How the American Rescue Plan Act of 2021 Impacts Employers

By Jeanette Coleman, SPHR & SHRM-SCP on Mar 29, 2021
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On March 11, 2021, President Joe Biden signed the American Rescue Plan Act  (ARPA) into law, one of the largest economic rescue plans in U.S. history — and much needed. According to Pew Research, almost half of Americans are reporting they are still experiencing financial pain one year after the start of the pandemic. The $1.9 trillion rescue plan delivers this much-needed relief to the American people, rescues the economy, and tackles the coronavirus. Here’s a breakdown of what’s in the ARPA:

Expansion of the Paycheck Protection Program and Other SBA Programs

The American Rescue Plan Act provides additional funding for programs the SBA is already administering and also adds new small business assistance programs. Here’s a breakdown of the SBA’s new programs and funding laid out in the ARPA:

  • An additional $7.25 billion in funding gets added to the Paycheck Protection Program (PPP). What’s more, eligibility expands to include additional nonprofits that weren’t previously eligible for forgivable loans and digital news services that provided local and public health news to the public during the pandemic. The current deadline to apply for a PPP loan is unchanged and remains March 31, 2021, which may be problematic as lenders are backlogged with applications. In fact, Bank of America already stopped accepting PPP applications this last Tuesday with 30,000 applications still processing and pending approval.
  • An additional $15 billion in funds gets added to the Shuttered Venue Operators Grant (SVOG) program, also administered by the SBA, which provides grants to venues that have closed due to the pandemic, including museums, theaters, concerts and more. Additionally, venue operators are now allowed to apply for both a PPP loan and the SVOG program.
  • Targeted Economic Injury Disaster Loan Advance (EIDL) payments get an additional $15 billion injection, including $5 billion for Supplemental Targeted EIDL Advance payments for businesses that have been hit the hardest. 
  • A new program, called the Restaurant Revitalization Fund, provides industry-focused grants specifically for restaurants. The total funding in this new program administered by the SBA is $28.6 billion.
  • The New Community Navigator pilot program receives $100 million to provide grants to eligible organizations that help increase access to pandemic assistance programs.

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COBRA Subsidies

The ARPA provides a 100% COBRA subsidy for up to six months (through September 30, 2021) for eligible employees (and their families) who lost their coverage due to an involuntary termination or involuntary reduction in hours from April 1, 2021 to September 30, 2021.  The subsidy is paid by the employer, plan or insurer and then the employer is reimbursed through a dollar-for-dollar tax credit. 

These rules are not optional for employer-sponsored group health plans. All group health plans subject to COBRA, except health flexible spending accounts (FSA), must provide this subsidized coverage.

The ARPA does not extend the COBRA coverage period; COBRA coverage will expire 18 months after the qualifying event. 

Paid Leave

The ARPA extends and expands tax credits for voluntary employer-provided paid sick or family leave due to COVID-19 established under the Families First Coronavirus Response Act (FFCRA), but does not extend the mandate. Here’s what the ARPA includes:

  • Tax credits for employers who voluntarily provide FFCRA-like paid leave for qualifying wages extends from April 1, 2021 to September 30, 2021.  
  • Tax credits for FFCRA-like paid leave expand to cover these additional reasons:
    • The employee is obtaining the COVID vaccination;
    • The employee is recovering from any injury, disability, illness, or condition related to the COVID vaccination;
    • The employee is seeking or awaiting the results of a diagnostic test of medical diagnosis for COVID-19;
  • Allows employers to voluntarily provide an additional 10 days of FFCRA-like paid sick leave, if they choose to do so, beginning April 1, 2021, by resetting the clock on the 10-day limit.

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Dependent Care Flexible Spending Accounts

The American Rescue Plan Act temporarily increases the amount employees can put in their Dependent Care Flexible Spending Accounts (FSAs) in 2021 to $10,500 for married couples filing jointly. Employers may choose to amend their plans to allow for the temporary increase.

Unemployment Compensation

Under the American Rescue Plan Act, unemployment benefits are extended for millions of Americans who are without work due to the pandemic. The Act

  • Extends the Pandemic Emergency Unemployment Compensation (PEUC), the Pandemic Unemployment Assistance (PUA) and the Federal Pandemic Unemployment Compensation (FPUC)/Mixed Earners Unemployment Compensation (MEUC) through September 6, 2021;
  • Increases the maximum amount of time an individual can receive PUA benefits to 79 weeks (86 weeks in high unemployment states) and PEUC benefits to 53 weeks;
  • Provides individuals eligible to receive unemployment benefits through their state between March 14 and September 6, 2021, an additional $300 per week boost as part of the Federal Pandemic Unemployment Compensation (FPUC) program;
  • Continues the MEUC weekly amount of $100 per week; and
  • Gives those who received unemployment compensation in 2020 and had a household income under $150,000 tax relief by making the first $10,200 in unemployment compensation tax-free. 

Employee Retention Credit

The employee retention credit was originally created by the CARES Act to encourage employers to retain employees during the pandemic by allowing qualifying employers to claim a credit for wages paid to those retained workers. The American Rescue Plan Act extends the employee retention credit through December 31, 2021. Additionally, eligibility is expanded to include new startups that were in business by February 15, 2020, and to severely financially distressed employers whose gross receipts are less than 10% of what they were during the previous year’s corresponding quarter. 

Pension Plan Relief

The ARPA provides financial relief to underfunded pension plans with no obligation to repay the relief amount. The Butch Lewis Emergency Pension Plan Relief Act of 2021, included in the ARPA, provides the funding to qualifying single and multiemployer pension plans.

Additional Information

  • Minimum Wage Increase: The ARPA does not include the $15 minimum wage provision.
  • Stimulus Checks: The American Rescue Plan Act does include $1,400 stimulus checks for each qualifying individual in the household. However, the payments phase out at a quicker rate for higher-income-earning taxpayers. 
    • Individuals earning up to $75,000 per year will receive full payment, but individuals earning $80,000 or more are ineligible. 
    • Couples earning up to $150,000 will receive full payment, but couples earning $160,000 or more are ineligible. 
    • Finally, head-of-household filers who earn up to $112,500 will receive full payment, but head-of-household filers who earn 120,000 or more will be ineligible.

Guidelines for employers surrounding ARPA continue to become available. We will continue to cover this expansive new legislation and keep you posted.

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