Navigating the American Rescue Plan’s Employment-Related Provisions

On March 12, 2021, the American Rescue Plan Act of 2021 (ARP) was signed into law, providing an estimated $1.9 trillion stimulus package to address the ongoing COVID-19 pandemic. Some of the ARP’s key provisions include a number of employment-related sections that build upon prior legislation to create a scaffold of employer obligations and worker entitlements arising from the pandemic’s impact on the U.S. economy.

Background

The ARP is the latest piece of legislation aimed at addressing the COVID-19 pandemic, and its robust provisions contain a number of extensions and expansions of benefits previously enacted through prior legislative efforts and executive actions.

The first such effort, the Families First Coronavirus Response Act (FFCRA), enacted on March 18, 2020, was an employee-focused aid package that established emergency paid sick leave (EPSL) and emergency paid family leave (EFMLA) for workers who were impacted by COVID-19 and its related closures.

The second such effort, the Coronavirus Aid, Relief and Economic Security (CARES) Act, passed on March 27, 2020 and established a suite of pandemic-related unemployment insurance benefits, including Pandemic Unemployment Assistance (PUA), a benefit available to workers who would not otherwise be eligible for unemployment insurance; Federal Pandemic Unemployment Compensation (FPUC), a supplemental $600 weekly benefit paid in addition to other unemployment insurance benefits; Pandemic Emergency Unemployment Compensation (PEUC), a 13-week extension on existing eligibility for unemployment insurance benefits; and certain enticements for states to develop short-time compensation (also known as shared work) programs.

FPUC benefits, which expired at the end of the July, were extended in part through the Lost Wage Assistance (LWA) program. The LWA program, authorized pursuant to President Trump’s August 2020 executive directive, provided $300 in supplemental weekly unemployment insurance benefits upon the expiration of the FPUC.

On December 27, 2020, Congress passed the Consolidated Appropriations Act of 2021, which included an 11-week extension of the PUA and PEUC benefits through March 14, 2021. The Act also expanded PUA eligibility to include “mixed earners” whose income is partially derived from self-employed earnings and wages paid by an employer. These benefits are limited to $100 per week. The Consolidated Appropriations Act also converted FFCRA leave from a mandate to a program in which employers could receive tax credits with respect to wages paid under leave policies that met the FFCRA’s requirements.

On February 26, 2021, President Biden’s Department of Labor (DOL) issued guidance expanding the eligibility requirements for PUA to those individuals who refused work due to believed violations of coronavirus-related workplace health and safety standards.

1. Extension of Pandemic-Related Unemployment Insurance Benefits

The ARP extends the CARES Act unemployment insurance benefits in their various forms through September 6, 2021. Specifically, the FPUC benefits are extended at their current weekly amount of $300. The PUA benefits — including the expanded eligibility for “mixed earners” and those who have refused work due to health and safety concerns — and the PEUC benefits have been extended, with a new cap at 79 weeks of benefits. The ARP also waives federal taxes on the first $10,200 of unemployment benefits that an individual collected in 2020, so long as the taxpayer’s adjusted gross income was less than $150,000 in 2020. As with the CARES Act benefits, the extended ARP unemployment insurance benefits will not impact an employer’s state unemployment insurance rates.

2. Extension and Expansion of FFCRA Leave Tax Credits

The ARP continues the voluntary nature of the FFCRA leave program and extends tax credits with respect to wages paid to employees while on FFCRA leave through September 30, 2021. The ARP expands the reasons for taking FFCRA leave to include: (1) employees who are receiving a COVID-19 immunization, and (2) those who are awaiting confirmation of a COVID-19 test result. The ARP increases the length of EFMLA leave from 10 weeks to 12 weeks and resets the start date for EPSL leave to March 31, 2021, such that employees who have previously exhausted the 80 hours of EPSL leave under the FFCRA would be newly eligible for emergency paid sick leave.

Employers who have made use of the FFCRA leave tax credits or plan to do so should be cognizant that their existing policies and practices will need to be updated to take into consideration the new changes to the FFCRA leave.

3. Creation of Six-Month COBRA Subsidy

Effective April 1, 2021, the ARP establishes a full subsidy on health insurance premiums for continued coverage under COBRA. This subsidy expires on September 30, 2021. The COBRA subsidy is available to employees and their dependents who qualify or would have qualified for COBRA coverage during that timeframe, but had not elected to participate in any COBRA-covered plans. The ARP’s COBRA subsidy is not available to employees who have voluntary resigned from employment or who are no longer eligible to receive COBRA as a result of the expiration of the coverage period (typically, 18 months) or becoming eligible for health insurance under another employer’s plan or Medicare.

Employers, multi-employer plans and insurance plans will be required to initially cover the cost of the subsidies and will be reimbursed through a tax credit for such costs. The Treasury Department has yet to release regulations or guidance with respect to advancing this tax credit. Employers are required to update their COBRA notices or issue stand-alone notices to those individuals who will be eligible for the subsidy. Model notices are expected to be issued by the DOL before April 25, 2021. Employers should coordinate with their COBRA providers to prepare and disseminate notices that comply with the ARP’s requirements.

Legislative Agenda Moving Forward

One much-discussed proposal that did not make the ARP’s final cut was increasing the minimum wage to $15, a long-standing legislative priority for Democrats. A Senate parliamentarian ruled that this provision could not be included in the bill because it failed to meet the requirements for budget reconciliation contained in the Senate’s complicated parliamentary rules. Even so, employers should expect to see similar minimum wage hikes introduced by House Democrats in later legislation, given the support expressed by the Biden administration.

The Biden administration has also voiced its support for permanent federal paid sick leave and paid family leave. To the extent FFCRA leave forms a footprint for such future legislative schemes, employers may want to track the developments of that law and its various intricacies.