Recently, President Biden has just signed the American Rescue Plan Act of 2021 (ARPA). In addition to providing more loan money to the existing Paycheck Protection Program (PPP), ARPA includes additional relief provisions including, COBRA Subsidies, changes to the Dependent FSA Maximum, extension to the Families First Coronavirus Response Act (FFCRA) credits, and extension to federal Unemployment Benefits.
COBRA Premium Subsidy
Under the American Rescue Plan, the government will subsidize 100 percent of COBRA premiums for laid-off workers and covered relatives, allowing them to stay on their company-sponsored health plan through September. 100% COBRA subsidies between April 1, 2021 and September 30, 2021 – If an individual and/or family members lose coverage because of involuntary termination or reduction in hours, their COBRA coverage payments will be subsidized 100%.
- If an employee is involuntarily terminated between April 1, 2021 and September 30, 2021, COBRA is to be subsidized 100% for that individual & family. (Note: If termination is voluntary, or COBRA event is due to death of a QB or dependent age-out, it doesn’t qualify for the subsidy.)
- Those who are eligible will be able to elect COBRA and simply forego premium payment. Employers pay the premiums 100% from April 2021 through Sept 2021.
- Employers will need to keep detailed records of COBRA payments and will be eligible to receive tax credits equal to the COBRA premiums that were paid for eligible individuals. The credit will be provided by the Treasury Department through a reduction of Medicare payroll taxes.
Dependent Care FSA Maximum increases from $5,000 to $10,500, or $5250 for married individuals filing separately – After years of no change to this benefit that allows individuals to pay for childcare expenses with pre-tax dollars, the maximum has been more than doubled. Currently, it appears that the increase only applies to taxable years (i.e., plan years) beginning during the 2021 calendar year. Employers should contact their FSA vendors or review their Payroll System to confirm that FSA Maximums have been adjusted with the new maximum levels.
The Families First Coronavirus Response Act (FFCRA) required employers with fewer than 500 employees to provide paid sick leave and paid family leave for certain COVID-19-related reasons through the end of 2020. FFCRA provided refundable tax credits to eligible employers to reimburse them for the paid leave wages. This is an extension of the act and does not provide additional FFCRA leave to employees who have used or exhausted previous FFCRA leave.
Although employers are no longer required to offer such leave, Congress extended the tax credit in prior legislation for employers that voluntarily continued to offer covered leave through March 31. The American Rescue Plan Act extends the tax credit again through Sept. 30 and increases the maximum per-employee tax credit that employers can receive.
Extended Unemployment Benefits
The new law extends the federal government’s $300 weekly supplement to unemployment benefits through Sept. 6, and the first $10,200 in unemployment benefits will be tax-free for households earning up to $150,000.
The American Rescue Plan Act also extends Pandemic Unemployment Assistance for self-employed and gig workers and other workers who do not qualify for state unemployment benefits, and Pandemic Emergency Unemployment Compensation, which gives additional weeks of state benefits to people who have been unemployed long-term.
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