The Modern Workplace

1. Additional Extension of FFCRA Tax Credits

As you likely recall, The Families First Coronavirus Response Act (FFCRA) provided workers with COVID-19 related sick leave benefits (and employers with a corresponding tax credit), which expired on December 31, 2020. Although employers are no longer obligated to offer such leave, a prior stimulus package extended the tax credits for employers that voluntarily continued to offer the paid leave through March 31, 2021. The American Rescue Plan Act now extends those tax credits yet again, this time through September 30, 2021. Meaning, while providing employees with COVID-19 related sick leave is still not mandatory for employers, the dollar-for-dollar payroll tax credit incentive to do so voluntarily has been extended until the Fall. New with this stimulus package is the expansion of leave for which tax credits are permitted, to include for example, time off to obtain a COVID vaccine.

The relief package extends the federal enhancement of $300/week in unemployment benefits through Labor Day (September 6, 2021). As with a prior stimulus package, self-employed and “gig economy” workers will continue to be covered. And, added late in Congressional negotiations is a tax break provision likely to be of great interest to employees earning less than $150,000 per year. For those individuals, the first $10,200 received in unemployment benefits in 2020 will be free of federal income tax in 2021.

As we all know, terminated employees often forego electing COBRA coverage because it is cost prohibitive. That’s likely about to change. The relief package contains a provision which is new to the panoply of assistance measures our government has offered over the last year, and we expect it will be highly utilized by terminated employees (yet likely difficult to manage administratively for employers). In essence, a government subsidy will cover 100% of the premiums for any laid off employees who are eligible for continuing health coverage under COBRA for a six-month period beginning April 1, 2021 and ending September 30, 2021. The subsidy is not available for employees who voluntarily end employment. As a practical matter, employers will receive the subsidy and then “pass it along” to COBRA enrollees through a payroll tax credit against the employers’ quarterly taxes. Stay tuned for more details we expect to be forthcoming from the government on how exactly to implement the subsidy.