On March 11, 2021, President Biden signed into law the American Rescue Plan Act of 2021 (“ARPA”), the most recent stimulus bill enacted to address the COVID-19 pandemic. The law contains various provisions that impact employers, including an extension of tax credit incentives for employers voluntarily continuing to provide Families First Coronavirus Response Act leave and a new COBRA premium subsidy.

Families First Coronavirus Response Act

• Background: Under the Families First Coronavirus Response Act (“FFCRA”), which was signed into law in March 2020, private sector employers with fewer than 500 employees were required to provide paid leave for COVID-19-related reasons through two provisions: the Emergency Paid Sick Leave (“EPSL”) and the Emergency Family Leave Act (“EFMLA”).
  • Under the EPSL, workers were entitled to up to 80 hours (10 days) of paid sick time:
    • at their regular rate of pay (or the Federal minimum wage, if higher), up to $511 per day and $5,100 in the aggregate, for COVID-19-related reasons concerning their own health needs, and
    • at 2/3 of their regular rate of pay (or the Federal minimum wage, if higher), up to $200 per day and $2,000 in the aggregate, for COVID-19-related reasons concerning their need to care for family members, or if they were experiencing any other substantially similar condition specified by the U.S. Department of Health and Human Services.
  • Under the EFMLA, workers were entitled to up to 12 weeks of leave, with the first 2 weeks unpaid and the remainder at 2/3 of their regular pay, up to $200 per day and $10,000 in the aggregate, when they were unable to work because of a need to care for a child whose school or child care provider was unavailable due to COVID-19 closures.

Employers who provided such leave were then entitled to receive a fully refundable tax credit equal to the paid leave granted. Following the expiration of the FFCRA on December 31, 2020, employers were no longer required to provide such leave, but the Consolidated Appropriations Act of 2021 gave employers the option to claim the tax credits through March 31, 2021 for voluntarily continuing to provide FFCRA leave. For a summary of the FFCRA requirements prior to ARPA, see S&K’s Alert: Federal and State Paid Leave Legislation in Response to COVID-19: What Employers Need to Know About the Families First Coronavirus Response Act and S. 8091.

• Extended Duration: ARPA further extends the period for employers to provide voluntary FFCRA leave and claim associated tax credits through September 30, 2021.
• Expanded Eligibility for Leave: To claim the tax credit for providing FFCRA leave, the leave must be provided for a qualifying reason under either the EPSL or EFMLA provisions. While the EFMLA and EPSL provisions originally covered different leave scenarios under the FFCRA, ARPA expands the EFMLA to apply to the same leave reasons as under the EPSL—if the employee is unable to work or telework because:
  • (1) The employee is subject to a Federal, State, or local quarantine or isolation order related to COVID-19;
  • (2) The employee has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
  • (3) The employee is experiencing COVID-19 symptoms and is seeking a medical diagnosis;
    • ARPA further expands this category to include leave for employees:
      • seeking or awaiting the results of a COVID-19 test or medical diagnosis, if the employee has been exposed or the employee’s employer has requested the test or diagnosis;
      • obtaining COVID-19 immunization; or
      • recovering from an injury, disability, illness, or condition related to such immunization
  • (4) The employee is caring for an individual who is subject to an order as described in (1) or has been advised as described in (2);
  • (5) The employee is caring for a son or daughter because the child’s school has been closed or the childcare provider is unavailable due to COVID-19 precautions;
  • (6) The employee is “experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor.”
• Expansion of EPSL and EFMLA:
  • ARPA provides a new allotment of up to 80 hours (10 days) per employee of EPSL leave beginning on April 1, 2021.
  • ARPA does not create any new allotment of EFMLA leave, which is still capped at 12 weeks, but eliminates the requirement that the first two weeks be unpaid such that the entire 12 weeks is paid at a rate of 2/3 of the employee’s regular pay, up to $200 per day and $12,000 in the aggregate.
• Prohibition on Discrimination: APRA contains new non-discrimination rules, stating that employers will be ineligible to claim the tax credit if the employer discriminates in favor of highly compensated employees, full-time employees, or on the basis of an individual’s employment tenure.

COBRA Subsidy

• Background: The Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) permits eligible employees to continue coverage under their employer’s health insurance plan for up to 18 months after coverage is lost; certain states’ laws provide for an additional continuation coverage period beyond the 18 months for qualifying events. Employees who continue coverage under federal COBRA or state continuation coverage must pay the full cost of the premium.
• Subsidy: Under ARPA, eligible employees may now receive up to six (6) months of fully subsidized continuation premiums from April 1, 2021 through September 30, 2021. Employers will be obligated to pay these premiums directly, but will receive reimbursements for the COBRA premium subsidies through a payroll tax credit.
• Eligibility: An individual is eligible for the ARPA COBRA subsidy if:
  • During the period from April 1, 2021 through September 30, 2021, they
    • are eligible for COBRA continuation coverage by reason of a qualifying event that is a reduction in hours (such as reduced hours due to change in a business’s hours of operations, a change from full-time to part-time status, taking of a temporary leave of absence, or an individual’s participation in a lawful labor strike, as long as the individual remains an employee at the time that hours are reduced) or an involuntary termination of employment (not including a voluntary termination); and
    • elect COBRA continuation coverage

OR

• • They experienced a qualifying event that was a reduction in hours or an involuntary termination of employment prior to April 1, 2021 and
    • did not elect COBRA continuation coverage when it was first offered prior to that date; or
    • elected COBRA continuation coverage but are no longer enrolled (such as an individual who dropped coverage because they were unable to pay the premiums)
• Notice Requirement: Employers are required to provide notice of the COBRA subsidies to eligible employees no later than May 31, 2021. The DOL has issued model notices and additional information regarding the COBRA premium subsidy on its website.
• Interaction with State Continuation Coverage: The ARPA does not change any requirement of a state continuation coverage program. ARPA permits eligible individuals who elect continuation coverage under state insurance law to receive premium assistance from April 1, 2021 through September 30, 2021, or to switch to other coverage offered to similarly situated active employees if the plan allows it, provided that the new coverage is no more expensive than the prior coverage.

Employers should contact counsel for assistance in issuing proper notices before the May 31, 2021 deadline and determining their COBRA premium obligations under ARPA.

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Seward & Kissel has established a COVID-19 Resource Center on our website to access all relevant alerts that we distribute.

If you have any questions regarding the ARPA, please contact your relationship partner at the Firm.