On March 11, President Biden signed the American Rescue Plan Act of 2021, which provides and extends emergency COVID-19-related relief. The legislation creates another round of economic impact payments of $1,400 per person and extends unemployment insurance benefits.
Key Payroll Provisions
The key payroll provisions are as follows:
- Expansion of tax credits, originally created by the Families First Coronavirus Response Act (FFCRA), for emergency paid sick leave and expanded family and medical leave wages (together, qualified wages). Tax credits are now available for qualified wages paid for leave taken through September 30, 2021. Only the tax credits for voluntarily providing leave are extended; the requirement to provide the leave expired on December 31, 2020. The legislation increases the amount of wages eligible for the credit for expanded family and medical leave wages from $10,000 per employee to $12,000. The legislation also adds leave for the time it takes to get a COVID-19 vaccine as a reason for which paid sick leave may be provided. The 10-day limit for paid sick leave will reset after March 31, 2021.
- Extension of the employee retention credit (ERC), originally created by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, for qualified wages paid through December 31, 2021. The law continues the ERC rate at 70% of qualified wages up to $10,000 per employee per calendar quarter.
- Increase in the maximum amount of dependent care assistance that may be excluded from an employee’s income from $5,000 to $10,500 (from $2,500 to $5,000 for married individuals filing separately) for 2021.
- Creation of a COBRA premium assistance tax credit for employers. The legislation provides a subsidy of 100% of COBRA premiums beginning April 1 and ending on September 30, 2021. Employers may claim the credit as a payroll tax credit on Form 941. The credit is refundable and the legislation authorizes the Treasury to issue guidance allowing an advanced credit.
Future Developments
Additional information on the payroll provisions in this legislation will be covered in the April issue of Payroll Currently, published on April 2.
To learn more about federal and state laws, regulations, and information to keep your company's payroll operations in compliance, check out Payroll Source Plus!
Jyme Mariani, Esq., is Managing Editor of Payroll Currently and Payroll Information Resources for the APA.