The American Rescue Plan (ARP) Act, the latest COVID-19 relief measure put forth by the Biden administration, was signed into law in March 2021. It includes a variety of changes affecting the health insurance industry, business owners and managers, and health care providers.
Below is a summary of nine provisions in the ARP affecting employers, employees, and health care providers.
PROVISIONS AFFECTING EMPLOYERS
Federally Subsidized COBRA Premiums
The ARP provides a temporary 100% subsidy of COBRA premiums for the period of April 1, 2021, through September 30, 2021, for “assistance-eligible individuals (AEIs).” This includes employees involuntarily terminated or who involuntarily experienced a reduction in hours, resulting in a loss of benefit eligibility. The subsidy also extends to covered dependents of employees. Employers are expected to forward COBRA premiums, which will be later reimbursed by the IRS via quarterly payroll tax credits.
Paycheck Protection Program (PPP) Updates
An additional $7.25 billion is allocated in the ARP for the Paycheck Protection Program (PPP), created in 2020 to help small businesses deal with the economic fallout of COVID-19. One day before the PPP application deadline of March 31, 2021, President Biden extended the timeline for applying to May 31, with loan funding by the Small Business Administration (SBA) extended through June 30, 2021.
Under the PPP, qualifying small businesses can apply for a First Draw or Second Draw loan, with full loan forgiveness available if 60% of loan proceeds go toward payroll and other eligible expenses. In addition, under the ARP, eligibility for a PPP loan is extended to include non-profit entities, Internet-only news publishing organizations, and veterans’ organizations, subject to specified staffing and other limits.
Available Temporary Dependent Care FSA Maximum Contribution Increase
A temporary increase in the contribution maximum for a dependent care Flexible Spending Account (DCAP FSA) is also included in the ARP. The ceiling can now be $10,500 (up from $5,000) or $5,250 (up from $2,500) for married taxpayers filing separately for the 2021 tax year. This is a non-mandatory change, which allows employers to determine if they will permit the higher limits. Employers with DCAP plans that renewed 1/1/21, 2/1/21, or 3/1/21 that elect to allow the higher ceiling will want to hold a special enrollment in 2021 to give employees the opportunity to change their previous election for the year if Open Enrollment for the DCAP has already taken place. Other options include expanded carryover options or an extended 12-month grace period.
EIDL Advance
The Emergency Injury Disaster Loan (EIDL) program established as part of prior COVID relief assistance through the SBA gets a boost in the ARP. Businesses in low-income communities that previously did not receive an EIDL could now be eligible for a grant of up to $10,000, if the business has 300 or fewer employees and experienced a greater than 30% reduction in revenue. An additional $5,000 payment is available to a new tier of hard-hit smaller businesses – those with fewer than 10 employees with a reduction in revenue of greater than 50%.
Restaurant Revitalization Grants
ARP includes $28.6 billion for qualifying restaurants or food and drink service locations impacted by COVID-19 between February 15, 2020, and December 31, 2021. This includes $5 billion for eligible entities with gross receipts of less than $500,000 during 2019, and $23 billion for eligible entities of different sizes based on annual gross receipts. The SBA may adjust distribution of funds as necessary based on demand and the costs in the markets in which eligible entities operate.
Eligible businesses include the following:
- * restaurants
- * food stands
- * food trucks
- * food carts
- * saloons
- * inns
- * taverns
- * bars
- * lounges
- * brewpubs
- * tasting rooms
- * taprooms
- * caterers
Tax Reporting for Gig Workers
Beginning in the 2022 tax year, more reporting is required by gig economy businesses (like Uber, Lyft, Thumbtack, and others) concerning their workers earning $600 or more annually. The threshold for using Form 1099-K is $20,000 currently. The change is expected to result in better income tax reporting and collection of tax payments from workers in this segment of the economy.
FFCRA Leave Extension and Expansion
As part of the Families First Coronavirus Response Act (FFCRA), beginning in January 2021, private sector employers with fewer than 500 employees were no longer required to provide emergency paid sick leave or family and medical leave – although they do have the option to provide leave and apply for refundable tax credits to offset related costs. (Employers can claim tax credits through September 30, 2021.)
