the employee’s allocation of emergency paid sick leave days on April 1, 2021.  For example, an employee that exhausted their emergency paid sick leave in October 2020 will now have an additional ten (10) days of emergency paid sick leave to use for a qualifying reason between April 1 and September 30.
  4. Emergency Family and Medical Leave Tax Credit Expansion.  Under the FFCRA, emergency family and medical leave was only available to employees who were unable to work (or telework) due to the need to care for minor children due to a school or place of care being closed, or the childcare provider of such children being unavailable due to a COVID-19 emergency declared by a federal, state, or local authority.

    Now, under the ARPA, tax credits for voluntarily providing emergency family and medical leave are available for any of the qualifying reasons set forth in the FFCRA (i.e., reasons 1 through 6 mentioned above), as well as the new reasons related to COVID-19 immunizations and seeking or awaiting the results of a COVID-19 test.
  5. Non-Discrimination Rules.  Employers who are voluntarily providing leave and receiving tax credits must also follow new non-discrimination rules.  These rules make the tax credit available only to those employers who provide leave to all employees without discriminating against certain categories of workers.  Specifically, the tax credit is not available to those employers who discriminate (1) in favor of highly compensated employees, (2) in favor of full-time employees, or (3) on the basis of employment tenure.

COBRA Subsidies.  COBRA coverage allows employees and their dependents to remain on their employer’s group health insurance for up to thirty-six (36) months due to a qualifying reason, including a period of eighteen (18) months if coverage is lost due a reduction in work hours or the employee’s involuntarily termination of employment. Normally, the worker and any covered dependents are fully responsible for payment of premiums. 
The ARPA now requires employers to fully subsidize COBRA for certain eligible individuals for up to six (6) months if they lost coverage in November 2019 or later due to the employee’s involuntary termination (for reason other than gross misconduct) or reduction in work hours. Eligible individuals include those who (i) are either already enrolled in COBRA; (ii) did not previously elect COBRA continuation coverage when it became available to them; and (iii) elected CORBA initially but stopped paying the premiums.  

The premium subsidies apply from April 1 to September 30. Employers will receive reimbursements for the subsidy through a payroll tax credit.  Notably, however, the subsidy does not extend the required COBRA period. For example, if a former employee’s COBRA coverage is scheduled to end on June 30, 2021, the former employee is only eligible for a subsidy from April 1 to June 30.

Employers must notify eligible individuals about the new COBRA subsidy before May 31, 2021. The Department of Labor is expected to publish model notices by mid-April.   

Department of Labor’s COVID-19 Oversight.  The ARPA allocates $200 million in additional funding to the Secretary of Labor through September 30, 2023, for the Wage and Hour Division, the Office of Workers’ Compensation Programs, the Office of the Solicitor, the Mine Safety and Health Administration, and OSHA.  The additional funds are intended to help the DOL’s various divisions carry out COVID-19-related worker protection activities, and for the Office of Inspector General for oversight of the Secretary’s activities to prevent, prepare for, and respond to COVID-19.

If you have any questions on this topic, or need assistance navigating these changes, please contact our Labor & Employment Law Practice Group. We encourage you to subscribe to our Labor & Employment E-Briefs to keep up with the latest HR news, tips, and updates.