American Rescue Plan Act Offers New Benefits Relief for Individuals and Businesses

On Thursday, March 12, 2021, President Biden signed the American Rescue Plan Act (ARPA). A $1.9 trillion stimulus package, the ARPA contained a multitude of provisions for individuals and businesses. For employers specifically, the new package includes extensions and enhancements relevant to employers and benefit plan sponsors.

While offering FFCRA leave remains optional for employers, the recently signed American Rescue Plan Act makes some substantial changes to the program. ARPA incentivizes employers to continue offering FFCRA leaves by extending the payroll tax credits for another 6 months, March 31 through September 30, 2021. Should an employer opt to continue offering FFCRA leaves, they must do so in a consistent manner and universally. ARPA included a non-discrimination mandate to prevent employers from claiming the tax credit if they discriminate in favor of highly compensated employees, full-time employees, or employees based on tenure.

Key FFCRA Provisions in ARPA:

• Beginning April 1, the EPSL bank will be refreshed to 80 hours. There is no new allotment for paid family leave.
• Three new qualifying reasons for FFCRA EPSL that would be paid out at the employee’s regular rate of pay at a cap of $511 per day:
  • Obtaining a COVID-19 vaccination.
  • Recovering from an injury, disability, illness or condition related to a COVID-19 vaccination.
  • Seeking or waiting the result of a COVID-19 test or diagnosis because of potential exposure or at their employer’s request.
• Employees can now take EFMLA for any and all of the qualifying reasons under EPSL at 2/3 regular rate of pay to a cap of $200 per day.
• The first two weeks of EFMLA are no longer unpaid. The total cap for PFML credits has been raised from $10,000 to $12,000 accordingly.

For more information, view the relevant text of the bill here.

A dependent care assistance plan (DCAP) is a benefit plan that helps pay for qualifying family services. In previous stimulus packages, it was unclear if or how DCAP reimbursements counted toward taxable income. The ARPA, however, clarifies that the DCAP exclusion is now $10,500 (or $5,250 for married individuals) for the calendar year 2021. Individuals looking to take advantage of this provision must increase their DCAP election before the end of the 2021 plan year.

Created within the Affordable Care Act (ACA), premium tax credits (PTC) allow families and individuals to purchase health insurance with refundable tax credits. PTCs are ideal for low-income or poverty-level families because it creates a reduced premium. The ARPA created a special enrollment period through May 15, 2021. Individuals without health insurance can enroll in coverage from the Health Insurance Marketplace and potentially receive advance PTC payments.

Additionally, the ARPA lifted the income limit disqualifying individuals with an income of more than 400% of the federal poverty level. Individuals receiving unemployment compensation during 2021 are subject to special PTC rules.

For individuals experiencing involuntary termination or reduced work hours, the ARPA provides a 100% subsidy for COBRA premiums from April 1 through September 30, 2021. This includes all group health plans except flexible spending accounts (FSA). Employers and insurance companies are responsible for complying with the COBRA subsidy, and employee benefits professionals should carefully note federal COBRA compliance.

Employers must offer a 60-day COBRA election window to eligible employees, and all coverage will be effective April 1, 2021. Participants are not required to elect retroactive coverage or provide a date of their qualifying event. Employers will be entitled to an advanceable, refundable tax credit against Medicare payroll taxes to pay for coverage during the subsidy period. The Department of Labor (DOL) will provide forms and instructions for employers to apply for the credit.

COBRA coverage will extend through September 30, 2021, or until the participant is eligible for other coverage, including Medicare. Any beneficiary that fails to notify the plan that they are no longer eligible can be penalized up to $250.

Current COBRA participants may select new plans within 90 days of notification of enrollment as long as

• the cost does not exceed the original cost associated with enrollment
• the coverage is offered to similarly situated employees, and
• the new coverage does not consist solely of excepted benefits.

Employers must provide a notice describing the available COBRA assistance to individuals who become eligible between April 1 and September 30, 2021. This notice could include amending existing communications or adding a separate attachment. All necessary forms, contact information, and descriptions must be included within the notice and establish beneficiary obligations.

Similarly, when the subsidy is set to expire, employers must provide an expiration notice to participants. It must disclose the expiration date no less than 15 days prior, along with any other coverage options the individual may be eligible to receive. The DOL issues model notices available to aid compliance.

While we expect the DOL to provide ongoing assistance and guidance around the COBRA subsidy, employers and plan sponsors should prepare to identify and notify eligible individuals.

As always, your Aldrich Benefits Advisor is here to support you and your business. We understand these changes are complex, and can help you understand the evolving legislative landscape and related impacts. For further information, please contact your advisor. We are monitoring the guidance and updates for the ARPA and FFCRA closely, and will continue to provide updates. For additional details, view the full resource document.