American Rescue Plan - Impact on Employers

On March 11, 2021, President Joe Biden signed into law the American Rescue Plan Act (ARPA), a $1.9 trillion legislative package including a significant range of policies to provide additional pandemic relief.

This E-Alert summarizes two measures included in the ARPA which are of particular interest to employers—the subsidy for COBRA premiums and the expansion of FFCRA leave.

Other employment-related provisions in the ARPA include extension of pandemic-related unemployment benefits, expansion of Exchange subsidies for ACA premiums, and an increase in DCAP contribution limits.

COBRA Subsidy
The ARPA provides a 100% subsidy of COBRA premiums from April 1, 2021, through Sept. 30, 2021, for employees and their family members who lost health insurance due to the involuntary termination (or reduction in hours) of their employment. Eligible individuals may elect subsidized COBRA even if they had never made an initial COBRA election or had enrolled in COBRA and then dropped it.

The subsidy is not available for employees who voluntarily terminated their employment or who qualify for another group health plan.

For eligible individuals not enrolled in COBRA as of April 1, 2021, the ARPA provides a second window of time to enroll in order to take advantage of the subsidy. Plan sponsors are required to provide a notice of availability of the subsidy and eligible individuals will have 60 days to elect subsidized COBRA after receiving notice of the benefit. The DOL will issue model notices for this purpose.

The subsidy is funded by the federal government through a refundable payroll tax credit. We anticipate that the Internal Revenue Service will provide more details on exactly how to claim the credit in upcoming weeks.

Modifications to FFCRA
Although the Families First Coronavirus Response Act (FFCRA) expired on December 31, 2020, the federal law was previously extended on a voluntary basis through March 31, 2021. Effective April 1, 2021, the ARPA further extends the FFCRA through September 30, 2021 and makes additional changes which employers with less than 500 employees can continue to offer on a voluntary basis.

Extension of Tax Credits: The ARPA extends the FFCRA tax credits through September 30, 2021. Employers may continue to voluntarily offer the FFCRA and receive the appropriate tax credits.

NY employers must offer NY COVID Leave if they choose not to offer the FFCRA. NY employers should click here for information regarding NY Paid Family Leave for COVID-19.

Expanded Reason for Emergency Paid Sick Leave: The six reasons provided for emergency paid sick leave remain the same. However, employees in need of leave for the COVID-19 vaccine or recovery from any injury or condition related to the immunization are eligible for emergency paid sick leave. Additionally, an employee may receive emergency paid sick leave when seeking or awaiting COVID-19 testing.

Additional Ten Days of Emergency Paid Sick Leave: The ARPA provides an additional ten days of emergency paid sick leave for those employees who previously took ten days of emergency paid sick leave.

Increase Wages Eligible for Family Leave Credit: The amount of wages eligible for the family leave credit increases from $10,000 to $12,000 per employee and removes the two-week waiting period for Emergency FMLA.