American Rescue Plan Act Doesn’t Require Leave

Tax credits for paid leave extended and expanded

Allen Smith, J.D. By Allen Smith, J.D. March 15, 2021
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​Like the last stimulus package passed in December, the American Rescue Plan Act (ARPA)—signed into law March 11—doesn't require Families First Coronavirus Response Act (FFCRA) paid and emergency family leave. But ARPA does extend and expand the FFCRA tax credits, incentivizing small and midsize employers to provide paid time off for FFCRA and new COVID-19-related reasons.

The Consolidated Appropriations Act of 2020 extended the FFCRA tax credits through March 31 for FFCRA leave. ARPA extends these tax credits through Sept. 30.

Many employers covered by the FFCRA "may want to offer the same COVID-19 paid-leave programs that they have been offering, given that the credits reimburse most of the costs associated with such leave," said Michael Chittenden, an attorney with Covington & Burling in Washington, D.C. "However, employers will need to make their own decision regarding whether to maintain their paid-leave policies based on their workforces and current economic situation."

Deciding whether to offer FFCRA-like leave "is an individual choice that should be taken by each employer given their specific circumstances, taking into account the industry, geographic region, company culture, competitive needs and other similar factors," said Rich Meneghello, an attorney with Fisher Phillips in Portland, Ore.

Keep in mind, too, the severity of disease in your region. LaKeisha Caton, an attorney with Pryor Cashman in New York City, said that employers should consider offering paid sick leave and emergency family and medical leave on a temporary basis until the virus is under control.

FFCRA Provisions

The FFCRA had two major provisions, the Emergency Paid Sick Leave (EPSL) Act and the Emergency Family and Medical Leave (EFML) Expansion Act. Under the EPSL Act, private employers with fewer than 500 employees and some public employers had to pay sick leave of up to 80 hours, or roughly 10 days, to employees who needed to take leave for certain coronavirus-related reasons.

Under the EFML Expansion Act, employees were eligible for an additional 10 weeks of family leave paid at two-thirds of their regular wages to care for a child whose school or place of care is closed or whose child care provider is unavailable because of COVID-19. The FFCRA does not have requirements for private-sector employers with 500 or more employees, and ARPA did not change that.

Additional COVID-19-Related Reasons

Under ARPA, tax credits continue to be available for paid sick leave and paid family leave, and now for these additional reasons:

  • The worker is getting a COVID-19 vaccine.
  • The employee is recovering from complications due to receiving the vaccine.
  • The worker is awaiting the results of a COVID-19 test or diagnosis for coronavirus.

ARPA also resets the 10-day limit for the tax credit for paid sick leave under FFCRA as of April 1. Any days an employee took before that date will not count toward the cap following that date, said Randi May, an attorney with Hoguet Newman Regal & Kenney in New York City.

[See SHRM members-only HR Q&A: How does the American Rescue Plan Act affect employers?]

Other New Tax Credit Provisions for Paid Sick and Family Leave

As noted in the Society for Human Resource Management's summary of ARPA's workplace provisions, the new law's tax credit provisions for paid sick and family leave:

  • Increase family leave covered wages from $10,000 to $12,000 per employee.
  • Increase the number of days of paid leave for self-employed workers from 50 days to 60 days.
  • Add employer restrictions on receiving credits if paid-leave policies favor highly compensated employees, full-time workers or employees based on tenure.
  • Provide for reimbursement of pension plan and apprenticeship program contributions made by employers under a collective bargaining agreement that are allocable to employee paid sick and family leave.

"Employers with union workforces may see greater credits than they would have under the prior credits," Chittenden said.

The statute of limitations for the Internal Revenue Service to recoup the credit if it is wrongfully claimed has been extended from the standard three years to five years.

Employee Retention Credit

In addition, ARPA extends the employee retention credit established under the Coronavirus Aid, Relief, and Economic Security Act through the end of the year. The employee retention credit "allows certain businesses to claim a tax credit for qualifying wages paid to employees," said Jim Plunkett, an attorney with Ogletree Deakins in Washington, D.C.

ARPA also expands eligibility for the employee retention credit to new startups that were established after Feb. 15, 2020, and to companies if their revenue declined by 90 percent compared to the same calendar quarter of the previous year. The credit is capped at $50,000 per calendar quarter for startups.

EPSL Overlapping with FMLA

If an employee works for an employer that is covered by both the Family and Medical Leave Act (FMLA) and the ARPA extended and expanded credits, the employee may be entitled to traditional FMLA leave and the EPSL tax credit may also be available, depending on how sick the employee or family member is with COVID-19.

State Mandates

A number of jurisdictions, such as California, New York and Washington, D.C., have adopted paid sick leave and paid family leave mandates.

Expect more states in the coming months to consider adopting COVID-19-related paid-leave laws, predicted Mark Goldstein, an attorney with Reed Smith in New York City.

"It remains to be seen whether efforts to provide paid leave at the federal level will be successful, but it may be possible given some bipartisan interest in the topic in the past," Chittenden said.

The fate of federal proposals such as the Family and Medical Insurance Leave Act "remain in flux given the tight Senate majority," Meneghello said.

"There's never been a single bill quite this large or ambitious, and the president and speaker have both promised that it's only the start of the agenda," said Alec Beck, an attorney with Barnes & Thornburg in Minneapolis.

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