The American Rescue Plan (ARP) was signed by President Biden on March 10, 2021 to provide $1.9 trillion of additional economic stimulus to individuals and businesses in response to the COVID-19 pandemic. Within the ARP, new guidance was released related to COVID-19 human resource policies, including paid sick and family leave and the Dependent Care Assistance Program (DCAP).
Paid Sick and Family Leave
Originally, the Families First Coronavirus Response Act (FFCRA), set in place last year, provided businesses with paid sick and family leave payroll tax credits. As an update to these provisions, the Consolidated Appropriations Act, 2021 (CAA), signed into effect in December 2020, allowed companies the option to decide whether or not they would provide paid sick and family care leave, and extended the payroll tax credit deadline to March 31, 2021.
With the recent passage of the ARP, paid sick leave and Family and Medical Leave Act (FMLA) tax credits are still optional and only apply to employers with 500 or less employees. The ARP modified the limits to the credit by allowing employers to extend another 10 days of paid sick leave and another 10 weeks of FMLA to employees. This option will be effective April 1, 2021 – September 30, 2021.
Dependent Care Assistance Program (DCAP)
The ARP allows employers to temporarily increase the amount that employees can contribute to a DCAP for 2021. If employers choose this option, the increase will allow employees to contribute up to $10,500 for the year, which was previously capped at $5,000. For married filing jointly taxpayers, the increased range is $2,500 to $5,250. If employers choose to increase the limit, they must amend their DCAP plans by the end of the 2021 plan year.
When reviewing and implementing this new guidance, it’s important that businesses are also aware of the ARP’s non-discrimination rules, which are set in place to ensure that companies that choose to offer paid leave benefits are offering the benefits to all of their employees in the same way. In order to take advantage of the tax credits, when establishing policies for paid leave, employers must not discriminate by compensation level, status or length of employment.
If your company needs guidance on updating leave policies or assistance programs, our HR experts are here to help. Contact your Warren Averett advisor, or have a member of our team reach out to you.