The American Rescue Plan and Human Resources Implications

The newest relief legislation passed during the COVID-19 pandemic is the American Rescue Plan Act (ARPA). The new law contains several human resources provisions that went into effect on April 1 and will continue through September 30, 2021.

Emergency Paid Sick Leave

Emergency Paid Sick Leave (EPSL) was created last year as part of the Families First Coronavirus Response Act (FFCRA) and has been included, with some changes, in the ARPA. The law provides tax credits for private-sector employers with 499 or fewer U.S. employees for qualifying leave taken anytime between April 1, 2021 and September 30, 2021.  The same tax credit caps created in the FFCRA on the amount of tax credit reimbursements continue to apply in the ARP.

The ARPA version of EPSL is different from the FFCRA version in several respects.  First, it is a voluntary program as it was with the extension that was announced for the beginning of 2021, rather than being mandatory as it was originally. In addition, the ARP version of the EPSL adds three more qualifying reasons for using the leave, which are:

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 seeking or awaiting the results of a diagnostic test or medical diagnosis for COVID-19, or the Company has requested such a test or diagnosis.

Plus the original qualifying reasons for leave under the FFCRA:

1. The employee was subject to a federal, state, or local quarantine or isolation order related to COVID-19;
2. The employee’s health care provider advised the employee to self-quarantine due to concerns related to COVID-19;
3. The employee experienced symptoms of COVID-19 and sought a medical diagnosis;
4. The employee was caring for an individual who was subject to either scenario #1 or #2 above;
5. The employee had to care for a child, whose school or place of care closed, or the employee’s childcare provider was unavailable due to COVID-19 precautions; or
6. The employee experienced other conditions similar to COVID-19 (as identified by the Secretary of Health and Human Services).

Importantly, the bank of time allotted to employees for EPSLA resets, which means that if the 80-hour allotment that existed prior to March 31, 2021 is gone either because it was used or it expired, and another 80 hours became available on April 1, 2021.

Emergency Family Medical Leave Expansion

The original FMLA law covered COVID-related leave if an employee became ill due to the virus, but only allowed for the 80-hours of reimbursable wages using ESPL. After that, employees were limited to the standard paid time off provided under company policy. The FFCRA expanded the qualifying reasons for FMLA as part of the Emergency Family Medical Leave Expansion Act (EFMLA). EFMLA provided paid leave for employees needing to care for a child whose school or place of care had closed, or whose childcare provider was unavailable due to coronavirus precautions.

The ARP reintroduced EFMLA and further expanded it. The paid leave provisions now will cover all of the same scenarios that are covered under EPSL. Note that the expansion does not cover the employee is taking FMLA for a reason that is not COVID-19 related.

In addition, if an employee takes EFMLA leave, the entire period of leave is paid. This eliminates the previous initial unpaid period and the need to transfer time from an employee’s EPSLA bank to the EFMLA bank. Tax credits for EFMLA leave are two-thirds of the employee’s regular pay rate, capped at $200 per day. Accordingly, the total EFMLA reimbursement will be capped at $12,000, which is $2,000 higher than was previously provided.  

Employee Retention Credit

The Employee Retention Credit (ERC) is a tax credit program that was enacted as part of the CARES Act in 2020 to provide incentives for companies to retain employees during the pandemic.  The program has been extended through December 31, 2021.  If a company is eligible and all of the criteria are fulfilled, it may be reimbursed up to $5,000 for each full-time employee that was retained during the defined time period. Companies should consult with its financial executives and accountants to determine eligibility.

COBRA Subsidy: Employer Responsibilities

The ARPA mandates that employers subsidize COBRA premiums for certain former employees. The new law states that potentially eligible people for the subsidies are employees, spouses, and dependents who lost healthcare coverage from November 2019 through the present time due to a reduction in hours or involuntary termination. Employees that were terminated for gross misconduct will not qualify for the subsidy. If an employee is Medicare eligible or has another employer’s group health plan available, for instance through a spouse’s healthplan, then the company is not required to subsidize COBRA payments.

Employers must notify eligible former employees about the new COBRA subsidy by May 31, 2021. The Department of Labor released Model Notices which can be found here: U.S. DOL-EBSA-Cobra Premium Subsidy

Final Thoughts

The American Rescue Plan Act is sweeping legislation that covers many areas of pandemic-related economic recovery. As with previous pandemic-related legislation, employers should involve both its human resources and legal teams to become aware of the requirements of the ARP, as well as the opportunity to recoup costs under its provisions.

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