The American Rescue Plan Act
of 2021 (ARPA)

ARPA Key Insights for Businesses

As has been the case with all COVID-related programs, issues, subsidies, notices, tax credits, etc. AdvanStaff did not anticipate creating or providing services in these areas!  However, we continue to support you and your company as these complex programs are passed through Congress, enforced through new laws, and made a part of your day to day management of your business.  We are here for you!

On March 11, 2021, President Biden signed the American Rescue Plan, which provides additional relief to individuals and businesses impacted by the COVID-19 epidemic.

There are several provisions in this legislation of interest to employers. AdvanStaff HR will assist with many of the provisions.

Key takeaways:

  • The Act provides income tax benefits to many individual taxpayers, including some that are retroactive to 2020, as well as another round of stimulus payments 
  • 100% COBRA subsidy proved between April 1 – September 30 for involuntarily terminated employees and their families
  • Paycheck Protection Program (PPP) loans will now be available to more nonprofit organizations
  • The Employee Retention Tax Credit has been extended through December 31, 2021
  • The CARES Act unemployment compensation provisions have been extended and modified 
  • SBA grants and other programs for restaurants and shuttered venues have been created 
  • Substantial funding for state and local governments, Covid-19 vaccine distribution and testing, at–risk pension plans, the transportation industry, K-12 and higher education funding, emergency rental assistance, EIDL grants to businesses located in low-income communities and much more is included in the 628-page legislation

Employer facing provisions in greater detail

Paycheck Protection Program (PPP) 

There is $7.25 billion allocated for PPP, now allowing various nonprofit organizations to qualify for these loans/grants. Organizations involved in lobbying would need to meet certain tests to qualify. Notably, the current iteration of PPP loans expires on March 31, 2021 with about 40% of the funding left. No extension was provided in this legislation, though Congress and the SBA are being asked to provide a 60-day extension. Nonprofits now eligible for PPP loans must: 

  • Have no more than 300 employees 
  • Not receive more than 15% of their revenue from lobbying activities

501(c)(3) organizations that employ no more than 500 employees per location and 501(c)(6) organizations that employ no more than 300 employees per location will also now qualify for PPP loans. 

We expect forthcoming DOL and IRS guidance to provide greater detail regarding premium assistance eligibility, newly required notices and claiming available tax credits. We will continue to monitor this issue and provide relevant updates as needed.

COBRA requires group health plans to allow covered employees and their dependents to continue their group health plan coverage when it would be lost due to specific events, such as a termination of employment or reduction in working hours. Individuals are usually allowed to continue their COBRA coverage for 18 months, although some similar state mini-COBRA laws mandate a longer coverage period.

Under COBRA, group health plans may require those covered to pay 102% of the premium for their continuing health insurance, leading many eligible individuals to decline coverage. The ARPA subsidy covers the full cost of COBRA or miniCOBRA premiums from April 1 – Sept. 30, 2021, for “assistance-eligible individuals.”

What Role Will AdvanStaff Play And How Are We Preparing?

As has been the case with all COVID-related programs, issues, subsidies, notices, tax credits, etc. AdvanStaff did not anticipate creating or providing services in these areas!  However, we continue to support you and your company as these complex programs are passed through Congress, enforced through new laws, and made a part of your day to day management of your business.  We are here for you!

Currently, we are working on the following:

  1. Coordination with our COBRA administrator to identify “Assistance Eligible Individuals” all the way back to November of 2019.

    Determining who was involuntarily separated or had reduced hours due to COVID will be challenging and we may need your help!
  1. Anticipating what the special notification must contain and creating a rough document so we can get a draft ready to send as soon as federal guidance is forthcoming.
  2. Determining and monitoring what states pass new legislation that forces smaller employer to comply with state “mini-COBRA” modified provisions related to this issue.
  3. Working out a process to notify all of your “Assistance Eligible Individuals” who have already separated from the company or had hours reduced to the point of losing regular coverage.
  4. Working out a process to notify all newly separated employees (from April 1st forward) of their option to continue COBRA with a 100% subsidy.
  5. Determining what notification will be necessary to participants who will “run the clock” on the COBRA subsidy prior to its expiration on September 30, 2021.
  6. Determining how to pass through the billing subsidy from the COBRA Administrator.
  7. Determining how to apply the federal tax credit to your business and how to handle having a shortage of taxes for reimbursement.
  8. Much more!

We will keep you apprised of our progress and highly encourage you to share this information with other internal managers, owners who may not be involved in daily management of issues like this and any other stakeholder at the management or higher level.

