American Rescue Plan Act: What you need to know now

The rush to get the $1.9 trillion American Rescue Plan Act (ARPA) passed by the House and the Senate, and signed into law by President Joe Biden was completed on March 12.

And if you haven’t heard, parts of it affect employers.

Here’s what you need to know:

COBRA coverage

The government’s subsidy was changed from 85% to 100% of COBRA premiums for assistance-eligible individuals (employees, former employees, covered spouse or covered dependents) who lost their employer sponsored health benefits. This applies to people who were involuntarily terminated or had a reduction of work hours.

The special election period started April 1 and runs through Sept. 30, 2021, and applies to anyone who didn’t elect COBRA continuation coverage but would’ve been eligible for it. In addition, anyone who elected coverage and discontinued it before April 1, 2021 is eligible.

Employers are required to notify covered individuals about the availability of the COBRA subsidy, so the DOL is releasing model notices soon, as well as COBRA coverage expiration notices.

The new COBRA notices must include:

• forms for establishing eligibility for premium assistance
• name, address and phone number of the plan administrator
• description of the extended special election period
• individuals’ obligation to notify the plan if they become eligible for coverage under another plan, and
• description of the beneficiary’s right to a subsidized premium and any conditions to entitlement.

Once the notices are sent out, eligible individuals are allowed 60 days after receiving it to elect coverage, and won’t be required to pay the premium during that period.

COBRA premiums for self-insured plans are covered by the employer and reimbursed through a payroll tax credit. For fully insured plans, the tax credit is claimable by the insurer.

While the ARPA tasked the DOL and IRS with issuing regs and guidance on the application and administration of the COBRA subsidy provisions, COBRA premiums covered 100%.

Experts highly recommend employers consult a tax expert before filing.

Emergency paid sick, family leave

If you’re providing paid sick leave and paid family leave under the Families First Coronavirus Response Act, the ARPA extends the tax credit until Sept. 30, 2021. It also resets the 10-day limit for the tax credit for paid sick leave to April 1, 2021.

In addition to the current reason for taking emergency sick or family leave, the following reasons were added:

• obtaining COVID-19 vaccine
• recovering from any injury, disability, illness or condition related to the COVID-19 vaccine, or
• getting or awaiting the results of a diagnostic test or medical diagnosis for COVID-19. 

However, firms that discriminate against highly compensated employees, full-time employees or employees on the basis of tenure with the employer when determining eligibility don’t get the tax credit.

Other changes

For 2021 only, employers have the option to extend their dependent care assistance program or dependent care flexible spending account to cap from $5,000 (or $2,500 for separate married returns) to $10,500 (or $5,250 for separate married returns).

And the Paycheck Protection program gets an addition $7 billion.

Info: American Rescue Plan Act: Impact on Employers and Employees;
ARPA Signed Into Law: What Does That Mean for Employers?;
100% COBRA Subsidies Included in the Latest COVID Stimulus Bill