On March 12, President Biden signed the $1.9 trillion COVID-19 relief package—the American Rescue Plan Act (ARPA) of 2021 (H.R. 1319). The new law includes the much anticipated $1,400 refundable tax credit for individuals, but has several provisions that will impact businesses. There are medical benefit subsidies which significantly impacts COBRA administration and the ACA Marketplaces including payroll tax credits. There are also extensions to hours and credits for employers to offer under the Emergency paid Sick Leave and Emergency FMLA paid leave benefits. This includes incentives for getting the vaccine, such as PTO and additional types of payroll tax credits.
COBRA Subsidy Provision
The subsidy applies to an “assistance eligible individual” (AEI) who is any COBRA qualified beneficiary who is eligible for, and elects, COBRA during the period of April 1, 2021 through September 30, 2021, due to an involuntary termination of employment or reduction in hours. (The reduction in hours is not required to be involuntary.)
- AEIs must be offered at least a 60-day window within which to elect COBRA coverage.
- Employers will be entitled to an advanceable, refundable tax credit against Medicare payroll taxes (1.45%) to pay for coverage during the subsidy period. The DOL will provide forms and instructions for employers to apply for the credit.
- Additional guidance is expected for multi-employer (union) plans and professional employer organizations (PEOs.
- The subsidy is available until the first of the following events to occur:
- the qualified beneficiary becoming eligible for other group health plan coverage (other than coverage consisting only of excepted benefits, such as dental or vision, coverage under a health FSA, or coverage under a qualified small employer health reimbursement arrangement (QSEHRA));
- the qualified beneficiary becoming eligible for Medicare;
- the end of the qualified beneficiary’s maximum COBRA duration; or
- September 30, 2021.
- Qualified beneficiaries who fail to notify the plan that they are no longer assistance-eligible can be liable for a $250 penalty or 110% of the amount of premium assistance received, if greater.
- Employers may allow currently enrolled AEIs to select new plans within 90 days from the date they are notified of the enrollment option to elect a different plan.
OnePoint HCM COBRA Administration
OnePoint HCM offers an all-inclusive COBRA administration service that handles virtually all aspects of COBRA process. As the ARPA offers COBRA enrollment from April 1, 2021 through September 30, 2021, our service April 1, 2021 through September 30, 2021, our COBRA solutions can track qualifying events and enrollment eligibility to ensure timeline completion of all required tasks.
ACA Marketplaces Subsidies
Depending on the type of group plans you make available to your employee, your employees may qualify now for plans on the marketplace they might not have previously or for government premium subsidies they may want to take advantage of. Some of the new provisions regarding the ACA Marketplaces include:
- Nearly $35 billion in premium subsidy increases for those who buy coverage on the Patient Protection and Affordable Care Act (ACA) marketplaces.
- Removes the 400 percent federal poverty level limit on subsidy eligibility.
- One year, the bill provides premium subsidies of ACA marketplace coverage equivalent to a person earning up to 133 percent of the federal poverty level for people who receive unemployment.
Paid Sick Leave Provisions
The ARPA expands FFCRA leave (EPSL and E-FMLA) in several ways for employers who choose to offer it from April 1, 2021 through September 30, 2021: The 10-day limit for EPSL resets as of April 1, 2021. Employees were previously limited to 80 hours from April 1, 2020 through March 31, 2021.
- Paid leave continues to be limited to $511 per day ($5,110 total) for an employee’s own illness or quarantine (paid at the employee’s regular rate), and $200 per day ($2,000 total) for leave to care for others (paid at two-thirds of the employee’s regular rate).
- A new “trigger” is added under both the EPSL and E-FMLA provisions. Employees qualify for leave if they are:
- seeking or awaiting the results of a diagnostic test for, or a medical diagnosis of, COVID-19, and the employee has been exposed to COVID–19 or the employee’s employer has requested such test or diagnosis;
- obtaining immunization related to COVID–19; or
- recovering from any injury, disability, illness, or condition related to such immunization.
- Leave under the E-FMLA provision is increased from $10,000 to $12,000, with $12,000 being the maximum an employer may claim for an employee in 2021.
- Leave under the E-FMLA provision is expanded to be available for any EPSL-qualifying reason, which is when an employee is unable to work or telework because the employee:
- is subject to a federal, state, or local quarantine or isolation order related to COVID-19;
- has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
- has COVID-19 symptoms and is seeking medical diagnosis;
- is caring for an individual who is subject to a quarantine or isolation order;
- is caring for a child if the school or day care center has been closed, or the child-care provider is unavailable, due to COVID-19 precautions; or
- is experiencing any other substantially similar condition specified by the regulatory agencies.
- E-FMLA leave taken on or after April 1, 2021 is not subject to the 10-day elimination period that applied previously under FFCRA.
- An employee’s eligibility for E-FMLA may depend on when they used E-FMLA previously and how the employer establishes its 12-month FMLA period (e.g., calendar year, fixed period, measure-forward, or “rolling” 12 months).
- For leave taken on or after April 1, 2021, the employers may take a credit against Medicare payroll tax only (1.45%); however, the credit continues to be refundable.
- EPSL and E-FMLA credits are available for qualified health plan expenses and for the employer’s share of Medicare and Social Security taxes.
- ARPA clarifies that refundable credits may be received by state and local governments that are tax exempt under Code 501(a). See IRS Article
- ARPA adds a new nondiscrimination requirement that eliminates the credit for any employer that discriminates in favor of highly compensated employees, full-time employees, or employees based on tenure.
This now also now extends to federal government employees under the Emergency federal employee leave fund.
In addition, retroactive to the March 27, 2020, enactment of the CARES Act, the law now allows employers who received Paycheck Protection Program (PPP) loans to claim the ERC for qualified wages that are not treated as payroll costs in obtaining forgiveness of the PPP loan.
Finally, another noteworthy impact is, effective January 1, 2021, the definition of qualified wages was changed to provide:
- For an employer that averaged more than 500 full-time employees in 2019, qualified wages are generally those wages paid to employees that are not providing services because operations were fully or partially suspended or due to the decline in gross receipts.
- For an employer that averaged 500 or fewer full-time employees in 2019, qualified wages are generally those wages paid to all employees during a period that operations were fully or partially suspended or during the quarter that the employer had a decline in gross receipts regardless of whether the employees are providing services.
The summaries of these particular provisions in ARPA are not exhaustive and are subject to change. This article should not be considered legal advice or guidance. Please consult legal counsel or a labor law attorney to determine how new laws will affect your business operations.
How OnePoint HCM Can Help
OnePoint continues to monitor new laws and legislation in order to help our clients meet new regulatory and compliance requirements. Our all-in-one HCM database infrastructure and configurable pay rules and accrual rules makes it easier to adapt to new tracking and reporting requirements. Advanced modules for Leaves of Absence and COBRA Administration can be added to automate the administrative process and improve compliance. Configurable HR actions, checklists and workflows can be built to match your internal processes to improve communication and ensure employer obligations are correctly and timely completed. Contact OnePoint to discuss how we can help your organization prepare for these new laws.