The recently enacted American Rescue Plan Act (“ARPA”) includes several key provisions that impact employers. The following is a summary of those provisions, though the changes to the implementation of FFCRA-like paid leave for COVID-19 related reasons are discussed in a separate article by BPJ Associate Sarah Stuart.
COBRA Premium Subsidy
Under the ARPA, employers are required to offer a subsidy of 100 percent of the cost of premiums for COBRA coverage for “Assistance Eligible Individuals,” which include employees (and their dependents) who lost group health plan coverage as a result of an involuntary termination of employment (other than for gross misconduct) or a reduction in hours and are, or could have been, eligible for COBRA at any time between April 1, 2021, and September 30, 2021. The subsidy is not available to employees who voluntarily terminate their employment. Former employees who fall within the eligibility criteria but did not elect COBRA coverage or elected not to continue COBRA coverage prior to April 1, 2021, and who would otherwise be within the employee’s COBRA coverage period, are also eligible for the COBRA subsidy.
The subsidy ends when or if the individual becomes eligible to enroll in another group health plan or similar program. The subsidy suspends the individual’s obligation to pay COBRA premiums for up to six months, but it does not extend the time period for COBRA continuation coverage. Notably, it is the responsibility of the employer (or the multiemployer plan or insurer) to provide the COBRA coverage and pay the COBRA premium costs. The employer may then claim a credit against its quarterly Medicare payroll tax liability for the amount of such coverage.
Importantly, employers are required to notify all eligible employees and former employees who are entitled to, but not enrolled in, COBRA coverage as of April 1, 2021, of the new opportunity to elect the subsidized COBRA coverage, and such notice must be sent by May 31, 2021. Employers are also required to update their current COBRA notices to include the information on the COBRA subsidy. The DOL has issued guidance stating that employers may be subject to an excise tax of up to $100 per qualified beneficiary with a maximum of $200 per family for each day that the employer violates the COBRA rules.
The ARPA extends the expanded federal supplemental unemployment benefits through September 6, 2021, for individuals that become unemployed as the result of the COVID-19 pandemic. The act provides for $300 in weekly federal pandemic unemployment compensation in addition to any amounts provided under state law. The expanded program continues to cover several categories of workers that are generally not eligible to receive unemployment benefits, including self-employed individuals, independent contractors, and part-time employees. Based on this extension, eligible individuals could receive up to 79 weeks of unemployment benefits. The ARPA also renders the first $10,200 of unemployment benefits received in 2020 non-taxable for households with adjusted gross incomes under $150,000. Recently, however, Tennessee announced that it is withdrawing from the $300 weekly federal supplement effective July 3, 2021.
Employee Retention Credit
The ARPA also extends employee retention tax credits through December 31, 2021, and expands the categories of employers that may be eligible to take the credits. The employee retention credits were previously extended through June 30, 2021, and the amount of the credit was increased from fifty percent (50%) to seventy percent (70%) of qualified wages paid to the employee. The limit on per-employee wages also was previously increased from $10,000 for the year to $10,000 per quarter. Employers are eligible for the employee retention credits for 2021 if gross receipts are less than eighty percent (80%) of gross receipts compared to the same quarter in 2019.
Paycheck Protection Program
The ARPA includes an additional $7.25 billion towards the Paycheck Protection Program (“PPP”) forgivable loans to help small businesses in the wake of the COVID-19 pandemic. Employers must meet the same eligibility requirements as in 2020. In addition, eligibility guidelines have been expanded to allow for more nonprofit organizations to participate in the PPP.
If you have questions about compliance or eligibility under the ARPA, we are here to assist you.