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:
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:
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:
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
Guidelines for employers surrounding ARPA continue to become available. We will continue to cover this expansive new legislation and keep you posted.
Written by
Jeanette Coleman, SPHR, SHRM-SCP, is the Director of Human Resources at Axcet HR Solutions, where she has contributed her expertise for over 21 years.
As a leader in the HR industry, she holds advanced certifications as a Senior Professional in Human Resources (SPHR) and SHRM-Senior Certified Professional (SHRM-SCP). Jeanette oversees HR strategy and operations, ensuring Axcet delivers exceptional HR services that help small and mid-sized businesses stay compliant and grow.
With a Master’s degree in Human Resource Management from Keller Graduate School and a Bachelor of Science in Business Administration from Kansas State University, Jeanette is well-equipped to lead and support clients in navigating complex HR challenges.
Throughout her 15-year tenure as Director of Human Resources, she has been instrumental in positioning Axcet as the Midwest’s largest and premier Professional Employer Organization (PEO). Her previous roles at Axcet include Director of Employee Benefits and Senior HR Consultant, where she gained extensive experience in HR outsourcing, payroll administration, and employee risk management.
Jeanette’s leadership reflects her deep commitment to helping businesses thrive through strategic, compliance-driven HR solutions. Through her writing, she shares insights on HR strategy, compliance, and best practices to help employers confidently manage their workforce.
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