The 2021 American Rescue Plan Act (ARPA)
On March 11, 2021, President Biden signed into law H.R. 1319 – the American Rescue Plan Act (the “Act”). The following are select highlights that may be relevant to your payroll and quarterly tax filing completed by IPS. The Act contains additional funding and support programs beyond what is described below. The full details of the Act can be found at Congress.gov.
Employee Retention Credit Extended Through 2021
The Employee Retention Credit (ERC), which was scheduled to expire on June 30, 2021, is extended through December 2021. The credit percentage remains 70 percent of up to $10,000 in qualified wages per employee per quarter, i.e., a $28,000 maximum credit per employee for 2021.
Employers may qualify if their operation is fully or partially suspended due to orders from a governmental authority related to COVID-19, or if the organization can demonstrate that gross receipts for a calendar quarter are less than 80 percent of the gross receipts of the employer for the same calendar quarter in 2019.
Please work with your accountant or legal counsel to first determine your eligibility for some or all of the available credit. Once eligibility and credit have been determined, please contact IPS for assistance in getting your calculated credit applied.
Families First Coronavirus Response Act (FFCRA) Paid Sick and Family Leave Tax Credit Extended
The FFCRA Paid Sick and Family Leave tax credit is extended beginning April 1, 2021 through September 30, 2021. The requirement for employers to offer paid FFCRA leave expired in 2020 leaving the decision to continue offering paid leave to the individual employer. The original FFCRA limits for paid sick leave applied from March 2020 through March 2021 and will now reset for qualifying sick leave paid between April 1, 2021 and September 30, 2021.
The Act has added new reasons for which employees may take paid sick or family leave, including leave for time awaiting the results of a test to diagnose COVID-19, to obtain immunization for it, or to recover from any adverse health impacts arising from the immunization. The Act also increases the wage limit for paid family leave payments from $10,000 per employee to $12,000 per employee.
To properly record and pay these leave types, the applicable earnings codes will need to be added to your company’s payroll environment. Please contact IPS to discuss your needs and the next steps for setup.
Dependent Care FSA Exclusion Increased
The Act increases the exclusion for employer-provided dependent care assistance from $5,000 to $10,500 ($5,250 for married filing separately) for 2021. Employers would need to amend their cafeteria or dependent care flexible spending account plan to implement this change. Should you amend your cafeteria plan to implement this change, please contact IPS to ensure the applicable limits are updated for your company.
100% COBRA Health Coverage Subsidy
The Act provides COBRA premiums for “assistance eligible individuals” to be subsidized by the federal government, through payroll tax credits, for a period of six months, beginning on April 1, 2021 and ending on September 30, 2021. Questions or concerns should be discussed with your provider to determine your direct impact. Once eligibility and credit have been determined, please contact IPS for assistance in getting your calculated credit applied.
The U.S. Department of Labor (DOL) and Internal Revenue Service (IRS) are issuing regulations and guidance on items included in the American Rescue Plan Act of 2021. IPS will continue to monitor for future developments and update accordingly.