The American Rescue Plan ACT of 2021 - Important Legal Notice
March 23, 2021
President Joe Biden signed the American Rescue Act (ARPA) into law on March 11, 2021. The package includes several provisions of interest to employers.
Federal Pandemic Unemployment Assistance Extended
Federal Pandemic Unemployment Assistance benefit remains at $300.00 per week through Sept. 6, 2021. This increases the total number of weeks from 50-79 weeks for individuals that do not qualify for regular benefits.
There are no changes to eligibility for individuals that do not qualify for state unemployment benefits (ex. Self-employed, gig workers, and others in non- traditional employment).
The act also extends the CARES benefits to individuals that exhausted benefits to September 6, 2021 from 24 weeks up to 53 weeks.
Federal payments to nonprofits and government agencies increases from 50%-75% after March 31, 2021 through September 6, 2021 for the cost of providing unemployment benefits.
COBRA CONTINUATION COVERAGE
The act now provides for 100 % subsidy of premiums for eligible COBRA recipients for continuation coverage if they lose their job through involuntary termination. Employers may claim a refundable tax credit against their Medicare payroll tax liability for the cost of the premiums. The assistance is available through Sept. 30, 2021, and is no longer available once an individual becomes eligible for coverage under another group health plan or Medicare.
Qualified Beneficiaries are required to notify their group health plan if they become eligible for other coverage during the subsidy period, if they fail to do so they could be liable for a $250.00 penalty, which may be waived if the failure was due to reasonable cause and not willful neglect. An intentional failure can result in a penalty of $250 or 110% of the amount of premium assistance received, if greater.
The federal government's subsidy for COBRA coverage premiums that ex-employees would otherwise be required to pay will:
- Begin on April 1, 2021.
- End on Sept. 30, 2021.
Only assistance eligible individuals (AEIs) qualify for a subsidy, and this excludes employees who voluntarily end their employment.
The definition of an AEI: Someone who, in the time period between April 1, 2021 and Sept. 30, 2021, is eligible for COBRA coverage due to an involuntary termination (other than for gross misconduct) or a reduction in hours and elects coverage. An AEI no longer is eligible for a subsidy upon the earliest date of his or her becoming eligible for other group health plan coverage (that is not an excepted benefit) or Medicare or the expiration of his or her maximum COBRA period.
Under the ARPA, employers could give laid-off employees up to 90 days (following COBRA-notice receipt) to elect to enroll in a different group health plan offered by their employer. The premium for the alternative coverage choice cannot be higher than the premium for the plan in which the employee had been enrolled, among other restrictions.
This could be a huge relief to affected employees or covered relatives, assisting them financially, eliminating the burden of searching for new plans and understanding the ins and outs of a new plan.
Under the ARPA, a terminated worker who is eligible for assistance and who has not elected COBRA coverage by April 1, or who elected COBRA coverage but then discontinued it, may elect COBRA coverage during a special enrollment period starting April 1 and ending 60 days after the date on which the COBRA notification was delivered.
These individuals may receive the subsidy on a prospective basis without having to elect and pay for COBRA retroactively for months prior to the subsidy becoming available.
Employers will have to include information about the availability of the subsidy and the special 60-day enrollment period for qualified beneficiaries in their COBRA Notices by May 30, 2021. The information may be added to current COBRA notices or be provided in a separate document.
COBRA notice forms, either as amended or as a separate document, must include:
- The forms necessary for establishing eligibility for COBRA premium assistance.
- The name, address and telephone number necessary to contact the plan administrator and any other person maintaining relevant information in connection with premium assistance.
- A description of the extended election period provided by the legislation.
- A description of the option to enroll in different coverage, if adopted by the employer.
Plans must also:
- Send a separate expiration notice to eligible individuals when their periods of premium assistance are due to expire.
- Notify individuals if their subsidy will end before Sept. 30, 2021, although this notice will not be required if their subsidy is ending due to the individual's eligibility for other coverage.
In addition to providing the required notices, plan sponsors of group health plans should consider whether they will permit individuals to enroll in a different—but not more expensive—plan option than the one in which they were enrolled when coverage was lost. Plan sponsors would have the option to permit this and would need to include the availability of that option in the notices they send out.
Employers will obtain the subsidy, to be passed along to COBRA enrollees, through a payroll tax credit against employers' quarterly taxes. If the credit exceeds the amount of payroll taxes due, the credit would be refundable when employers submit Form 941, their quarterly tax return. The credit could also be advanced under rules that will be set by the Treasury Department.
The premium amount may be advanced by the insurer of a fully insured group health plan or the plan sponsor of a self-funded group health plan, which, in turn, may work through the plan's COBRA third-party administrator.
Dependent Care Flexible Spending Accounts
The act raises the 2021 contribution limit for Dependent Care Flexible Spending Accounts (FSAs) to $10,500 for single taxpayers and to $5,250 for married individuals filing separately. The provision raises the exclusion limits for the plan year beginning after December 31,2020 and before January 1, 2022.
Employer Credits for Paid Sick and Family Leave
Extends employer credits to September 30, 2021, for employer-provided paid sick and family leave – established under the Families First Coronavirus Response Act (FFCRA).
Increases qualified Family Leave covered wages from $10K to $12K per employee.
Increases the number of days of paid leave for self-employed from 50 days to 60.
Expands the paid leave credits, including self-employed individuals, to cover COVID-19 vaccinations or wait times for test results or diagnoses.
Adds employer restrictions on receiving credits if paid leave policies favor highly compensated employees, full-time workers, or employees based on tenure.
Provides 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.
Employee Retention Credit
Extends the employee retention credit through December 31, 2021. The employee retention credit was originally enacted in the Coronavirus Aid, Relief, and Economic Security (CARES) Act, P.L. 116-136, and it allows eligible employers to claim a credit for paying qualified wages to employees.
Expands eligibility for the credit to new startups that were established after Feb. 15, 2020, and companies if their revenue declined by 90% compared to the same calendar quarter of the previous year. The credit is capped at $50,000 per calendar quarter for startups.
Veteran Rapid Retraining Assistance Program
The act also provides $386 million for rapid retraining program to reskill unemployed veterans for high demand jobs or in high-technology programs.
Lastly another important change in the act that employers want to pay attention to is the Modification to the Paycheck Protection Program. This modification increases funding total to a little under $814B. It maintains eligibility for 501(c)(3) and 501(c)(6) organizations. It also expands eligibility to labor organizations, social/recreational clubs, and fraternal benefit societies.
As we know, our laws are constantly changing so you will need to stay on top of the act while monitoring for any changes or additions.
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