The American Rescue Plan Act (ARPA) was enacted on March 11, 2021 as part of a plan by the Biden Administration to combat the economic crisis that has impacted individuals and businesses alike. This Act is significant in nature because it covers so many areas, including some key HR related provisions for companies of all sizes, with a sizable impact on small businesses.
Extended Covered Leave and Tax Credits
Remember the Families First Coronavirus Response Act (FFCRA) from 2020?
Here is a refresher if needed, but the nuts and bolts of it was that companies under 500 employees were required to provide paid sick leave to employees that were unable to work for specific reasons related to COVID. That expired on December 31, 2020 but was extended on a voluntary basis through March 31, 2021.
Through the ARPA, it continues the extension of the voluntary paid leave under the FFCRA through September 30, 2021. That means the refundable tax credit is available to eligible employers that choose to provide paid leave under this program through September 2021. The tax credit is equivalent to the amount paid under the leave, up to a max amount.
Important note: Although the participation in this program is voluntary as a company, if it is offered to one employee it must be offered to all eligible employees.
Also, through ARPA, the reason for a covered paid leave is expanded to cover vaccine related leave and the maximum refundable tax credit amount is increased. More details on the eligibility and tax credits can be found here.
COBRA applies to companies with 20 or more employees and allows employees to continue coverage after employment for a period of up to 18 months. However, state continuation applies to companies with less than 20 employees.
This provision under the ARPA requires companies to provide eligible employees with up to 6 months of subsidized COBRA starting April 1, 2021 through September 20, 2021. Eligible employees are those that lost medical benefits coverage because of an involuntary termination or reduction of hours and is not eligible for other coverage. Companies will be required to send notices to eligible employees under this provision, which will be issued by the Department of Labor in the coming weeks.
This means the company picks up the cost of the premium for the COBRA covered individual and the company will get that refunded through a payroll tax credit, similar to the leave program noted above.
The two initial questions we had that Josh help us with are:
Does this subsidy for healthcare continuation also apply to state continuation or is it only federal COBRA?
The COBRA subsidy applies to all sized groups, even if they are below 20 (under state continuation) or over 500 (where the FFCRA didn’t apply).
Do you know if it is only for involuntary separations and reduction of hours specifically related to COVID or is it any involuntary separation?
There will be some people who are not eligible for the subsidy, but we are going to be focused on well-defining that eligibility. But involuntary termination will, in all likelihood, be broadly defined.
There is a lot to work through and understand with the COBRA Subsidies so we strongly recommend that you work with your benefit broker or COBRA administrator for your benefit plans. You can also reach out to our friend Josh Burger at firstname.lastname@example.org.
Again, there are many provisions of this Act that are detailed and intricate. We are only touching on 2 key provisions that may impact your small business.
We strongly encourage small business owners to work with their HR partner as well as their Benefits Broker, CPA or Accountant to ensure that all aspects of their business is covered and managed appropriately.
We will continue to stay on top of this to best support the small business community in which we work.