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Overview of the American Rescue Plan Act of 2021


Posted in on April 13, 2021

The American Rescue Plan Act of 2021 (the “ARPA”) was passed by Congress and signed into law in March, 2021. It includes approximately $1.9 trillion in spending to provide assistance to individuals and businesses as they recover from the COVID-19 pandemic. The below is an overview of key provisions of the ARPA for individuals and businesses.

Direct Stimulus Payments

The ARPA provides a direct cash payment (deemed a “rebate”) to eligible individuals. The payments are up to a maximum of $1,400 for an individual or $2,800 for a joint return. In addition, those who are eligible and have dependents (defined by the ARPA to include children, college students and elderly relatives) receive up to an additional $1,400 per dependent. To be eligible for the maximum amount, the following income thresholds (based on adjusted gross income in tax returns) were established: (a) $75,000 for individual filers; (b) $150,000 for joint filers or surviving spouse filers; and (c) $112,500 for head of household filers. Those with adjusted gross income levels above the applicable maximum may still receive a reduced payment, with the payments phasing out as income increases.

Extension of Unemployment

The ARPA extends three (3) of the federal unemployment programs that were created by the CARES Act – summarized below.

1. Pandemic Unemployment Assistance (PUA) provides unemployment benefits for select self-employed individuals/independent contractors, “gig” workers, and other people not otherwise eligible for regular unemployment.  The ARPA extends the deadline to claim PUA benefits to September 6, 2021 and also increases the number of weeks available to 79.

2. Federal Pandemic Unemployment Compensation (FPUC) was initially a short term weekly unemployment payment (originally an extra $600) on top of an individual’s weekly benefit. The ARPA extends this in part, providing an additional $300 per week until September 6, 2021.

3. Pandemic Emergency Unemployment Compensation (PEUC) provides an additional 13 weeks of benefits either (1) after employees exhausted their regular benefits, or (2) for individuals who are not eligible for traditional unemployment benefits. The ARPA extends the deadline to claim PEUC benefits to September 6, 2021, and also increases the number of weeks available to 53.

Finally, with the ARPA, up to $10,200 of unemployment benefits paid in 2020 will not be considered taxable income for anyone who earned less than $150,000.

COBRA Subsidy

 COBRA, short for “Consolidated Omnibus Budget Reconciliation Act”, is a federal program that provides eligible employees and their dependents the option to continue health insurance coverage after a job loss or a reduction in hours. This continuation in coverage is often at a significant cost increase to the eligible employee as their former employer is no longer paying the employer’s portion of the insurance premium.

The ARPA provides a federally funded COBRA subsidy for up to six (6) months of COBRA premiums, from April 1, 2021, to September 1, 2021, for assistance eligible individuals. “Assistance Eligible Individuals” are individuals who were previously eligible but did not elect COBRA or elected and then dropped COBRA and if COBRA had been elected would have been covered during the subsidy period. Individuals also qualify if at any time during the subsidy period they become eligible for COBRA. Spouses and children of the assistance eligible individuals are also eligible. Available premium subsidies include all COBRA eligible coverage including medical, dental and vision insurance, and all state “mini-COBRA” programs. Coverage is available to all eligible individuals for the duration of the six (6) months unless their coverage would end during that six (6) months period under COBRA rules (qualifying for other insurance or hitting the eighteen (18) month coverage max).

Assistance eligible individuals must be given a new sixty (60) day election period. Typically, COBRA coverage must be the same coverage the individual had while employed, but the ARPA allows employers to permit employees to elect different coverage that may have a lower premium. This election must be made within ninety (90) days.

Assistance eligible individuals do not have to pay COBRA premiums during this six (6) month subsidy. Their group plan pays the premiums and employers are reimbursed by the Federal Government via a payroll tax credit. Private employers and non-federal government employers subject to COBRA are eligible for the payroll tax credit. The Secretary of the Treasury is to provide further guidance on this tax credit.

Employers will be required to give COBRA notice to all employees or former employees who qualify as assistance eligible individuals regarding the available premium assistance and expiration of the subsidy. The Secretary of Labor is to provide model language for required notifications under the ARPA.

American Rescue Plan Act

Tax Credits for Paid Sick and Family Leave

Under the Families First Coronavirus Response Act (FFCRA), which expired on December 31, 2020, “covered” employers, those with fewer than 500 employees, had to provide Emergency Paid Sick Leave (“EPSL”) of 80 hours for full-time employees, and Emergency Family and Medical Leave Expansion Act leave (“EFMLEA”) of 12 weeks (the first 2 weeks are unpaid). In exchange for these mandates, certain employers were reimbursed with payroll tax credits. The Consolidated Appropriations Act of 2021 extended the credits until March 31, 2021 and ARPA further extends the credit to September 30, 2021 if employers voluntarily choose to continue to provide these benefits.

Employers who voluntarily choose to continue paid sick leave must give 10 days of leave as of April 1, 2021, and must continue to offer the leave for all 6 of the following reasons:

  1. The employee is subject to a Federal, State, or local quarantine or isolation order related to COVID-19.
  2. The employee has been advised by a health care provider to self-quarantine due to concerns related to COVID-19.
  3. The employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis, the employee is seeking or awaiting the results of a diagnostic test for, or a medical diagnosis of COVID-19 and such employee has been exposed to COVID-19 or the employee’s employer has requested such test or diagnosis, or the employee is obtaining immunization related to COVID-19 or recovering from any injury, disability, illness, or condition related to such immunization.
  4. The employee is caring for an individual who is subject to an order described in paragraph (1) or has been advised as described in paragraph (2).
  5. The employee is caring for a child of such employee if the school or place of care of the child has closed, or the child care provider of such son/daughter is unavailable, due to COVID-19 precautions.
  6. The employee is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor.

For the employer to be eligible to receive the tax credit, from April 1, 2021 through September 30, 2021, an employee must be able to use up to 10 days of paid sick leave at 2/3 regular pay capped at $200/day and $2,000 total for reasons (4) – (6); and regular pay capped at $511/day and $5,110 in total for reasons (1) – (3), even if employee used their EPSL.  Employers will not get the tax credit for more than 10 days of paid leave even if the employee has not exhausted their EPSL.

For paid family leave tax credit, although the leave period is not extended beyond 12 weeks, ARPA expands the reasons an employee can take paid family leave to include the paid sick leave reasons 1 – 6.  ARPA also removes the rule that the first 10 days of family leave are unpaid.  Lastly, an employer is not required to pay more than $200/day and $12,000 total.  Family leave under ARPA is also paid at 2/3 regular pay with a $200/day cap.

Boost to the Paycheck Protection Program and Restaurant Revitalization Fund

The ARPA added $7.25 billion of funding to the Paycheck Protection Program (“PPP”) for businesses suffering from adverse circumstances related to the COVID-19 pandemic. In addition, the ARPA made PPP loans more easily obtainable for non-profit entities as well as those who run unincorporated businesses such as self-employed individuals, independent contractors and sole proprietors.

The ARPA also established a new Restaurant Revitalization Fund (“RRF”) providing up to $25 billion in forgivable loans to restaurants, to be managed by the Small Business Administration. Much like PPP loans, RRF loans can be used for payroll, rent and mortgage payments, utilities, employee benefits and supplies. The ARPA requires that $5 billion of the RRF funds be earmarked for restaurants with 2019 gross receipts that were less than $500,000.

If you have questions about the ARPA, please reach out to one of the attorneys at Baker, Braverman & Barbadoro, P.C.