CLIENT ALERT
Abbygale Martinen | March 15, 2021
On March 11, 2021, President Biden signed the American Rescue Plan Act (“ARPA”) of 2021 into law—the third relief package since the beginning of the COVID-19 pandemic just over one year ago. This $1.9 trillion stimulus aims to provide needed support to individuals and small businesses, to expedite the country’s recovery from the pandemic, and to assist in administering the national vaccine program. The following is a brief overview of several key elements included in ARPA.
Direct Payments to Citizens
Single Americans will receive a direct payment in the amount of $1,400, couples will receive $2,800, and families will receive $1,400 for each child or dependent. This means that a family of four with gross income of $150,000 or less could receive up to $5,600. These payments are subject to phase outs for individuals with adjusted gross incomes in excess of $75,000 and married couples with adjusted gross incomes in excess of $150,000. The payments are phased out completely for those individuals with adjusted gross incomes greater than $80,000 and married couples with adjusted gross incomes greater than $160,000.
Income limits and payment amounts for most people are based on your 2019 incomes and tax returns. If you filed a 2019 tax return, are a social security recipient, or you uploaded your direct deposit information to the IRS for the previous stimulus payments, you will receive the new stimulus payment automatically. If you have already filed your 2020 tax return, eligibility for this round of stimulus payments will be based on your 2020 income.
Employee Benefits
COBRA – From April 1, 2021 through September 30, 2021, individuals who have lost their group health benefits previously provided by their employer because they have been laid off, furloughed, or have reduced hours can continue their group health benefits without having to pay COBRA premiums. The employer, plan, or insurer, who must absorb the cost of COBRA premiums during this period, can claim a tax credit for those costs against its quarterly Medicare payroll tax liability.
Federal Contractors – ARPA extends reimbursements for federal contractors who provide paid leave to employees and subcontractors unable to work or telework due to the pandemic, originally provided in the CARES Act, through September 30, 2021.
Employee Safety – ARPA provides $200 million to a number of federal offices, including the Department of Labor’s Wage and Hour Division and the Occupational Safety and Health Administration (“OSHA”), for the purpose of preventing, preparing for, and responding to COVID-19 in the workplace.
Pension Plan Funding – ARPA provides funding and relief to both single and multi-employer pensions plans. For employers who sponsor single employer defined benefit plans, ARPA provides several ways to stabilize funding, including implementing 15-year amortization periods (up from 7), fresh start rules, and an increase in interest rates used for minimum funding determinations. For multi-employer pension plans, ARPA provides for special assistance for certain troubled plans from the Pension Benefit Guaranty Corporation (“PBGC”), delayed funding status recognition and extended recovery periods, permission to amortize the impact of investment losses for the first two plan years ending after February 29, 2020 over a 30-year period (up from 15), and an increase in PBGC premiums starting in 2031.
Tax Provisions for Individuals
Dependent Care – ARPA increases the maximum contribution limit for Dependent Care Flexible Spending Accounts from $5,000 to $10,500 for single taxpayers and from $2,500 to $5,250 for a married individual filing separately for 2021.
Child Tax Credit – ARPA increases the child tax credit to $3,600 per child for children under 6 years old and $3,000 per child for children ages 6-17. For 2021, the child tax credit is fully refundable and is expected to be paid in monthly installments from July through December 2021.
Earned Income Tax Credit – ARPA increased the earned income tax credit for 17 million workers, including cashiers, food preparers and servers, home health aides, and other frontline workers, by as much as $1,000. ARPA reduces the applicable minimum age for earned income tax credits to 19 years old, with some exceptions, and has eliminated the maximum age.
Premium Tax Credits – Under ARPA, taxpayers who obtain health insurance on the marketplace may be eligible for an increase in tax credits for 2021 and 2022 and will not have to pay more than 8.5% of their household income towards their health insurance premiums.
Student Loan Forgiveness – ARPA provides that any student loans forgiven between December 31, 2020, and January 1, 2026, are tax free and no longer treated as taxable income for that time period.