First, because the ARPA requires health plan sponsors to provide notice of the subsidy and the Special Enrollment Period, you will need to identify Assistance Eligible Individuals.

  1. This means that employers will not only need to provide COBRA election paperwork to individuals who become eligible during the Subsidy Period, but they will also need to identify and notify individuals who experienced a qualifying termination during the last 18 months and who may be eligible to enroll during the Special Enrollment Period.
  2. Employers must also provide notice of the expiration of subsidized coverage. 

The federal government is expected to issue a model notice, for use, within the next 30-days, but we will work with you right away to help begin the process of identifying Assistance Eligible Individuals.

Second, employers are obligated to provide this subsidized COBRA coverage and must pay the Assistance Eligible Individual’s premium.

  1. Employers can then claim a credit for those premiums against their quarterly Medicare payroll tax.
  2. The credit can be advanced and is refundable, so an employer could claim a refund if the premiums paid exceed the taxes due.
  3. Every step of the way, your company will need to know and carefully monitor, in conjunction with the COBRA administrator (which will be AdvanStaff provided COBRA administrator, if you use ours) precisely how many Assistance Eligible Individuals took advantage of the ARPA COBRA subsidy, who they were, and for how many months, so reimbursement through a quarterly payroll tax credit can be filed. 
  1. First, any covered employee who becomes eligible for COBRA continuation coverage due to a qualifying termination is eligible for ARPA subsidized COBRA.
    1. Qualifying terminations are limited to involuntary terminations of employment or a reduction in hours significant enough to trigger a loss of coverage.
  2. Second, the subsidy is also available to individuals who previously became eligible for COBRA coverage and are still within their maximum coverage period.
    1. This could include individuals who were involuntary terminated as early as November 1, 2019.  In this scenario, individuals previously eligible for coverage but not currently enrolled because they waived COBRA or elected COBRA and subsequently dropped it, may enroll for coverage to take advantage of the subsidy.
    2. This second bite at the apple from those who previously waived (and are qualified under “2a” above) is available only beginning April 1, 2021 and ending 60 days after the eligible individual receives notice of the availability of the subsidy (the “Special Enrollment Period”).

The ARPA COBRA subsidy covers two categories of “Assistance Eligible Individuals.”

The COBRA subsidy in the ARPA applies to group health plans subject to federal COBRA or to a state mini-COBRA program. Plans subject to federal COBRA are plans maintained by employers with 20 or more employees on more than 50% of the business days in the previous calendar year. Small-employer plans, small governmental plans and church
plans are not subject to federal COBRA, but may be subject to a state mini-COBRA law and therefore be covered by the ARPA’s COBRA subsidy provisions.

Health flexible spending arrangements under Section 125 cafeteria plans are not covered by the ARPA COBRA subsidy.

The ARPA allows individuals to elect subsidized COBRA if they:

  • Become eligible for COBRA due to involuntary job termination (not caused by gross misconduct)
    or reduction in hours between April 1 and Sept. 30, 2021;
  • Previously declined COBRA after becoming eligible due to involuntary job termination (not caused by gross misconduct) or reduction in hours, but would still be within their COBRA coverage period had they elected the coverage at that point; or
  • Previously elected COBRA but discontinued the coverage before April 1, 2021

The election period for subsidized COBRA under ARPA begins on April 1, 2021, and runs until 60 days after the date individuals receive notice from the health plan of the availability of the COBRA subsidy.

  1. The ARPA COBRA subsidy is available for a six-month period from April 1, 2021, to September 30, 2021 (the “Subsidy Period”), but the ARPA does not extend the normal 18-month period of COBRA coverage. 

    For instance, an Assistance Eligible Individual who has already had COBRA coverage for 16 months on April 1, 2021 will only be eligible for the ARPA COBRA subsidy for 2 months—not until September 30, 2021.
  2. Similarly, anyone electing COBRA during the Special Enrollment Period  will be covered beginning on April 1, 2021, but their COBRA coverage will not continue past the date that their maximum COBRA coverage period would have otherwise expired if they had elected COBRA when originally available.

    For example, a former employee who lost coverage on February 15, 2020, but did not elect COBRA coverage, could enroll during the Special Enrollment Period and be covered through August 15, 2021.
  1. The Subsidy Period will also end if the Assistance Eligible Individual becomes eligible for coverage under another group plan or Medicare.

The ARPA contains a provision that—at the employer’s option—allows individuals eligible for the COBRA subsidy and enrolled in the employer’s group health plan to change to different health coverage also offered by the employer. The new coverage cannot have a higher premium than the individual’s previous coverage, and it must be offered to similarly situated active employees. The option does not apply to plans that provide only excepted benefits, to qualified small employer health reimbursement arrangements or to health flexible spending arrangements.

