The American Rescue Plan Act (ARPA) of 2021 was passed by Congress on March 10 of this year. It was passed as a means of providing continued relief related to the novel coronavirus pandemic. It affects the economy, public health, state and local governments, individuals, and businesses.
Some of the areas of impact include:
As payroll managers, there are some important implications to be aware of.
There are 7 key areas of impact for payroll management. In this post, we will offer an overview of the changes. If you have specific questions, please don’t hesitate to get in touch with the payroll experts here at Complete Payroll.
Here is what you need to know about paid sick and family leave credits:
ARPA extends the previously established FFCRA paid sick time and family leave credits until September 30, 2021. It establishes that paid sick and family leave credits are both able to be increased by the employer’s share of Social Security taxes (6.2%). However, it can only be applied to the employer’s share of the Medicare tax (1.45%), not the employee’s.
Some of the other changes include:
The original ERC provided a 50% tax credit of up to $10,000 in wages paid by eligible employers whose businesses have been financially impacted by the pandemic.
ARPA extends the ERC from June 30, 2021, until the end of the year (December 31, 2021). It allows the tax credit to continue at a rate of 70% during this time. The $10,000 in qualified wages remains the same. With both the CAA and ARPA extensions, an employer could potentially claim up to $40,000 in qualified wages per employee through 2021.
ARPA also does the following:
ARPA extends continued unemployment provisions through September 6, 2021. (Note that many other aspects of the bill extend to the end of the calendar year, but unemployment provisions do not.)
Unemployment provisions include:
The FPUC unemployment payment of $300 per week has been extended through September 6, 2021. Importantly, ARPA does not extend the 50% credit for reimbursing employees.
ARPA allocates an additional $7.25 billion towards PPP funding. This is important, though: the application period has not been extended. It ends on March 31, 2021.
The legislation also adds “additional covered nonprofit entity” as an eligible nonprofit for First Draw and Second Draw PPP loans. You can learn about these definitions in the following sections: Code Sec. 501(c) other than those Code Sec. 501(c)(3), Code Sec. 501(c)(4), Code Sec. 501(c)(6), or Code Sec. 501(c)(19).
The legislation also:
There are few more relief-related provisions to be aware of.
Restaurant revitalization grants pull from $28,600,000,000 that has been appropriated for fiscal year 2021 to help struggling restaurants. These grants are administered by the SBA, and the funds will be available until they have been exhausted.
Restaurants are not eligible for these grants if they operate at more than 20 locations, regardless of whether or not the restaurants use different names. If your company already received or has a pending application for the Economic Aid to Hard-Hit Small Businesses, Non-Profits, and Venues Act, you are not eligible.
Grants may be used for:
In addition to restaurants, there are a few specific industries that are supported by the legislation. Shuttered venue operators, such as theaters and talent representatives, who can demonstrate a 25% reduction in revenues can pull from ARPA’s appropriated $1,250,000,000 in grants.
Airports and manufacturing employers can also apply for these grants.
There have been some major changes to the Earned Income Credit (EIC) for tax years beginning after December 31, 2020 and before January 1, 2022.
Taxpayers without qualifying children can expect:
A final area of ARPA’s governance is in pension and benefits-related pensions.
Dependent Care Assistance has been increased from $5,000 to $10,500 for married couples filing jointly. Filing separately? The cap is $5,250. Assistance Eligible Individuals (AEIs) may also receive an 85% subsidy for COBRA premiums.
Employers may apply a quarterly tax credit against the Medicare payroll tax equal to the premium amounts not paid by AEIs. If the credit amount exceeds the quarterly Medicare payroll tax, the excess will be treated as an overpayment refundable under Code Sec. 6402(a) and Code Sec. 6413(b).
Questions? Let’s talk! We know that it can be overwhelming to adapt to the constant changes that we’re all facing because of the pandemic, including this most recent legislative response to it. If you have questions, we have answers. We look forward to helping you make informed decisions about your HR and payroll processes.