What's in the $1.9 Trillion American Rescue Plan for Employers and Employees? Tax Credits for Paid Sick Leave, Vaccination Leave, and COBRA Coverage

Mar 17, 2021   Print PDF

By Aviva Kamm | Related Practice: Employment

In addition to funding for vaccinations and additional stimulus payments, the American Rescue Plan contains some provisions to continue support for employers and workers as the COVID-19 pandemic continues. Two significant parts of the law are extensions of tax credits to provide paid sick leave and paid family leave, and providing COBRA benefit continuation for eligible employees between April 1 and September 30, 2021.Illustration of workers with masks

Paid Sick Leave and Family Leave

During the first year of the COVID-19 pandemic, private-sector companies with fewer than 500 employees were able to access tax credits to fund paid sick leave and paid family leave for employees affected by the pandemic under a law called the Families First Coronavirus Relief Act (FFCRA). (We previously discussed FFRCA leave in articles accessible here and here.) After December 31, 2020, employers were no longer required to provide the paid leave, but could do so optionally and continue to collect tax credits through March 31, 2021 if they did so. (See our previous article here.)

What’s in the new law:

  • Paid leave is now voluntary. Employers are not required to provide paid leave.
  • Tax credits available through September. Covered employers who opt to provide paid leave may access tax credits through September 30, 2021.
  • New leave allotment. Employers can claim tax credits for FFCRA leave for up to 10 days of paid sick leave and up to 12 weeks of paid family leave on or after April 1, 2021, even if the employee used all or some of their FFCRA leave allotment before March 31, 2021.
  • Additional qualifying reasons for paid sick leave. In addition to the reasons leave was available under the FFCRA, employers may now claim tax credits for leave taken for COVID-19 testing, vaccination, and side effects of vaccination. Specifically, leave is now permitted for absences when:

    1. The employee is seeking or awaiting the results of a diagnostic test for, or a medical diagnosis of, COVID-19 and such employee has been exposed to COVID-19 or the employee's employer has requested such test or diagnosis;
    2. The employee is obtaining a COVID-19 vaccination; or
    3. The employee is recovering from any injury, disability, illness, or condition related to a COVID-19 vaccination.  
  • Longer paid family leave. Under the FFCRA, employees could take up to 10 weeks of paid leave for expanded family leave. (The employee could take a total of 12 weeks, but the first two weeks of family leave were “unpaid” because they overlapped with the two weeks/10 days of paid sick leave.) The new law allows employers to claim tax credits for up to 12 weeks of paid expanded family leave, up to a maximum of $12,000.
  • Additional qualifying reasons for paid family leave. Under the FFCRA, extended paid family leave was available only for employee absences for childcare due to school closures. Under the new law, employers may claim tax credits for paid leave for childcare-related absences as well as any of the reasons that paid sick leave are allowed. The result is that up to $12,000 of paid sick leave can be available to an employee with COVID illness or symptoms that last longer than two weeks, or to someone who uses up two weeks of paid sick leave due to COVID-19 illness and at a later time needs time off to get vaccinated. The full list of qualifying reasons for leave is listed below.
  • Statutory requirements still apply. Employers can only claim tax credits if they follow all the requirements of the FFCRA, including keeping records documenting the reasons for employee leave and not retaliating against workers who take leave. For additional information on these requirements, see our earlier article here.
  • Daily leave amounts remain the same. As before, the maximum tax credit an employer may claim is $511 per day when leave is taken for self-care or one’s own diagnosis or vaccination and 2/3 of regular wages up to $200 per day when leave is taken for care of another person:

Up to $511/day

Self-care

The employee is subject to a federal, state, or local quarantine or isolation order related to COVID-19.

The employee has been advised by a health care provider to self-quarantine due to concerns related to COVID-19.

The employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis.

The employee is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor.

Testing and Diagnosis

The employee is seeking or awaiting the results of a diagnostic test for, or a medical diagnosis of, COVID-19 and such employee has been exposed to COVID-19 or the employee's employer has requested such test or diagnosis

Vaccination

The employee is obtaining a COVID-19 vaccination; or

The employee is recovering from any injury, disability, illness, or condition related to a COVID-19 vaccination. 

Up to $200/day

Care of others

The employee is caring for an individual who is subject to a quarantine or isolation order or has been advised to self-quarantine due to concerns related to COVID-19.

The employee is caring for a son or daughter whose school or place of care has been closed, or the child care provider is unavailable, for reasons related to COVID-19.


COBRA Coverage Through September 30, 2021

The American Rescue Plan also aims to maintain medical coverage for workers who would otherwise lose medical insurance coverage as a result of losing their job. The law provides that for assistance-eligible individuals, COBRA premiums will be treated as being paid in full for any month from April through September 2021, unless the worker is eligible for coverage under any other plan (such as if they are offered coverage from a new employer). The law also creates a new enrollment period for workers who were eligible but did not elect COBRA coverage before the American Rescue Act passed and now want to take advantage of this premium assistance to elect to maintain their benefits using COBRA.

Workers are considered “assistance-eligible” if they (a) are eligible for COBRA continuation coverage, (b) elect to enroll in COBRA coverage, and (c) did not become eligible for COBRA because they voluntarily quit their job.

What this means for employers:

  • Employers have a new notification requirement: COBRA notices must include written notification about the availability of premium assistance and options to enroll in different coverage, if permitted by the employer. Plans must also issue notices to individuals who became eligible for COBRA before April 1, 2021 and now have a renewed opportunity to elect COBRA coverage. Model notices will be made available by the Department of Labor within 30 days of the law’s enactment. Notice requirements are technical and specific; we recommend consulting counsel or plan administrators to ensure your company’s notices comply.
  • Employers may decide to offer severance pay but not payment of COBRA premiums in severance agreements for terminations between March and September 2021. Considerations such as anti-discrimination, following precedent or company policy, or compliance with severance agreements already in place may dictate otherwise; we recommend consulting counsel before deciding how this provision affects your company’s severance offers.

If you have specific questions about how the new law impacts your company’s policies, contact a member of the Stokes Lawrence Employment group.

To see all of our COVID-related posts, visit our COVID-19 Resources page.