FFCRA Update: What Employers Need to Know

March 17, 2021
Kathryn M. Hindman, Anne Denecke & Maryann Yelnosky

On March 11, 2021, the American Rescue Plan Act of 2021 (“ARPA”) was signed into law, providing continued economic relief to individuals, businesses, and state and local governments during the COVID-19 pandemic.

Like the Consolidated Appropriations Act of 2020 (which extended the Families First Coronavirus Response Act (“FFCRA”) leave tax credit provisions through March 31, 2021), the ARPA extends the FFCRA tax credits through September 30, 2021. As has been the case since FFCRA expired on December 31, 2020, covered employers (with fewer than 500 employees) are not required to provide FFCRA leave to employees. Instead, employers may choose to continue to provide FFCRA leave to eligible employees and to obtain the tax credits that remain in effect to offset certain costs associated with providing the leave.

For those employers who choose to continue to provide leave, the ARPA also makes certain modifications to the FFCRA, all of which are effective on April 1, 2021:

1. Covered reasons for emergency paid sick leave expanded.

Under the FFCRA emergency paid sick leave provisions, covered employers provided paid sick leave up to 80 hours (or roughly 10 days) to employees who needed to take leave for six COVID-19 related reasons. In addition to the original six reasons for leave, employers may now offer FFCRA emergency paid sick leave and receive tax credits for providing leave to employees who are: (i) obtaining a COVID-19 vaccine, (ii) recovering from any injury, disability, illness or condition related to the COVID-19 vaccine; or (iii) seeking or awaiting the results of a diagnostic test for, or a medical diagnosis of, COVID-19, when an employee has been exposed to COVID-19 or the employer has requested the test or diagnosis.

2. Reset of emergency paid sick leave clock.

ARPA also resets the 10-day (80 hour) limit for emergency paid sick leave under FFCRA. As a result, any FFCRA time an employee took before April 1, 2021, will not count toward the cap following that date. Employers that continue to voluntarily provide emergency paid sick leave may claim a payroll tax credit to offset up to 10-days (80 hours) of wages paid as qualified emergency paid sick leave, even if employees previously exhausted their emergency paid sick leave entitlement. In practice this means that the ARPA allows an employer to provide employees with an additional 10 days (80 hours) of leave and to receive tax credits for employees who previously took emergency paid sick leave.

3. Emergency Family and Medical Leave (FMLA) tax credit expansion.

Previously, tax credits taken by employers to cover the cost of providing emergency FMLA leave were only available if the employee was unable to work (or telework) to care for their child whose school or place of care has been closed or was unavailable due to the public health emergency. Under the ARPA, employers may claim tax credits for emergency FMLA leave arising from any of the reasons set forth in the FFCRA, including the two additional reasons described above. The ARPA also removes the two-week waiting period for emergency FMLA leave and raises the aggregate cap on payment for such leave from $10,000 to $12,000 per employee.

4. Non-discrimination rules related to the tax credit.

The ARPA tax credits are disallowed for any employer that discriminates by choosing to provide FFCRA leave: (i) in favor of highly compensated employees (as defined in Section 414(q) of the Internal Revenue Code); (ii) in favor of full-time employees; or (iii) on the basis of employment tenure.

5. Mandatory leave for federal workers.

Federal workers are now eligible for paid leave for COVID-related absences for themselves and their families under ARPA.

6. Reimbursement of certain contributions under a labor agreement.

The ARPA also provides for reimbursement of pension plan and apprenticeship program contributions made by employers under a collective bargaining agreement that are applicable to employee FFCRA paid sick and family leave.

The US Department of Labor (DOL) is required to issue regulations or other guidance regarding the changes to FFCRA mandated by ARPA. We will provide updated information on these regulations or guidance as it soon as it is available.

The ARPA also makes changes to health care continuation rights under federal COBRA law by subsidizing 100% of premiums for certain eligible COBRA recipients:

From April through September 2021, free COBRA coverage is available for employees (and their covered family members) who lost group health insurance due to an involuntary termination or reduction in hours caused by the pandemic. This subsidy does not apply to those who voluntarily quit their employment.
Individuals covered by COBRA during this period will not be charged any premiums. Instead, self-insured employers will cover the COBRA premiums and take a dollar-for-dollar tax credit by retaining the amount of payroll taxes equal to the amount of COBRA premiums paid, rather than deposit them with the IRS. For fully insured plans, the credit is claimable by the insurer.
Within 60 days of April 1, a notice of a special enrollment period must be sent to all eligible participants who have not yet elected COBRA coverage by April 1, or who elected COBRA coverage but then discontinued it. Due to former COBRA election deadline extensions from the US Department of Labor and the IRS (that temporarily extended the period in which eligible employees can elect and begin making COBRA premium payments) this group will include those who lost coverage at the start of the pandemic. However, COBRA coverage has not been extended - the duration of COBRA coverage will still be measured from the date of the original qualifying event.
The Department of Labor will issue model COBRA notices addressing the subsidy, and more guidance is also expected.

What should employers do?

Make a decision: Decide if you will start or continue to provide both emergency paid sick leave and emergency paid FMLA to employees until September 30, 2021, under the ARPA provisions. Keep in mind that the additional allotment of hours becomes available to employees on April 1, 2021.
Update: If you choose to provide additional FFCRA leave under ARPA, you should update your forms, policy and records applicable to paid sick and family leave. Forms should reflect the extension of FFCRA leave for the additional qualifying reasons. Because of the additional allotment of hours provided to employees, employers should also make sure their record keeping provides for accurate tracking of each employee’s use of leave.
Remember: Under the Oregon Family Leave Act, Oregon employers who employ over 25 employees in Oregon are still required to provide up to 12-weeks of unpaid protected leave to eligible employees who need time off to care for their own serious health conditions, their family members’ serious health conditions, and to care for a sick child, which includes a child whose school or childcare provider has been closed in conjunction with a public health emergency, including COVID. In other words, even if you choose not to provide extended FFCRA leave, eligible employees may still have rights to protected leave for COVID-related reasons.
Assess: Determine which, if any employees/dependents lost health care coverage under the ARPA rules and look for the model COBRA notices and guidance from the DOL to notify these individuals of the federal government subsidy.
Consider: If payment of COBRA continuation payments is included in a separation or severance agreement, consider reducing the amount the employer pays for months that would be included in the federal government subsidy.

Experienced. Disciplined. Committed.

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