Extension of FFCRA Tax Credits but No Leave Mandate
The Appropriations Bill (Bill), signed into law by President Donald Trump on December 27, 2020, does not extend the emergency paid sick leave (EPSL) and expanded family and medical leave (EFMLA) mandates created by the Families First Coronavirus Response Act (FFCRA). These leave requirements expired on December 31, 2020.
However, the Bill does extend the time limit for employer tax credits, if an employer voluntarily continues to offer FFCRA leave. As a result, tax credits will be available to fund FFCRA leave offered by employers through March 31, 2021.
The FFCRA’s leave mandates require businesses with fewer than 500 employees to provide employees up to 80 hours of paid sick leave for their own health needs or to care for others for certain COVID-19 related reasons. The act also requires an additional 10 weeks of paid family leave to care for a child whose school or place of care was closed, or childcare provider was closed or unavailable due to COVID-19.
The FFCRA employer tax credits cover certain costs of the employee leave required by the law; specifically, employee wages, health plan expenses allocable to those wages, and the employer’s portion of the Medicare tax related to the wages.
It is important to note that employees who have exhausted their EPSL or EFMLA leave benefits in 2020 will not be entitled to a new bank of leave under FFCRA in 2021. However, for purposes of EFMLA, if the FMLA 12-month period resets under your company’s policy, an employee would be entitled to paid EFMLA once again.
Employers should also keep in mind that in addition to leave under the FFCRA, many state and local governments enacted similar paid COVID-leave laws and ordinances earlier last year to assist employees dealing with COVID-19 or caring for family members affected by the pandemic. For New York employers, the state’s COVID-19 Paid Sick Leave does not have an expiration date and presumably continues into 2021. However, except for healthcare workers, employees are only entitled to one instance of NY COVID-19 Paid Sick Leave.
Expanded Unemployment Insurance Benefits
The Bill also extends the 13 weeks of federal unemployment benefits provided under the CARES Act for an additional 11 weeks; workers receiving unemployment benefits will receive an additional $300 per week through March 14, 2021. In addition, the Bill extends the Pandemic Emergency Unemployment Compensation (PEUC), and the Pandemic Unemployment Assistance (PUA) programs and provides an additional $100 per week for certain individuals earning both wage and self-employment income whose unemployment insurance benefit calculation does not consider self-employment when calculating the benefit amounts.
Stimulus Bill Provides Temporary Special Rules for FSAs
Lastly, the Bill provides temporary special rules for health and dependent care flexible spending accounts (FSAs) that give employees additional time to use these funds.
Because of the COVID-19 pandemic, employees may be more likely to have unused amounts in health or dependent care FSAs. For plan years ending in 2020 and 2021, the Bill allows employers to:
- Permit employees to carry over unused amounts remaining in these FSAs to the next plan year.
- Extend the grace period to 12 months after the end of such plan year.
- Permit employees who cease plan participation during 2020 or 2021 to continue to receive reimbursements from unused amounts through the end of the plan year in which their participation ended.
The Bill also allows employees to elect to prospectively modify the amount of their FSA contributions for plan years ending in 2021, even if they have not experienced a change in status. However, the applicable dollar limitations will continue to apply. These changes are optional and, if permitted, require amendments to plan documents. Employers can retroactively adopt plan amendments incorporating these provisions if specific requirements are met.