Heads up, Benefits pros. The IRS recently released new guidance on the Tax Credits for Paid Leave Under the American Rescue Plan Act (ARPA).
While no longer required to provide ARPA benefits, private employers with fewer than 500 employees can choose to extend them through the end of September in order to receive a federal tax credit.
A big proponent of American Rescue Plan Act is employees being able to take 80 hours of Emergency Paid Sick Leave and 12 weeks of paid Expanded Family and Medical Leave for COVID-19-related reasons.
The IRS clarified the qualifying reasons for both types of leave. They include, if the employee is/has:
- Under a COVID-19 quarantine or isolation order, or has been advised by a doctor to isolate due to COVID-19 concerns
- Symptoms of COVID-19 and is either awaiting test results or a medical diagnosis
- Receiving a COVID-19 vaccine or recovering from vaccine side effects
- Caring for someone who is under a self-quarantine related to COVID-19, and
- Taking care of a child whose place of care is closed due to COVID-19 concerns.
Further ARPA clarifications
The biggest update coming from this guidance includes an expansion of a sixth reason to take ARPA leave:
6. The employee is experiencing a condition substantially similar to COVID-19.
According to the new guidance, this reason includes an employee accompanying someone to obtain the COVID-19 vaccine.
The IRS also got more specific about who the “someone” can be:
- an immediate family member
- someone who regularly resides in the employee’s house, or
- a similar person with whom the employee has a personal relationship.
It’s important to note that the employee can’t take ARPA leave to assist someone with whom they have no personal relationship.
Employers who are extending ARPA benefits to their employees need to be aware of these changes, as it gives workers more flexibility with the leave than before.
If you already have ARPA leave policies in place, it’s crucial to update them now.