This week’s Answers at 8 comprised a question-and-answer session on the new COBRA subsidy as part of the American Rescue Plan Act, which took effect on April 1, 2021 and runs through September 30, 2021.
Key takeaways from the COBRA Q&A include:
- The COBRA Subsidy is mandatory for all employers subject to COBRA.
- An eligible employee can elect to enroll in just the subsidy period, which is April 1st through September 30th, or up until the end of the COBRA period. They do not have to pay retroactively.
- These eligible employees will have a 60-day election window for the subsidy from the date of the notice. The suspended grace periods (under a previous act) will not apply to this election notice.
- UPDATE SINCE SESSION: DOL Model Notices released so employers and/or administrators should be notifying these assistance-eligible individuals (AEIs) by May 31st. If you have any active COBRA participants that have paid for the COBRA premiums before they are notified of the subsidy, you will have 60 days to provide a refund back to them. There is also a DOL FAQ on this topic.
- The subsidy will be provided to employers as a credit against certain FICA payroll taxes, so coordinate with your payroll vendor.
- The subsidy is only available to those who are “involuntarily” terminated or have a reduction in hours (such as reduced hours due to change in a business’s hours of operations, a change from full-time to part-time status, taking of a temporary leave of absence, or an individual’s participation in a lawful labor strike, as long as the individual remains an employee at the time that hours are reduced). Those not returning from FMLA/ADA leaves of absences should be reviewed on a case-by-case basis, as the details for why they are not returning could determine whether or not they qualify.
- Those terminated for “gross misconduct” are excluded from the subsidy. The NC definition of gross misconduct generally refers to actions that were serious or frequent enough to demonstrate intentional or careless disregard for the employer’s interests, such as theft, violence, harassment, or coming to work intoxicated. The final answer depends on the situation, and we recommend contacting Catapult or legal counsel for advice before making the determination not to give the subsidy to an employee.
- The subsidy includes employees and dependents, who under COBRA would be considered qualified beneficiaries. This applies to those who are covered immediately before the reduction of hours or involuntary termination occur. The dependent events (ineligible dependent, divorce, death of employee) are not eligible events for the subsidy.
This past week has seen quite a few compliance updates or extensions as well.
- The EEOC announced the EEO-1 reporting will be available beginning April 26th for the 2019 and 2020 data. The data needs to be submitted by July 19th.
- Those who missed the March 2nd date for OSHA 300 log reporting may still submit through the end of this year, including those required to submit data electronically.
- USCIS extended the in-person I-9 document verification flexibility. As of April 1st, only those who are working in person on a regular and consistent basis have to complete the in-person verification. All employers still hiring and working remotely will remain under the flexible verification process. Click here to learn more.
In legal news, final rules and a new executive order provide unemployment and TIP regulations.
- Executive Order 207 was signed on March 30th, extending the unemployment expediting process for attached claims through June 30, 2021.
- FLSA finalized the TIP rule under FLSA with the following provisions taking effect April 30th. Read more here.
- If the employer does not take a tip credit, it may allow workers such as cooks or dishwashers to share in a mandatory tip pool. (New recordkeeping obligations apply).
- Employers, managers, and supervisors are explicitly prohibited from keeping tips received by employees.
- The Internal Revenue Service issued guidance for employers claiming the Employee Retention Credit under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) modified by the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (Relief Act). Notice 2021-23 explains the changes to the Employee Retention Credit for the first two calendar quarters of 2021, including:
- The increase in the maximum credit amount
- the expansion of the category of employers that may be eligible to claim the credit
- modifications to the gross receipts test
- revisions to the definition of qualified wages
- new restrictions on the ability of eligible employers to request an advance payment of the credit.
- While IRS Notice 2020-54 provided guidance on the W-2 reporting requirement in July 2020. This guidance was not incorporated into Form W-2 instructions for 2020. Since most employers provide W-2s to their employees by January 31st, there may be many who misreported leave payments and must now send corrected W-2s to their employees. This article discusses how to correct this.
We continue to await DOL clarification on several areas for the American Rescue Plan, which began last week. Soule Law firm attorney, Phil Wells, provided legal guidance on the interaction of EFML and traditional FMLA:
- The American Rescue Plan Act does not renew the requirement that employers provide their employees with paid or unpaid leaves of absence related to Covid-19 as originally mandated by FFCRA almost a year ago. ARPA does extend and expand the availability of payroll tax credits if employers voluntarily provide paid leave consistent with FFCRA and now ARPA.
- Employees do not get a new bucket of EFML leave as of April 1st.
- The act creates a new bank of up to 10 days per employee of qualifying paid sick leave (EPSL) that is available for tax credits for 2021, beginning on April 1, 2021. Thus, the amount of the tax credit per employee has increased from $10,000 to $12,000.
- ARPA broadens the COVID-19-related sick leave reasons for which an employee would qualify for paid sick leave. The 3 new reasons for paid leave include (a) getting tested or awaiting test results or medical diagnosis for COVID-19 (provided that the employee was exposed to COVID-19 or the test/diagnosis was requested by the employer); (b) getting the vaccine; or (c) recovering from an illness or medical condition associated with getting the vaccine.
- The expanded “sick leave reasons” (above) are now included as qualifying emergency family medical leave reasons for paid leave under FFCRA.
- Finally, ARPA disqualifies employers from receiving a tax credit if they violate FFCRA, such as the anti-retaliation provisions, or violate the nondiscrimination rules by administering FFCRA paid leave benefits in a discriminatory fashion in favor of highly compensated employees, full-time employees, or employees with greater seniority.
Vaccination planning is top of mind for a lot of employers. Catapult has several tools on our website that are available to members and non-members and we want to take a moment to highlight these for you. Keep in mind that these resources have been vetted for federal and NC compliance. If you are in another state, check state law:
- Voluntary Covid Vaccine Policy – Statement of company’s intent on not mandating vaccinations.
- Mandatory Vaccine Policy (do not use without reading the drawbacks and liability associated as discussed in our Vaccination Planning Tool)
- Voluntary Vaccine Acknowledgement form: Use this form when employees decline to get the COVID vaccine.
- Vaccination Planning Tool: This is a checklist that you can use to help you determine the right strategy for your organization. It asks a series of yes/no questions that will help guide you to the best decision for your organization.
We also have an FFCRA Policy and Form template that includes a certification form with the expanded leave reasons under ARPA, if you are looking for an easy way for employees to document their absences.