The American Rescue Plan Act of 2021: What Current and Former Employees Should Know
March 19, 2021
On March 11, 2021 President Biden signed the American Rescue Plan Act of 2021 into law. The legislation contains numerous provisions geared toward responding to and recovering from the COVID-19 pandemic. The following is a brief summary of some of the provisions in the Act which may be of particular interest to employees and individuals who recently have lost their jobs as a result of the pandemic:
Voluntary Extension of Paid Leave Under the FFCRA
The Families First Coronavirus Response Act (FFCRA) was signed into law in March 2020. For more information on the employment aspects of that law, please click here. As part of that legislation, private employers with fewer than 500 employees and certain public employers were required to provide up to 80 hours of paid sick leave to employees who were unable to work for one of the qualifying reasons under the FFCRA. In exchange for providing this leave, covered employers were eligible for federal tax credits to offset the cost of the paid leave.
The FFCRA expired on December 31, 2020, but employers were able to voluntarily extend paid leave benefit to their eligible employees and continue to receive tax credits through March 31, 2020. The American Rescue Plan Act provides an additional six month extension to employers to continue to provide paid sick leave pursuant to the FFCRA through September 30, 2021. Again, this extension is voluntary, so Emergency Paid Sick Leave and/or paid extended Family and Medical Act leave available to employees under FFCRA may no longer be available.
In addition to providing the voluntary six month extension to FFCRA leave benefits, the American Rescue Plan Act provided additional reasons which would qualify an employee for such paid leave. These include an employee being unable to work due to obtaining a COVID-19 vaccine; recovering from a condition, illness, or disability related to the vaccine; and seeking or awaiting the results of a COVID-19 test or diagnosis.
The Act also increased the cap on the total amount of paid expanded FMLA wages from $10,000 per employee to $12,000 per employee. Finally, the Act reset the period during which the up-to 80 hours of paid leave can be provided to the period running from April 1, 2021 through September 30, 2021. Employees who previously used some or all of their paid leave under the FFCRA will not be eligible for any additional leave under this extension, though.
Employees who are unable to work because of one of the qualifying reasons under the FFCRA or one of the additional reasons under the American Rescue Plan Act should ask their employer (or their union representative if they are represented by a union) whether it has agreed to extend FFCRA leave benefits through September.
The American Rescue Plan Act extends certain unemployment compensation benefits provided previously under the CARES Act (more information on which can be found here). This includes an extension through September 6, 2021 of both Pandemic Emergency Unemployment Compensation, which provides unemployment benefits to individuals not otherwise eligible for regular unemployment compensation, and the federal Pandemic Unemployment Assistance, providing unemployment compensation to individuals who are not normally eligible for any unemployment compensation. The Act also provides individuals receiving unemployment compensation with an additional $300 per week. Finally, the Act exempts from federal income tax the first $10,200 in unemployment benefits received by an individual or by each spouse in a household earning less than $150,000 in combined adjusted gross income for tax year 2020.
Subsidies and Expanded Rights to Coverage Under COBRA
Finally, the American Rescue Plan Act provides former employees with additional protection of healthcare benefits available to them under COBRA. The Act provides eligible individuals and qualified beneficiaries under group health plans with subsidized coverage under COBRA from April 1, 2021 through September 30, 2021. These subsidies are available to individuals who are eligible for COBRA due to an involuntary termination (other than for gross misconduct) or a reduction in hours. Subsidies only are available to people whose COBRA period would not have expired prior to April 1, 2021 and they will not be treated as taxable income.
Eligible employees who previously elected to continue benefits under COBRA but then dropped their coverage or who declined to elect coverage under COBRA initially will be given a second chance to continue or elect such coverage. Employers must provide former employees with a new opportunity to make an election of benefits under COBRA, effective April 1, 2021. This will not reset the clock, however. Coverage only will be maintained until the expiration of the original COBRA coverage period available to the employee. For example, an individual first eligible for COBRA on Jan. 1, 2021, who did not elect COBRA effective until April 1, 2021, still will be eligible for COBRA only through June 30, 2022. These subsidies will not be extended to employees who voluntarily left their job. Subsidies will cease to be provided if an employee starts a new job which offers group health insurance. Employers who pay for such subsidies will have the costs offset by federal tax credits.