American Rescue Plan
On Friday, March 12, 2021, President Biden signed the American Rescue Plan. The measure provides $1.9 trillion in economic relief, with many of the specific items directly affecting employers. The following provisions were included in the final bill:
- Extended Voluntary Paid Sick Leave Tax Credit – This bill extends the voluntary paid sick leave tax credit provision of the Families First Coronavirus Response Act (FFCRA) through September 30, 2021. The provision also “resets” the 10-day sick leave period after March 31, 2021. This extension contains technicalities in how it is structured; employers will now be required to file a Form 7200 to receive the tax credit going forward.
- COBRA Subsidies – The federal government will subsidize 100 percent of premiums for qualifying individuals eligible to receive COBRA coverage. Employers and plans will be able to claim a refundable tax credit against the Medicare payroll tax liability for the cost of these premiums.
- Multi-employer Pension Relief – Under this legislation, much needed relief will be provided to endangered multi-employer pension plans. Key points to the multi-employer relief language are as follows:
- Qualifying plans can retain their funding zone status for plan years that begin in 2020 or 2021. A plan in endangered or critical status would not have to update its plan or schedules until the plan year beginning March 1, 2021.
- Plan in endangered or critical status would be able to extend their rehabilitation period by five years giving plans more time to improve their status through various measures.
- Creation of a Special Financial Assistance Program for critical and declining status plans through lump sum payments by the PBGC. The legislation includes numerous qualifying characteristics to receive this support, much of which will need to be clarified by regulatory language.
- Extended Employee Retention Credit Tax (ERTC) – the ERTC was extended to apply to the third and fourth quarters of 2021. The amount of the credit remained the same as what was enacted by the Consolidated Appropriations Act (HR 133) on December 27, 2020; effective January 1 through June 30, employers are allowed a 70% credit for qualified wages up to $10,000 per quarter, per employee. Generally, businesses that experience a 20% year-over-year decline in gross receipts are eligible for the credit.
- Pandemic Unemployment Assistance (PUA) – The bill extends the PUA at $300 a week through September 2021.
- Economic Impact Payments – The Department of the Treasury will issue direct stimulus payments of $1,400 for individuals, payments will be phased out completely at $80,000 for individuals and $160,000 for joint filers.