UPDATE NOVEMBER 8: The Biden administration’s infrastructure legislation ends the employee retention credit (ERC) early. As of now, the latest language in the bill has ERC wages paid after September 30, 2021 ineligible for the credit (except for wages paid by an eligible recovery startup business). Employers must report ERC credits taken before September 30, 2021 and can file an amended 941 return up to three years after the reporting date.
If you work in HR, you’ll know that a new administration often means the passing of landmark legislation which will affect your business. These aren’t ordinary times, though, and the American Rescue Plan Act (ARPA) signed into law by President Biden on March 11, 2021, is just the latest in a series of big-ticket COVID-19 relief packages. The bill updates several programs initiated by previous legislation, and adds major stimulus measures of its own. To help business leaders, we’re breaking down what ARPA means for you.
What HR Leaders Need to Know
The American Rescue Plan Act extends the Paycheck Protection Program as well as payroll tax credits (established by the CARES Act) and emergency paid leave provisions (established by the Families First Coronavirus Response Act). It also increases the exclusion for employer provider dependent care assistance. The good news is, Paycor’s system is set up to handle all these changes.
Here are some of the measures in more detail:
- Paycheck Protection Program (PPP) Expanded
The Paycheck Protection Program, the flagship scheme supporting businesses suffering due to the pandemic, is now open to most nonprofit organizations. The program also received an extra $7.5 billion funding. (Congress recently approved an extension of the application period to May 31, 2021.) Read Paycor’s in-depth guide to the Paycheck Protection Program.
- Increase in Exclusion for Employer-Provided Dependent Care Assistance
The exclusion for employer-provided dependent care assistance has increased from $5,000 to $10,000 ($5,250 if married but filing separately) for the calendar year 2021.
- Extension of the Employee Retention Credit
The Employee Retention Credit was originally enacted in the CARES Act (passed in March, 2020) and allows eligible employers to claim a credit for paying qualified wages to employees. Under the American Rescue Plan, the ERC remains fixed at 70% of qualified wages to $10,000 per calendar quarter. The credit was set to expire July 1, 2021 then was extended to January 1, 2022 but as of November 7, 2021, the Biden administration’s infrastructure legislation ended the employee retention credit (ERC) early. As of now, ERC wages paid after September 30, 2021 are ineligible for the credit (except for wages paid by an eligible recovery startup business). Employers must report ERC credits taken before September 30 and can file an amended 941 return up to three years after the reporting date.
- Expansion and Extension of Emergency Paid Sick Leave and Emergency Paid Family Leave Credits
Employer credits, established by the Families First Coronavirus Response Act, for qualified wages paid for emergency sick leave and emergency family medical leave have been re-established from April 1, 2021 to September 30, 2021. Employee eligibility for leave reset April 1, 2021 and may now also be taken for COVID vaccinations. The amount of eligible emergency paid sick leave (ESL) for an employee remains $511 per day for a maximum of 10 days. Emergency leave for caring for a family member (EFSL) remains $200 per day (up to a maximum of $2000). The per-employee cap for Emergency Paid Family and Medical Leave (EFMLA) has increased from $10,000 to $12,000 and the number of eligible days from 50 to 60. The daily limit remains $200.
- New Payroll Tax Credit for Continuing Health Insurance Coverage (COBRA)
Individuals receiving continuing health coverage (COBRA) will be entitled to premium assistance through September 9, 2021. Employers who provide coverage and pay COBRA premiums may be eligible for a corresponding tax credit against the employers’ share of Medicare tax.
- Grant Opportunities for Restaurants (Restaurant Revitalization)
The Small Business Association (SBA) will administer a new grant program for restaurants that suffered pandemic-related revenue loss. Grants are available of up to $10 million per entity of $5 million per physical location. (Entities are limited to 20 location.) The grants are calculated by subtracting 2020 revenue from 2019 revenue.
The ‘Nice to Know’
The following measures may not directly impact your business, but they’ll affect your employees:
- Increase in child tax credit to $3,000 ($3,600 for children under 6) for qualifying taxpayers.
- Continuation of unemployment benefits with $300 in additional benefit payments for unemployed workers.
- Exemption of the first $10,200 in unemployment benefit from taxation in 2020.
- Economic impact / stimulus payments of $1,400 to single taxpayers earning $75,000 or less (phased out at $80,000) and married filers with joint incomes up to $150,000 (phased out at $160,000).
- Increased funding for education, public health, transportation, agriculture, housing, Medicaid, pensions, and state and local governments, among others.
What Wasn’t Included
Some additional provisions made big news before the bill passed, but were not included in the final act: most notably, an increase to the federal minimum wage to $15 per hour and a proposal to make federal paid leave permanent. Both items remain on the agenda for the current Congress. Paycor will keep HR leaders updated on all the latest important legislation—and how it impacts businesses.
How Paycor Helps
Paycor builds HR solutions for leaders. With Paycor, you can modernize every aspect of people management, from the way you recruit, onboard and develop your team, to the way you pay and retain them. See how Paycor can help the leaders of your organization solve the problems of today and tomorrow.