On March 11, 2021, President Biden signed into law the American Rescue Plan Act of 2021 (“ARPA”), authorizing an addition $1.9 trillion in emergency COVID-19 relief. Like its predecessor bills, the Coronavirus Aid, Relief, and Economic Security Act (“CARES”) of March 2020, and the Consolidated Appropriations Act from December 2020 (“CAA”), this newest stimulus package is designed to accelerate the country’s recovery from the economic and health effects of the COVID-19 pandemic. You can find our previous legal updates on the CARES Act here and the CAA here.
More information regarding the ARPA’s key benefits and programs is outlined below.
For employers with fewer than 500 employees, the ARPA extends the availability of the FFCRA’s EPSL and EFMLEA tax credits through September 30, 2021 (under the CAA, these were previously set to expire on March 31, 2021). Consistent with the CAA, under the ARPA employers still are not required to continue to provide EPSL or EFMLEA benefits after December 31, 2020. Instead, they may voluntarily continue to provide such paid leave benefits to eligible employees through September 30, 2021.
Beginning April 1, 2021, the ARPA permits an employer to provide an additional 10 days of leave to employees who previously took 10 days of emergency paid sick leave under the FFCRA. The ARPA also expands the covered reasons for sick leave set forth in the FFCRA to include three new eligibility criteria: in addition to the original six FFCRA criteria, employers can also receive tax credits (1) where an employee is seeking or awaiting the results of a diagnostic test or medical diagnosis of COVID-19 and such employee has been exposed to COVID-19, (2) where the employer has requested such test or diagnosis, or (3) where the employee obtains immunization (i.e. vaccination) related to COVID-19 or is recovering from any injury, disability, illness or condition related to such immunization after medical diagnosis.
Additionally, employers now may claim tax credits for emergency FMLA arising from any of the reasons set forth in the FFCRA, including the expanded reasons set forth above. Additionally, the ARPA increases the wages covered by the paid family leave credit from $10,000 to $12,000 per worker and removes the two-week waiting period on emergency FMLA leave.
The ARPA also adds “non-discrimination rules” that prevent employers from claiming the EPSL or EFMLEA credit if they make leave available in a manner that discriminates in favor of employees who are highly-compensated or full-time, or on the basis of tenure with the employer. This provision admonishes employers who make the decision to voluntarily provide leave to do so in a uniform manner, without discriminating against certain categories of workers.
Finally, as noted in our recent legal update, California employers are strongly cautioned to closely monitor their local, city and county ordinances, which could create additional layers of compliance requirements depending on a business’s specific location or the location where remote employees might be working. You can find our update on this topic here.
The ARPA extends the CARES Act and CAA federal UI benefits add-on of $300 per week through Labor Day (September 6, 2021). As before, the federal add-on UI benefit will be provided in addition to any California UI benefits received by eligible workers, and will be administered by the California Employment Development Department.
The ARPA thus increases the maximum number of weeks an individual may claim state unemployment insurance benefits plus the federal add-on UI program from 50 weeks (authorized in the CARES Act) to 79 weeks. The Act also leaves intact unemployment compensation to workers who are not normally eligible for benefits, including self-employed individuals, independent contractors, “gig economy” workers, and individuals who were unable to start a new job or contract due to COVID-19.
Like the CAA, the bill also provides an extra benefit of $100 per week in “Mixed Earner Unemployment Compensation” for workers who previously earned both wage and self-employment income, but whose base unemployment benefit calculation did not take the worker’s self-employment wages into account.
Finally, although unemployment benefits are taxable, the ARPA provides that the first $10,200 in UI benefits received in 2020 will not be taxable for households whose gross adjusted income was below $150,000 in 2020.
Although the ARPA is intended to prevent a gap in the federal add-on UI benefits under the CARES Act and the CAA (which are set to expire on March 14, 2021), it is possible that there may be a gap as state agencies adjust to the program and benefit extensions.
The ARPA also provides for the full cost of COBRA premiums so workers can maintain health insurance through their former employer’s plan at no cost through September 2021, to support workers eligible under the Consolidated Omnibus Reconciliation Act of 1985 (“COBRA”) due to involuntary termination or a reduction in hours. The bill provides a refundable tax credit to allow employers and health plans to be reimbursed for the full amount of COBRA premiums. Employers should consult with their broker or plan administrator about these COBRA-related changes.
The ARPA provides an additional $7.25 billion for PPP, thereby increasing the PPP program level from $806.4 billion to $813.7 billion. It does not extend the PPP's current application period, however, which will close on March 31.
It also extends the PPP to additional categories of not-for-profit entities not previously covered. Initially, only 501(c)(3) charities and 501(c)(4) civic leagues were eligible to receive PPP funds. The CAA then extended benefits under certain conditions to 501(c)(6) organizations such as chambers of commerce, travel bureaus and destination marketing organizations, as well as 501(c)(19) veterans’ organizations. The ARPA will make PPP loans available to all other not-for-profit organizations.
Larger non-profits would become eligible for PPP by striking the application of the Small Business Administration’s (“SBA”) affiliation rules to non-profits in the CARES Act and looking at the employee headcount per physical location. Thus, larger 501(c)(3) and veterans’ organizations are eligible for PPP so long as they employ no more than 500 employees per physical location of the organization. Larger 501(c)(6)s, domestic marketing organizations and all other non-profits in Section 501(c) of the IRC (except for 501(c)(4)s) are eligible for PPP if they do not employ not more than 300 employees per physical location of that organization.
It also provides that newly-eligible entities may take out second-draw PPP loans, provided that they have suffered at least a 25% revenue loss and employ not more than 300 employees.
The ARPA designates a new $28.6 billion grant program for restaurants and bars, $15 billion for the Economic Injury Disaster Loan (“EIDL”) Advance Grants Program to provide grants of up to $10,000 per business to “severely impacted” small businesses, and $1.25 billion for the Shuttered Venue Operators Grant program for music halls and other concert venues, including a set-aside for technical assistance to help entities apply for grants. Finally, the ARPA designates $175 million for the Community Navigator Pilot Program, which is designed to help small businesses in underserved and underbanked communities to access the COVID-19 relief resources available to them.
The ARPA provides a third wave of non-taxable economic impact payments worth up to $1,400 per individual and dependents. Unlike previous stimulus payments, parents of adult dependents and full-time students younger than 24 may qualify for a $1,400 payment. As before, eligibility for stimulus payments remains based on adjusted gross income and phases out for higher-earning taxpayers.
Individuals earning an adjusted annual gross income of up to $75,000 will receive the full $1,400 benefit. No individual with an adjusted annual gross income of over $80,000 will receive a stimulus payment. Stimulus eligibility for heads of households begins to phase out at $112,500 and phases out completely at $120,000.
Individuals filing jointly with an adjusted annual gross income of $150,000 or less will receive $2,800, plus $1,400 for each dependent. Joint filers with an adjusted annual gross income of over $160,000 will not receive any payment. Payments would be based on 2019 or 2020 tax returns.
Like the prior round of stimulus payments, experts believe that taxpayers who use direct deposit for IRS refund payments will receive their payments first, perhaps as soon as this coming week.
The ARPA contains many other changes that are beyond the scope of this legal update. For those interested in reading the full bill, you can find it here.
For further information regarding COVID-19 questions, or other employment law issues, contact the attorneys at LightGabler.