On March 11, 2021, President Biden signed a sweeping $1.9 trillion COVID-19 economic relief package, known as the American Rescue Plan Act of 2021, into law. While this stimulus bill touches on myriad different areas: including as disparate as direct $1,400 payments to individuals, increasing access to health care, assistance to K-12 schools, and improving national infrastructure, to name a few, the Act contains several provisions of note to employers.
Extension of Tax Credits for Employers Who Voluntarily Provide E-PSL and E-FMLA
As we previously wrote, the Families First Coronavirus Response Act (FFCRA), which required certain employers to provide COVID-19 repeated emergency paid sick and family leave to employees, expired on December 31, 2020. However, given the ongoing nature of the pandemic, former President Trump signed the 2021 Consolidated Appropriations Act (CAA), which permitted employers to choose whether to provide paid leave on a voluntary basis. If an employer elected to continue providing emergency paid sick leave, they would be eligible for payroll tax credits. Prior to enactment of the American Rescue Plan Act, this option was available until March 31, 2021.
The American Rescue Plan Act extends the availability of tax credits, which were originally enacted by the FFCRA, for employers who voluntarily provide sick and family leave through September 30, 2021. It is important to note that the new law “resets” the amount of leave available to employees (whose employer elect to provide paid leave.) Beginning April 1, 2021, employees will have a full 80 hours of paid sick leave available, even if an employee had previously taken paid sick leave pursuant to the FFCRA or CAA. Similarly, an employee’s 10-week allotment of emergency paid family leave will also reset beginning April 1.
The American Rescue Plan Act also adds (1) vaccine appointments and (2) complications due to receiving the vaccine as additional reasons that employees can qualify for paid sick and family leave. Previously, tax credits were available to employers providing emergency family leave only if the employee was unable to work (or telework) due to a need to care for a child whose school or place of care had been closed or was unavailable due to the pandemic. Under the Act, employers may now claim tax credits for emergency family leave for any of the reasons originally set forth under the FFCRA, in addition to the two expanded reasons mentioned above.
Employers must now decide whether to start or continue to provide paid sick and family leave under the Act’s provisions and be prepared to update their forms and policies accordingly.
Additional Tax Credit for Certain Amounts Paid Under Certain Collective Bargaining Agreements.
The American Rescue Plan Act also includes an additional tax credit for certain “amounts paid under certain collectively bargained agreements,” including pension plan contributions and apprenticeship fund contributions that are allocable to employee paid sick and family leave.
Under the Act, “collectively bargained defined benefit pension plans contributions” means, with respect to any calendar quarter, contributions which (i) are paid or incurred by an employer during the calendar quarter on behalf of its employees to a defined benefit plan, (ii) are made based on a pension contribution rate, and (iii) are required to made pursuant to the terms of a collective bargaining agreement in effect with respect to such calendar quarter.
The Act specifies that the amount of collectively bargained defined benefit pension plan contributions allocated to qualified sick leave wages for a calendar quarter “shall be the product of (i) the pension contribution rate (expressed as an hourly rate), and (ii) the number of hours for which qualified sick leave wages were provided to employees covered under the collective bargaining agreement . . . during the calendar quarter.”
Multi-Employer Pension Plans Given $86 Billion in Relief
Finally, the American Rescue Plan Act includes provisions regarding multi-employer pension plans and allows plans to obtain financial assistance from the Treasury Department. Under the Act, those multi-employer plans that are in “critical and declining” status will be given enough money in a lump sum from the Treasury Department to pay benefits through 2051 with no cuts to the benefits of participants and beneficiaries. This assistance is not subject to repayment. Plans that receive assistance under the Act are required to file regular status reports with the federal government and Congress.
The Pension Benefit Guaranty Corporation has 120 days to issue regulations or guidance setting forth application requirements for financial assistance.
Bottom Line
This is only a brief summary of only three provisions in a vast bill with wide implications for many Americans. Ultimately, the Act continues the trend of tax breaks and other benefits offered to companies who continues to support employees throughout the pandemic, even as the end may (hopefully) be in sight.