On March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 (“ARPA”) into law. The highly controversial $1.9 trillion stimulus plan includes a number of provisions that impact employers, including an extension and expansion of voluntary leave availability under the Families First Coronavirus Response Act (“FFCRA”), and a temporary COBRA subsidy provision that provides for payment by employers of 100% of employee COBRA premiums for eligible employees and their dependents. What follows is a summary of these ARPA provisions, which will immediately impact employers. For additional information on ARPA, and its applicability to you as an employer, we recommend you reach out to your GR labor and employment law counsel.
Voluntary FFCRA Leave Extended (with a Twist)
The FFCRA originally provided for mandatory Emergency Paid Sick Leave (“EPSL”) and Expanded Family and Medical Leave Act (“EFMLA”) through December 31, 2020, and what we covered in the Best Practices for Updating HR Policies During COVID-19 blog. Thereafter, pursuant to the Consolidated Appropriations Act signed on December 27, 2020, the availability of the leave was continued, but converted to a voluntary leave left to the discretion of the employer. ARPA again extends the availability of voluntary leave under the FFCRA making it available from April 1, 2021, to September 30, 2021.
ARPA expands voluntary paid sick leave availability by adding two additional qualifying reasons to the six existing qualifying reasons for EPSL. The two new reasons are in bold below. Employers may now provide 80 hours of EPSL to employees who are unable to work or telework because of one of the following eight qualifying reasons related to COVID-19:
- The employee is subject to a Federal, State, or local quarantine or isolation order related to COVID-19;
- The employee has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
- The employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis;
- The employee is seeking or awaiting the results of a diagnostic test for, or a medical diagnosis of, COVID-19 and the employee has been exposed to COVID-19 or is unable to work pending the results of the test or diagnosis;
- The employee is obtaining immunization related to COVID-19 or recovering from any injury, disability, illness, or condition related to such immunization;
- The employee is caring for an individual who either is subject to a quarantine or isolation order related to COVID-19 or has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
- The employee is caring for his or her child whose school or place of care is closed or whose childcare provider is unavailable due to COVID-19 related reasons; or
- The employee is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services.
Employees who qualify for EPSL qualifying reasons 1 through 5 (including the two new qualifying reasons) are provided EPSL at their regular rate of pay for a maximum of $511 per day and $5,110 in the aggregate. The EPSL compensation rate for qualifying reasons 6 through 8 remains at two-thirds of employees’ regular rate of pay for a maximum of $200 per day and $2,000 in the aggregate. To view the basics of the FFCRA, view our Stay Ahead of COVID's Second Wave webinar hosted by our founder and CEO Robin Imbrogno.
Significantly, ARPA provides for a reset of the 10 day EPSL bank for employees who utilized all or a portion of their allotted EPSL prior April 1, 2021, when the reset becomes effective.
ARPA also considerably expands EFMLA leave beyond the sole qualifying reason of caring for a child due to a COVID-19 related school closure or unavailability of childcare. Under ARPA, employees will now qualify for EFMLA leave for any of the 8 qualifying reasons for EPSL. Notably, ARPA amends the FFCRA to provide for 12 weeks of paid EFMLA leave as opposed to the 2 weeks of unpaid EFMLA leave followed by 10 weeks of paid EFMLA leave which the FFCRA originally provided for. Compensation for paid EFMLA leave remains the same at two-thirds an employee’s regular rate of pay at a maximum of $200 per day and $12,000 in the aggregate (which increased from $10,000 due to the additional 2 weeks of paid EFMLA). Unlike EPSL, employees’ EFMLA banks do not reset on April 1, 2021, as the availability of EFMLA depends on how much EFMLA and/or FMLA leave an employee has already utilized during the employer’s defined 12-month period.
Employers choosing to provide voluntary FFCRA leave as amended by ARPA must do so without discriminating in favor of highly compensated employees, full-time employees, or employees on the basis of their employment tenure. Employers who discriminate in the application of EPSL and/or EFMLA on any of the foregoing basis risk losing their reimbursement for such paid leave for the entire calendar quarter during which the discrimination occurred. The IRS will continue to reimburse employers for qualifying paid leave via tax credits. Accordingly, employers should consult with their accountants and/or tax attorneys regarding any inquiries related to the employer tax credits provided by ARPA. For any non-tax related EPSL and/or EFMLA leave inquiries, employers should contact their labor and employment counsel.
Return of the COBRA Subsidy and Notice Requirements
The COBRA Subsidy
The Consolidated Omnibus Budget Reconciliation Act (“COBRA”) allows employees and their covered dependents the right to choose to continue group health benefits under an employer plan for limited periods under circumstances such as job loss, reduction in the hours worked, transition between jobs, death, divorce, and certain other events. Typically, employees may be required to pay the entire COBRA premium for coverage up to 102% of the cost to the plan. COBRA also requires that employers and plans provide notices to eligible employees regarding such benefits.