If employees took 10 days of emergency paid sick leave under the FFCRA, the ARP allows an employer to provide those employees with an additional 10 days of leave, starting April 1, 2021. Employers can also claim a credit if they provide paid time off for employees to obtain the COVID-19 vaccination.
[Under California Senate Bill (S.B.) 95, the California Labor Code requires employers with more than 25 employers to provide up to 80 hours of COVID-19 supplemental paid sick leave to employees who are unable to work or telework due to related reasons. For additional information on SB 95, please refer to the National Law Review article, California Expands and Resets COVID-19 Paid Sick Leave, published on March 29, 2021.]
PROVISIONS AFFECTING EMPLOYEES (OR FORMER EMPLOYEES)
Federally Subsidized COBRA Premiums
As mentioned above, the ARP requires employers to forward 100% of COBRA premiums of assistance-eligible individuals (AEIs) between April 1, 2021, and September 30, 2021, which will later be reimbursed by IRS. Individuals qualify if they are entitled to COBRA at any time during the specified period – if they elect coverage, fail to elect coverage, or timely elect COBRA but drop it prior to April 1, 2021. For individuals who are eligible but failed to elect coverage (or let coverage lapse), the ARP mandates employers provide a new 60-day notice of the premium subsidy and the opportunity to enroll. The subsidy could end earlier than September 30, 2021, if the individual reaches the end of their 18-month maximum coverage period or becomes eligible for other group health coverage or Medicare. (Word & Brown published another ARP column last month by Director of Education and Market Development Paul Roberts; you can link to it in our Newsroom here.)
Marketplace Subsidy Eligibility
For 2021 and 2022, the ARP increases the availability of premium tax credits (PTCs) for individual and family coverage purchased through health insurance exchange marketplaces (such as Covered California and Nevada Health Link).
Federal PTCs are available to individuals earning between 100% and 400% of the Federal Poverty Level (FPL), based on a sliding scale. Those earning between 100% and 150% of FPL can get full coverage of their premiums paid for by PTCs. Those with incomes above 400% of FPL are eligible for assistance when their individual premium exceeds 8.5% of their overall household income. Individuals receiving unemployment benefits are also eligible for a $0 premium for coverage through a marketplace exchange.
FFCRA Leave Extension and Expansion
As mentioned previously, as part of the FFCRA, private sector employers with fewer than 500 employees are no longer required to provide emergency paid sick leave or family and medical leave for employees; however, they do have the option to provide such leave. If employees took 10 days of emergency paid sick leave under the FFCRA in 2020, the ARP allows an employer to provide those employees with an additional 10 days of leave, starting April 1, 2021.
PROVISIONS AFFECTING HEALTH CARE PROVIDERS
COVID-19 Vaccine Distribution
Like other measures passed by Congress in the past year (such as the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and Families First Coronavirus Response Act (FFCRA), the ARP includes funding for vaccine testing, contact tracing, promotion, distribution, administration, and monitoring by the Centers for Disease Control and Prevention. It also supports workforce initiatives by state, local, and territorial public health departments to hire staff and secure equipment, technology, and other supplies. In total, more than $70 billion is allocated to public health funding projects, including $3 billion for block grants to address mental health and substance use disorders as well as behavioral health services.
ADDITIONAL RESOURCES
For additional information on the ARP, read the American Hospital Association’s article, Summary of America Rescue Plan Act of 2021 and Provisions Affecting Hospitals and Health Systems, the National Law Review article, American Rescue Plan At of 2021: Key Healthcare Provisions, or Congress Passes ARPA With Many COVID-19 Payroll-Related Provisions, published by Thomson Reuters.
NOTE: This article is not intended to provide legal, tax, or any other professional guidance. The information is based on research using the best resources available at the time this overview was developed. While we believe the information is accurate, there is no guarantee as to accuracy, timeliness, or relevance of this information. Our goal is, of course, to support Word & Brown brokers and your clients by providing accurate information, although we acknowledge that information is always subject to change.