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Stimulus Bill Impact on FFCRA Paid Leave and Tax Credits
On December 27, 2020, President Trump signed into law a new coronavirus stimulus bill that includes provisions which modify and extend certain parts of the Families First Coronavirus Response Act (FFCRA). The FFCRA was set to expire on December 31, 2020. The new stimulus bill does not require employers to continue FFCRA paid leave benefits. However, the new stimulus bill amends the FFCRA to continue certain tax benefits for employers who voluntarily elect to offer those benefits through March 31, 2021.
As we previously summarized here, the original FFCRA required private sector employers with less than 500 employees and public sector employers with at least one employee to provide to eligible employees up to 80 hours of Emergency Paid Sick Leave (EPSL) for COVID-related reasons, and up to twelve weeks of Expanded Family and Medical Leave Act (EFMLA) with up to 10 weeks of that EFMLA leave being paid at 2/3 pay if a school or childcare facility is closed or the childcare provider is unavailable due to COVID.
We have previously explained that private sector employers were generally afforded a tax credit equal to the value of the required paid leave provided through December 31, 2020. The IRS has issued a series of FAQs regarding the FFCRA tax credits and provided a mechanism to allow eligible employers to access the credits by reducing payroll tax deposits. These paid leave credits were not available to governmental employers. In prior guidance, we explained that although governmental employers did not qualify for the tax credits, any paid leave required under the FFCRA was excluded from the definition of “wages” for purposes of an employer’s, including a governmental employer’s, Social Security tax obligations. This means governmental employers were not required to pay the 6.2% share of Social Security taxes on paid leave required under the FFCRA.
The new stimulus bill does not automatically require employers to extend the EPSL or EFMLA benefits, but employers may voluntarily continue those paid leave benefits. For private sector employers who voluntarily continue the EPSL or EFMLA benefits, the stimulus bill extends the availability of tax credits to March 31, 2021 to the extent an employee has not already taken advantage of them since April 1, 2020. For public sector employers, the language of the stimulus bill leaves open the possibility the Social Security tax exemption will no longer be available to governmental employers. We hope this language was simply unclear and the issue will be further clarified by the IRS. In the absence of such a clarification, governmental employers may want to assume they will no longer be eligible for the Social Security tax exemption. Whether these tax credits or possible exclusions are incentive enough to cause a particular employer to continue extending the leave benefits will depend on the employer’s financial situation and the specific needs of the workplace.
Both public and private sector employers who intend to take advantage of the tax credits or possible Social Security tax exclusions should ensure they are providing leave to employees who are qualified under the original criteria of the FFCRA. Tax credits or possible exclusions will only be available if the leave would have been available under the original terms of the FFCRA. Additionally, the dates of the available tax credits were extended, but no additional mandatory paid leave time was provided. Therefore, any employee who has already used their 80 hour equivalent EPSL paid sick leave or their total EFMLA will not be eligible for additional paid leave after December 31, 2020 under the FFCRA, and an employer who voluntarily grants an employee additional leave time will not be eligible for the tax credits or exclusions.
While there are limitations on the amount of leave for which tax credits or possible exclusions are available to employers based on the newly signed stimulus bill, employers are not required to provide additional leave after the expiration of the FFCRA on December 31st but may voluntarily provide additional paid or unpaid leave to their employees to assist with COVID-related absences. As employers consider what leave policies to adopt after December 31, 2020, the considerations will be different based on operational needs, financial concerns, and employee morale. Employers will want to review and revise their current policies to account for any discontinuation of leave benefits and inform employees of leave benefits available starting January 1, 2021.
If you have questions about the significance of these new provisions, please contact Lauren Burand at 252-364-0258 or firstname.lastname@example.org, Matt Flanary at 262-264-0253 or email@example.com, Claire Hartley at 262-364-0260 or firstname.lastname@example.org, or your Buelow Vetter attorney.