ARPA provides for a limited subsidy of COBRA premium payments for eligible individuals, and additional notice requirements for employers and plans. Connecticut employers who provide group health benefits will be subject to the requirements related to this subsidy. Per ARPA, the subsidy is explicitly available for state continuation of coverage programs, such as the one in Connecticut, also called mini-COBRA.
Under § 9501 of ARPA, 100% of the cost of continuing group health coverage under COBRA is subsidized for up to six months to Assistance Eligible Individuals (“AEI”). An AEI is an individual (i.e. employee or covered dependent) who, as of April 1, 2021, loses coverage under their employer’s health care plan due to (i) a reduction in hours or (ii) involuntary termination (other than for gross misconduct), and who elects COBRA continuation coverage. An AEI who timely elects COBRA is treated as having paid for coverage during the period starting April 1, 2021 and ending September 30, 2021.
Those eligible for the subsidy include not only those AEI’s who become eligible for and elect coverage on or after April 1, 2021, but also eligible employees and covered dependents who are already enrolled in COBRA and still within the coverage period, along with those who previously experienced an involuntary termination, or reduction in hours, but who did not elect COBRA. Additionally, individuals who initially elected but then dropped COBRA coverage are eligible and allowed to re-enroll if they are still within their original COBRA coverage period. As of March 31st, 2021, it is not clear whether the subsidy will cover medical, dental and vision coverage or just medical coverage.
The subsidy is only available for the period specified, from April 1, 2021 through September 30, 2021, and election of coverage and receipt of the subsidy cannot be used to extend COBRA coverage beyond the period that an AEI would have otherwise been eligible for coverage. As a result, those eligible for the subsidy will generally be limited to individuals who were first eligible for coverage on or after November 1, 2019. Guidance regarding the COBRA subsidy is expected to be forthcoming, but at this time it is unknown as to whether or not the ARPA subsidy must be made available to those who were eligible for COBRA coverage from an earlier date under a 29-month period or a 36-month period.
The subsidy is not available to employees who voluntary terminate employment. However, employers should expect litigation regarding whether or not a termination was actually “voluntary.” The COBRA subsidy is also not available to those who are either eligible for coverage under another employer’s group health plan or under Medicare. AEI’s who become eligible for coverage under another employer’s group health plan must give notice to the former group health plan of the new coverage.
COBRA Subsidy Notice Requirements
Employers must provide required notices to employees and former employees (and other beneficiaries) who may be impacted or who are eligible due to the extended election periods.
Employers must provide AEIs notice of these new rules by amending their notices or by adding a separate document to the current forms. The amended COBRA notices must be provided starting on April 1. The notice must be in clear and understandable language, advise of the availability of premium assistance and the ability to choose a different coverage option (if permitted), and provide the forms needed to establish eligibility for the assistance, the contact information for the person who can answer the AEIs questions, and an explanation of the penalties involved for failure to abide by the AEIs obligations for receiving premium assistance. In addition, AEIs who are eligible for the extended election period must be given notice of such by the administrator of the group health plan or other entity no later than May 31, 2021.
Plan sponsors must also notify AEIs when the premium assistance is set to expire. These notices must be sent between 45 and 15 days prior to the end of the premium assistance and must clearly identify the date the premium assistance expires and how the AEI can continue medical coverage through COBRA beyond the subsidy date without the subsidy, or through a group health plan. Notices need not be sent to AEIs whose subsidy is ending because the AEI became eligible under another group health plan.
The DOL is expected to issue guidance, including model notices as set forth in ARPA. The first of these model notices is expected to be issued by April 10, 2021, with additional notices regarding expanded eligibility to AEIs and termination notices expected by April 25, 2021 and May 31, 2021 respectively. However, employers are not relieved from notice requirements pending the release of the guidance and model notices.
COBRA Subsidy Funding
Funds to pay for premiums under ARPA are created by refundable Medicare payroll tax credits. These credits may be claimed by the insurer if the group health plan is insured, by the employer if the group health plan is self-insured, and by the plan if it is a multi-employer plan. Credits in excess of the applicable tax may also be refundable according to the Code’s overpayment rules. Notably, if an AEI mistakenly pays part or all of the premium attributable to the subsidy period, the entity claiming the credit must reimburse the AEI within specified time periods.
This is just one aspect of the updates that the ARPA has made. If you want to learn more about the updates to the Employee Retention Tax Credit, contact us today.