ARPA generally has two significant provisions impacting employers. The first will be somewhat familiar but both are addressed below.
Payroll Tax Credits for Paid Sick and Family Leave
ARPA does not require employers to offer paid sick or family leave as the Families First Coronavirus Response Act (FFCRA) required this time last year. Instead, ARPA extends the availability of payroll tax credits to employers who choose to offer paid sick leave and/or paid family leave. Between April 1 and December 31, 2020, employers were required to offer paid sick leave and family leave under the FFCRA. Those obligations expired on December 31, 2020. The availability of the tax credit was extended for those employers that voluntarily offered those benefits to employees between January 1 and March 31, 2021. Under ARPA, those benefits are further extended and modified, to some extent.
In addition to FFCRA’s reasons for leave, employers are entitled to payroll tax credits for up to ten working days, or 80 hours of paid sick leave (whichever is the less) if they are seeking or awaiting COVID-19 testing; obtaining COVID-19 vaccination or recovering from illness related to such vaccination. As to paid family leave, in addition to the previous leave for the care of a child whose day care or school has been closed due to COVID-19, if an employer chooses, payroll tax credit for paid family leave is available if a family member is seeking or awaiting COVID-19 testing, obtaining COVID-19 vaccination or recovering from illnesses related to such vaccination.
The cap on tax credit available for paid family leave has been raised from $10,000 to $12,000 per employee since the ARPA changes require no two-week waiting period.
These employee leaves are eligible for employer tax credit so long as the leave is taken between April 1, 2021 and September 30, 2021.
ARPA COBRA Subsidy
This is new and different. This was not at all addressed in the FFCRA. Again, this is a tax credit provided to employers for certain COBRA benefits. Unlike the paid sick leave and paid family leave extensions, the COBRA Subsidy is not discretionary. Employers are required to offer eligible employees subsidized COBRA. Individuals are eligible for the ARPA COBRA Subsidy if they are employees or covered dependents who lose coverage as a result in a reduction in hours or involuntary termination, whose COBRA maximum period has not expired prior to April 1, 2021 and who elect COBRA coverage. The ARPA COBRA Subsidy does not apply to voluntary terminations or to individuals covered by another group health plan or Medicare.
Election Period Changes.
In addition to the traditional COBRA election period, which generally occurs within 60 days of an employee’s separation from employment, ARPA creates a new opportunity for enrollment for those individuals who would have been eligible to enroll in COBRA coverage but elected not to enroll and for individuals who enrolled in COBRA coverage and subsequently dropped the coverage if their COBRA coverage window has not otherwise expired.
Recall, employees may be entitled to COBRA benefits for, most commonly, 18 months, but in some circumstances 36 months. Therefore, if an employee was terminated prior to April 1, 2021 and elected not to take COBRA or took COBRA and their coverage lapsed and the employee is not currently covered by another group health plan or Medicare, the employee can enroll for the first time or re-enroll with COBRA with a fully subsidized premium beginning April 1, 2021. These employees will have until May 30, 2021 to elect the COBRA subsidized coverage.
Employers are required to provide COBRA election notices that include this subsidized premium information to all individuals who become COBRA eligible between April 1 and September 30, 2021 and to those individuals whose COBRA coverage window has not closed prior to April 1, 2021, as previously noted. In addition to the initial notice of COBRA and COBRA Subsidy eligibility, employers are required to notify individuals of the date their COBRA Subsidy will expire. That notice must be provided between 45 and 15 days prior to the expiration of the Subsidy. It is anticipated that the Department of Labor will provide model notices on or before April 11, 2021.
Similar to paid sick leave and family leave, the COBRA Subsidy is paid by the employer; however, the employer may take a payroll tax credit for the COBRA Subsidy.