The change must be elected within 90 days of the employee receiving notice of the option.

The ARPA imposes new COBRA notice requirements on health plans

General Notice

Plan administrators must provide notification of COBRA benefits under ARPA. The notice must be written in clear and understandable language, and it must inform recipients of the availability of ARPA premium assistance and the option under the ARPA to enroll in different coverage (if the employer permits the option).

The notice must be provided to individuals who become eligible for COBRA or mini-COBRA during the period of April 1 – Sept. 30, 2021. In addition, it must be provided by May 31, 2021, to people who have already elected COBRA coverage, and to people subject to the ARPA election extension—that is, people eligible for the subsidy who declined or discontinued COBRA or mini-COBRA before April 1, 2021.

The notification may be included in an amendment to a plan’s existing notices or be given in a separate notice, but it must contain the following information:

  1. The forms necessary for establishing eligibility for premium assistance
  2. The name, address and telephone number necessary to contact the plan administrator and any other person maintaining relevant information in connection with premium assistance
  3. A description of the extended election period under the ARPA
  4. A description of the obligation of qualified beneficiaries to notify the plan if they become eligible for another group health plan or Medicare, and the penalty for failure to do so
  5. A prominently displayed description of the right to a subsidized premium and any conditions on entitlement to the subsidized premium
  6. A description of the option of the right to enroll in different coverage (if the employer permits this option)

The DOL is charged with issuing a model general notice by April 10, 2021, for plans to use to meet the general notice requirement.

Notice of Expiration of Subsidy

Plans must also provide individuals eligible for the ARPA subsidy with notice of its expiration. The notice must be written in clear and understandable language, and inform recipients that:

  • The premium assistance will expire soon, prominently identifying the expiration date; and
  • The individual may be eligible for coverage without premium assistance through COBRA continuation or a group health plan.

Plans are not required to issue an expiration notice to individuals whose subsidy is expiring because they became eligible for other group health plan coverage or Medicare.

The notice must be provided during the 45 – 15-day period before the individual’s subsidy expires. The DOL must issue model expiration notices by April 25, 2021.

Individuals will cease to be eligible for COBRA premium assistance for any month of coverage that begins on or after the earlier of the date they become eligible for either other group health coverage or Medicare. COBRA premium assistance also will cease as of the earlier of the date following the date the applicable maximum COBRA continuation coverage period expires or, in the case of an Extended Qualified Beneficiary, the date following the date that the period of COBRA coverage that would have been required had the COBRA election been made by, or had not been discontinued before, April 1, 2021.

ARPA requires plan administrators to provide clear and understandable written notice prior to premium assistance expiring except when it expires because an individual becomes eligible for other group health coverage or Medicare. The premium assistance expiration notice must clearly state when COBRA premium assistance will expire. It must also explain that the individual still may be eligible for group health coverage without premium assistance under either COBRA or another group health plan.

Plan administrators must provide this notice during a period that begins 45 days before premium assistance will expire and ends 15 days before premium assistance expires. The DOL will provide model premium assistance expiration notices by no later than April 25.

The ARPA COBRA subsidy is funded through a tax credit to employers (for self-insured plans and multi-employer plans) and insurance carriers (for fully insured plans). The credit is taken against payroll taxes. It can be advanced (according to forms and instructions to be provided by federal agencies) and is fully refundable. The credits will be provided each quarter in an amount equal to the premiums not paid by assistance-eligible individuals.

ARPA provides that a plan sponsor may (but is not required to) allow qualified beneficiaries to switch their group health plan election to a different employer-sponsored plan provided that:

  • the premium cost for that plan is not higher than for the plan in which the qualified beneficiary is enrolled;
  • the plan sponsor offers the plan to similarly situated active employees; and
  • the coverage is not just excepted benefits, a qualified small employer health reimbursement arrangement (QSEHRA) or a health flexible spending arrangement (HFSA).

Special Notes And Information:

  • Companies that are not required to provide COBRA continuation will likely NOT need to participate in this required federal program.
    • It is possible, however, that a company that is subject to a state’s continuation law (which often apply to smaller companies), will be somehow subject to similar laws which may be passed quickly by some states in the next few days and weeks.
  • Identifying the reason for termination with the COBRA provider will be challenging because COBRA participation and information sent to the administrator was never previously segmented into those that involuntarily lost coverage due to COVID from any other reason.  We may need your help with this!
  • We are assuming that companies that have gone out of business have no obligation under this program, but we are not certain.

