The American Rescue Plan Act of 2021 ($1.9 trillion relief bill signed by President Biden on Mar 11, 2021, or ARP) includes a number of provisions important to employers. These include several targeted programs for certain small businesses, direct payments to individuals, an expansion of unemployment benefits, and an extension of paid sick leave tax credits.
Here’s an outline of the most relevant provisions included in the Act.
Small Business Assistance
The American Rescue Plan invests billions toward small business assistance per the following breakdown:
- $15 billion for Economic Injury Disaster Loan (EIDL) Advance Grants Program to provide grants of up to $10,000 per small business in low-income communities affected by the pandemic.
- $28.6 billion in new grant program for bars and restaurants that have lost revenue due to the pandemic.
- $7.25 billion towards the Paycheck Protection Program (PPP) to include more non-profits and digital media companies, as well as extra funding for the program.
Similar to the two previous COVID-19 relief bills, the American Rescue Plan includes direct payments for eligible recipients of $1,400 per person ($2,800 for couples). The full amount will go to individuals earning under $75,000 (or $150,000 for couples), with payments cut off entirely for individuals earning over $80,000 (or $160,000 for couples). Individuals earning an amount between those figures will receive a reduced sum.
The ARP extends two previously established pandemic unemployment assistance efforts: the Pandemic Unemployment Assistance Program and the Pandemic Emergency Unemployment Compensation program. While these two programs were set to expire in March of 2021, they are now extended through Sep. 6, 2021.
In addition, the American Rescue Plan provides enhanced unemployment assistance payments of $300 per week. Unemployed gig workers, freelancers, contractors and others who previously qualified for aid will continue to be eligible under these programs.
Homeowners and renters will also receive billions in financial aid per the following breakdown:
- Aid for emergency rental assistance: $22 billion
- Aid for mortgages, utilities and property taxes: $10 billion
- Aid to states and localities to help individuals at risk of becoming homeless: $5 billion
Emergency Paid Leave Still Voluntary
If you remember, the Families First Coronavirus Response Act (FFCRA) passed in March 2020 required employers to provide employees with paid sick leave for specific reasons related to COVID-19. Employers with fewer than 500 employees were required to offer this leave, which they could then claim for reimbursement via tax credits.
Then the Consolidated Appropriations Act (CAA) passed in December 2020 changed the mandate to a voluntary option. Employers who wanted to provide paid sick leave for the same qualifying reasons could do so and still receive federal tax credits for paid leave through March 31, 2021.
The American Rescue Plan maintains the same voluntary status quo, extending tax credits for employers who choose to provide paid leave. However, the ARP expanded the list of qualifications for paid sick leave to include “obtaining a COVID-19 immunization or recover from any injury, disability, illness, or condition related to such immunization…” through the end of September 2021.
Child Tax Credits
The American Rescue Plan provides an overhaul of the child tax credit for the 2021 tax year. Taxpayers typically receive a $2,000 tax credit for each child up to age 16. With this new bill, the per child amount for 2021 increases to $3,000 for each child up to age 17, and $3,600 for children ages 5 and under --- with no limit to the number of children that can be claimed.
These tax credits are income-based similar to the direct payments, meaning the additional credit beyond $2,000 cuts off for individuals earning over $80,000 a year (or $160,000 for couples). The credits are fully refundable, meaning low-income individuals would still receive the benefit.
This Act also expands the earned income tax credit for individuals without children, nearly tripling the maximum credit.
Extension of Employee Retention Tax Credits
Per the American Rescue Plan, eligible employers may claim Employee Retention Tax Credits (ERTC) through December 31, 2021. For comprehensive details about the ERTC, please see this article.
The American Rescue Plan subsidizes private health insurance premiums for unemployed workers through the Consolidated Omnibus Budget Reconciliation Act (COBRA). The provision allows individuals eligible for COBRA insurance coverage to maintain their employer-sponsored coverage after losing employment without having to pay any portion of the premiums through the end of September 2021.
Additionally, the Act invests nearly $35 billion in premium subsidy increases for those who buy coverage on the ACA Marketplace. It increases subsidies provided to currently eligible individuals and removes the 400% federal poverty level cap (equal to approximately $51,000 for an individual) on subsidy eligibility.
What’s Not in the Act
- There is no minimum wage hike, which was initially included to bump the federal minimum wage to $15 per hour.
- The eviction moratorium has not been extended, which is set to expire on March 31, 2021.
While there are many complex provisions in this nearly $2 trillion relief bill, Stratus.hr is here to help employers make sense of everything. Please contact us at HR@stratus.hr with questions about how this Act may affect your organization.