While the $1,400 direct payments got most of the buzz, the American Rescue Plan Act of 2021 (ARPA) contains many provisions that impact employers.
Check out five of them in the new law that will most impact you and your finance team:
Temporary COBRA tax subsidy
Private employers subject to COBRA get some good news in the newest round of COVID relief.
Between April 1 and Sept. 30, 2021, you’ll receive 100% of employees’ COBRA premiums as payroll tax credits. Under the ARPA, people can continue COBRA coverage without paying any premiums.
Your team will have to contend with some new administrative duties with this change. There’s a new notice to send out to alert eligible employees.
Stay tuned – the Department of Labor, along with Health and Human Services, will come up with a model notice.
Paid sick and FMLA credits extended
Some old tax credits granted through the Families First Coronavirus Response Act get extended by the American Rescue Plan Act. Your company can now claim the tax credits for paid sick and Family and Medical Leave Act leave through Sept. 30, 2021.
However, Payroll will have to calculate them differently. Changes include:
- eligible wages increase to $12,000 per employee (it was $10,000 in 2020), and
- new types of leave count (including time off for folks to get vaccinated or waiting for COVID test results).
Note: These changes go into effect April 1, 2021. And the new law doesn’t mandate additional paid leave.
Employee Retention Credit extended
The Employee Retention Credit no longer expires on July 1. The newest COVID relief law extends it until the end of 2021.
Coverage also expands in specific situations, including for startup businesses established after Feb. 15, 2020 and for businesses that have experienced a 90% drop in gross receipts over a given quarter in 2019.
More money for PPP loans
There’s $7 billion more up for the taking if you need a Paycheck Protection Program (PPP) loan. The latest COVID relief law earmarked more money for these loans and expanded eligibility to more non-profits.
But the time to apply hasn’t changed. So you’ll need to act fast.
New deduction limits for exec comp
Public companies, take note: The American Rescue Plan Act modified IRC Section 162(m), which keeps employers from taking a deduction for executive compensation that exceeds $1 million.
At present, that’s limited to the CEO, CFO and the next three highest compensated employees. But starting in 2027, that expands by five to the next eight highest paid executives.