Let us know of any questions and we will do our best to provide answers!

President Biden signed the American Rescue Act Plan of 2021.  One thing for all employers to note is that there are provisions that extend and expand the Families First Coronavirus Response Act (FFCRA), the statute providing for paid family leave and paid sick leave for employees with COVID-19 issues who work for employers with fewer than 500 employees.

In 2020, all employers with less than 500 employees were required to provide FFCRA paid leave to employees covered by the Act.  Effective January 1, 2021, FFCRA paid leave became optional and it ran through March 31, 2021.  Covered employers were not required to participate, but if they did, they would continue to receive tax credits for the payments made to employees on leave for covered reasons.

Most of our clients have continued to voluntarily provide paid leave under FFCRA for Emergency Paid Sick time (Esick) or Emergency Paid Family Leave (EFMLA) and AdvanStaff has continued to administer the program for you and your employees.  Due to the American Rescue Plan Act, the option to participate will continue past the old March 31, 2021 end date, but there are changes that may be counterproductive for employers who do decide to use the program.

The American Rescue Act Plan of 2021extended and expanded the FFCRA in a number of different ways.

It extended the FFCRA expiration deadline beyond March 31.

FFCRA remains optional for eligible employers (those with fewer than 500 employees), but now those employers may continue the program, if they desire, through September 30, 2021. 

Any employer that voluntarily pays the FFCRA paid leave benefits during this time frame will continue to receive dollar-for-dollar tax credits for the monies paid.

Employers with less than 500 employees should be aware that if they voluntarily opt-in to the FFCRA as of April 1, 2021, the Act’s provisions have been expanded and employees will have broader rights to take sick leave and family leave. 

In order to promote vaccination and testing, the Act added two additional reasons that allow employees to qualify for FFCRA leave, effective April 1, 2021, if their employer opts in:

  1. FFCRA leave is available for employees who are unable to work because they are obtaining a COVID-19 vaccine, or are recovering from any illness, injury or condition related to such vaccine (side effects): and
  2. FFCRA leave is available for employees who are unable to work because they are seeking or waiting for the results of a diagnostic test or awaiting a medical diagnosis. 

The American Rescue Act Plan of 2021 also extended the FFCRA in two other important ways:

  1. The Act increased the number of weeks that an employee can seek paid family leave under the FFCRA from ten (10) weeks to twelve (12) weeks.  Thus, an employee now has 14 weeks of paid leave available, if he or she qualifies: two weeks of sick leave and twelve weeks of family leave. 
  2. The Act also resets employees’ FFCRA sick leave rights to zero on April 1, 2021.  Therefore, if employees took FFCRA sick leave prior to April 1, 2021, that does not count against their future right to leave right.   

Employers will have to decide if they wish to continue providing FFCRA leave.

AdvanStaff will provide an Opt In/ Opt Out option to each employer so you can document your decision through us and have a record of having done so.

If you decide to Opt In to continue to use ESick and EFMLA, just remember that it has been expanded as shown above and could end up encouraging employees to take extensive unwarranted leaves as some may seek to stay home and be paid even if they do not have a qualifying situation.

If you decide one way or the other on your company’s participation, it will be possible to change your mind, but we would not encourage or be able to support multiple changes over the next 6 months.

AdvanStaff will let you know when we have the Opt IN or OUT mechanism ready so please stay tuned!

If you have any immediate questions, feel free to contact our HR Director, Rebecca Woods at beckyw@advanstaff.com

Employee Retention Credit Overview

  • The Employee Retention Credit (ERC), which was just extended by the Consolidated Appropriations Act in January of 2021, is again extended—this time through December 31, 2021. Many of those same provisions remain—20% revenue loss, partial or full shutdown, etc. 
  • The 70% credit on the first $10,000 of qualified wages remains in place.   
  • In a change from previous rules, the ERC in the third and fourth quarters of 2021 can only be applied against Medicare taxes. This would generally mean that employers would take longer to receive the benefit.
  • New businesses that began in 2020 will have special rules to follow but should otherwise qualify for the credit.   

Section 9632 of ARPA provides temporary modifications to the amount an employee can elect for salary deferral—increasing it from $5,000 to $10,500 for 2021 only. 

AdvanStaff HR will notify participating employees that elected for the FSA Dependent care in 2021.

All content provided by AdvanStaff HR is for informational purposes only. All situations are different. Please talk to your trusted advisors for how laws, regulations, and compliance matters specifically apply to you and to your unique situation.

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