The American Rescue Plan Act: What Employers Need to Know about the New Stimulus Bill
Key Points about the latest stimulus:
- The American Rescue Plan Act sends direct payments to individuals, extends unemployment benefits, and provides additional funding in several key areas.
- Most notably for employers, the American Rescue Plan Act extends the Employee Retention and FFCRA-related tax credits.
On March 11, 2021, President Biden signed the latest stimulus bill into law. The American Rescue Plan Act is worth roughly $1.9 trillion, making it the largest COVID-19-related stimulus so far.
This bill provides much-needed aid for individuals and businesses alike. Key provisions of the American Rescue Plan Act include:
Extended Employee Retention Tax Credits
The Employee Retention Tax Credits were set to expire on June 30, 2021. The American Rescue Plan Act extends the program until December 31, 2021.
This extension doubles the maximum credit amount you can claim. The credit continues to cover 70% of qualified payroll expenses (up to $10,000 per employee per quarter). This means that with the extension, you can claim up to $7,000 per employee per quarter for each quarter of 2021. The credit is no longer limited to the first and second quarters only.
In addition, the Act makes qualifying start-up businesses eligible to claim these credits. The amount of credit these businesses can receive is limited to $50,000 per quarter. For more information about these credits, please click here.
Extended FFCRA-Related Tax Credits
The American Rescue Plan Act does not require you to provide Emergency Paid Sick Leave and Emergency Family and Medical Leave dictated under the Families First Coronavirus Response Act (FFCRA).
The American Rescue Plan Act does, however, extend the tax credits which reimburse you for any emergency paid sick or family leave you provide under the FFCRA until September 30, 2021.
This means that you may voluntarily provide leave under the FFCRA to employees with eligible leave remaining. If you choose to do this, you may continue to receive the corresponding tax credits for those leave payments until September 30, 2021. Under previous legislation, these credits were set to expire on March 31, 2021.
In addition to the extended deadline, other items to note include:
Vaccination as Qualifying Reason for Leave
Under the American Rescue Plan Act, you may now claim these credits if you choose to provide paid sick or family leave for:
- An employee receiving their COVID-19 vaccination
- An employee recovering from an injury, disability, illness, or condition related to the COVID-19 vaccine
- An employee waiting for the results of a COVID-19 test
Leave Limit Reset
The new bill also resets the paid sick leave limit. After April 1, 2021, you may provide an additional 10 days of paid sick leave under the FFCRA. If you choose to do this, this leave would be eligible for a tax credit.
Local & State Requirements
While providing leave under the FFCRA is optional at the Federal level, it may be required at the state or local level. Before deciding not to provide leave under the FFCRA, check your state and local laws to ensure you comply with any paid leave requirements.
If state or local laws require you to provide emergency paid sick or family leave, you may want to take advantage of the FFCRA tax credits to be reimbursed for those leave payments.
Additional PPP and EIDL Funding
The American Rescue Plan Act provides an additional $7 billion for the Paycheck Protection Program (PPP) and an extra $15 billion for Targeted Economic Injury Disaster Loan (EIDL) Advances.
The American Rescue Plan Act did not extend the PPP loan application deadline, but the later PPP Extension Act of 2021 did. The deadline to apply for a PPP loan is now May 31, 2021. For more information about Second Draw PPP loans, click here.
The Targeted EIDL Advances provide businesses in low-income communities with additional funds. To qualify for one of these advances of up to $10,000, your business must have:
- Previously received an EIDL Advance for less than $10,000 or
- Applied for an EIDL Advance but did not receive funds due to lack of available program funding
If you think you qualify, there’s nothing you need to do at this time. The Small Business Association will contact qualifying businesses with additional information and next steps.
For more information about Targeted EIDL Advances, please click here.
Direct Payments to Individuals
Like previous stimulus packages, the American Rescue Plan Act provides one-time direct checks to millions of individuals. The actual amount you receive will depend on your marital status and gross annual income.
Single adults who earn less than $75,000/year will receive a $1,400 check.
Single adults who earn $75,000 – $80,000/year will receive a reduced check amount.
Single adults who earn more than $80,000/year will not receive a check.
Couples who earn less than $150,000/year will receive a $2,800 check.
Couples who earn $150,000 – $160,000/year will receive a reduced check amount that depends on their combined income amount.
Couples who earn more than $160,000/year will not receive a check.
Parents will receive an additional $1,400 per dependent.
Child Tax Credit
The American Rescue Plan Act raises the Child Tax Credit amount, allowing qualifying parents to claim up to $3,000 per child ages 6 through 17 and up to $3,600 for each child younger than 6.
The credit amount phases out depending on income. Individuals earning more than $75,000, married couples earning more than $150,000, and heads of household earning more than $112,500 per year will receive a reduced credit amount.
The credit is also now fully refundable. This means that individuals who pay little or no taxes will be able to take full advantage of the credit.
Extended Unemployment Benefits
The American Rescue Plan Act further extends unemployment benefits until September 6, 2021. As a result, qualifying unemployed individuals will receive $300 per week on top of any aid they receive from their state (which averages $200-550/week, depending on the state) until the September deadline.
The Act also makes the first $10,200 of unemployment benefits received in 2020 non-taxable for households with less than $150,000 of income per year.
COBRA Coverage & ACA Expansion
From April 1, 2021 to September 30, 2021, qualifying individuals who lost their job and want to remain on their employer’s healthcare will not need to pay for COBRA coverage. The American Rescue Plan Act provides a subsidy to fully cover the cost of the premiums during this time period.
The American Rescue Plan Act also provides additional relief for qualifying individuals who receive healthcare through an ACA marketplace. For the next two years, qualifying individuals will not need to spend more than 8.5% of their income on healthcare premiums.
The American Rescue Plan Act provides additional funding for:
- Vaccine distribution, COVID-19 testing, contact tracing, and more
- Local and state governments
- Schools, including colleges and universities
- Restaurants, live venues, transit agencies, and other highly impacted industries
- Childcare providers
- Housing aid
- Food assistance
No Minimum Wage Increase
While the original bill proposed raising the Federal minimum wage to $15 per hour, this provision was removed from the finalized version. As a result, employers don’t need to worry about minimum wage increases at this time. However, the Federal minimum wage rate continues to be a topic of discussion, so it’s worth keeping on your radar.
How Sentric Can Help
We keep our clients informed of major legislation changes such as the American Rescue Plan Act. Our systems are also equipped to properly track and process the extended Employee Retention Tax Credits and FFCRA-related leave and tax credits.
For more information about how Sentric can help, please contact one of our product experts.