Tax Provisions for Business and Employers
Paid Leave Tax Credits – The Families First Coronavirus Response Act (“FFCRA”) paid sick leave and expanded Family and Medical Leave Act (“FMLA”) leave payroll tax credits are extended through September 30, 2021. Employers who voluntarily provide FFCRA leave or expanded FMLA leave remain eligible to take the tax credit for any such leave. While paid leave is no longer mandatory (as of December 31, 2020), ARPA expanded the eligibility criteria for FFCRA and expanded FMLA leave to individuals obtaining a COVID-19 vaccine, recovering from an injury or illness related to a COVID-19 vaccine, or seeking and/or awaiting the results of a COVID-19 test because the individual was exposed to COVID-19 or the employer requested the test.
Employee Retention Tax Credit – ARPA extends the employee retention tax credit, originally enacted as part of the CARES Act, through December 31, 2021. The employee retention tax credit allows eligible employers to claim a tax credit for qualified wages paid to employees.
Rental and Housing Assistance
ARPA provides almost $50 billion in housing assistance to renters, homeowners, and people experiencing houselessness. ARPA includes appropriations for emergency rental assistance, including $100 million for people living in USDA-subsidized rural properties, for emergency housing vouchers for the houseless, creating socially distanced housing, housing counseling, fair housing organizations, the Low-Income Home Energy Assistance Program, low-income water assistance, and direct financial assistance to struggling homeowners.
ARPA did not extend the national eviction moratorium, currently ordered by the Centers for Disease Control and Prevention, which is set to expire on March 31, 2021.
Industry-Specific Relief
Restaurant Industry – ARPA provides close to $30 billion to establish the Restaurant Revitalization Fund. Under this program, restaurants and other food and drinking establishments with no more than 20 locations and which are not publicly-traded entities, may apply for funds to be used for payroll costs, rent or mortgage payments, utilities, maintenance, food and beverage expenses, and paid sick leave, among others. The maximum grant available is $10 million per entity and $5 million per physical location.
State and Local Governments – ARPA provides $350 billion in aid for state and local governments, tribal governments, and U.S. Territories to supplement tax revenue lost due to the Pandemic. State and local governments have until December 31, 2024, to use these funds. In addition, ARPA provides over $128 billion in grants to state educational agencies, 90% of which is allocated directly to local educational agencies, in order to support the safe reopening of schools.
Transportation Industry – ARPA provides almost $30 billion in aid for transit agencies, airlines, airports, state departments of transportation, the motorcoach industry, and Amtrak.
Small Business Loans
ARPA infused another $7.25 billion into the Paycheck Protection Program (“PPP”) and allocated $15 billion to the Economic Injury Disaster Loan (“EIDL”) Program. Importantly, the current PPP application deadline of March 31, 2021 was not extended by ARPA. ARPA does, however, expand PPP eligibility to additional non-profits including labor organizations, social or recreational clubs, and fraternal benefit societies, and internet-only news publishers with multiple physical locations, but less than 500 employees. ARPA additionally provides that EIDL grants do not need to be included in gross income.
Unemployment Benefits
ARPA extends unemployment benefits that were first provided in the CARES Act through September 6, 2021. First, anyone receiving unemployment benefits, whether through State Unemployment or Federal Unemployment, will receive an extra $300 per week on top of their weekly benefit amount through the Federal Pandemic Unemployment Compensation program.
Second, Pandemic Unemployment Assistance (“PUA”), federal unemployment for claimants who would normally not be eligible for state unemployment, and Pandemic Emergency Unemployment Compensation (“PEUC”), which provided an extension of benefits, both of which were set to expire on March 14, 2021, are extended through September 6, 2021. Additionally, the maximum number of weeks a claimant is eligible for PUA has increased from 50 to 79 weeks and from 24 to 53 weeks for PEUC.
On top of extending unemployment benefits, ARPA exempts the first $10,200 of unemployment benefits from federal income taxes, so long as the claimant’s household adjusted gross income is less than $150,000.
Hospitals and Health Systems
ARPA provides significant funding to support vaccination administration and distribution efforts, the manufacturing and procurement of personal protective equipment (PPE) and other medical supplies, contact tracing surveillance, and the development and implementation of a national COVID-19 testing strategy. ARPA also provides relief for community health centers, rural healthcare providers and skilled nursing facilities as well as funding for state and local governments to address mental health and substance use disorders. In addition, ARPA provides billions in funds to help grow the health care workforce including tuition assistance and repayment programs.
Additional Alerts
The above list is not exhaustive. Please check our COVID-19 Resource Page regularly for more detailed information on the CARES Act, the Consolidated Appropriations Act of 2021, the American Rescue Plan Act of 2021, and other legislative and regulatory developments.