This is to remind employers that the American Rescue Plan Act of 2021 (“ARPA” or the “Act”), signed into law on March 11,
- Extends the payroll tax credits available to employers who will be voluntarily providing FFCRA Covid-19 related paid sick or family leave [1], from March 31, 2021, to September 30, 2021.
- Increases the amount of the credit by “so much of the employer’s qualified health plan expenses as are properly allocable to the sick leave wages for which such credit is allowed, and
- Includes an additional tax credit for certain amounts paid under a collectively bargained agreement for pension plan contributions and apprenticeship fund contributions that are allocable to paid sick and family leave.
New Categories of Paid Leave under ARPA
The American Rescue Plan expanded the qualifying reasons for both paid sick leave (“PSL”) and paid family leave (“PFL“) to include leave provided to an employee who is :
- Obtaining a Covid-10 immunization,
- Recovering from an injury, disability, illness or condition related to Covid-19 immunization, or
- Seeking or awaiting the results of a Covid-19 test or diagnosis because either the employee has been exposed to Covid-19 or the employer requested the test or diagnosis.
Also, the Plan expanded the qualifying reasons that leave can be provided as PFL (and still receive the tax credit) to include all of the reasons for which PSL can be used. See Footnote 1.
Additional Leave as of April 1, 2021
ARPA “resets” paid leave tax credit eligibility as of April 1, 2021. In other words, beginning on April 1, 2021, an employee will have the full 80 hours of paid sick leave available even if that employee had previously exhausted his FFCRA paid leave.
Paid Sick Leave (PSL)
Employers can receive a 100% tax credit for up to ten days of PSL for employees starting April 1, 2021, even if the employer had previously taken a tax credit for PSL leave paid to those same employees prior to April 1, 2021.
Paid Family Leave (PFL)
Employers can also receive a tax credit for up to 12 weeks of PFL – with the total cap for PFL increased from $10,000 to $12,000. This means the first two weeks of PFL no longer need to be unpaid.
Calculation of Tax Credit
PSL – The tax credit is based on an employee’s regular rate of pay (capped at $511 a day) if the leave is for one of the new reasons related to immunization or testing or because of the employee’s own symptoms, isolation or quarantine, For any other PSL reason, the amount of the employer’s tax credit is limited to 2/3 the employee’s regular rate of pay and capped at $200 a day.
PFL – The tax credit is based on 2/3 of the employee’s regular rate of pay up to a maximum of $200 per day for all PFL reasons for leave, including the new leave reasons related to testing or immunization.
Additional Tax Credit for Certain Amounts Paid Under Collective Bargaining Agreements
Under the Act, collectively bargained defined benefit pension plan contributions and collectively bargained apprenticeship program contributions means contributions which
- Are paid or incurred by an employer during the calendar quarter on behalf of its employees to a defined benefit plan and/or to a registered apprenticeship program.
- Are made based on an hourly contribution rate that the employer is obligated to pay on behalf of its employees under the terms of a collective bargaining agreement in effect with respect to such calendar quarter.
NonDiscrimination
The Act includes a non-discrimination requirement prohibiting employers from claiming a tax credit on any PSL or PFL wages if the employer discriminates in favor of highly compensated employees, full-time employees, or on the basis of seniority when granting leave. If employers do not make FFCRA paid leave available to all employees without respect to their job category or seniority, they may be denied the tax credit.
Update Policies and Forms
If employers plan to grant this paid FFCRA leave to employees, they will need to update their leave policies and forms to reflect the additional qualifying reasons for paid sick and family leave now available to employees.
Regulatory guidance from the Department of Labor and/or the IRS in the form of Frequently Asked Questions is expected within the coming weeks.
[1] As a reminder, FFCRA required employers with fewer than 500 employees to provide paid leave to eligible employees who were unable to work or telework because the employee: (1) was subject to a Federal, State or local quarantine or isolation order related to Covid-19 ; (2) had been advised by a health care provider to self-quarantine; (3) was experiencing Covid-19 symptoms and was seeking a medical diagnosis; (4) was caring for an individual subject to an order described in (1) or self-quarantining as described in (2); (5) was caring for a child whose school or place of care was closed or whose childcare provider was unavailable for reasons related to Covid-19; or (6) was experiencing any other substantially similar condition specified by the Secretary of Health and Human Services.