How to address ARPA benefits as an employer

The American Rescue Plan Act (ARPA) was signed into law on March 11, 2021, by President Joe Biden and was created to offer economic relief during the global coronavirus pandemic. ARPA is made up of a number of provisions that directly impact employers, but 2022 will see those provisions be far less flexible than in 2020 and 2021. Let's take a look at the most important components that should be taken note of and what has changed.

The value of ARPA Benefits and paid leave

ARPA was created to offer relief to individuals and businesses in their time of need. The coronavirus pandemic has negatively impacted many companies by forcing business owners to let staff members go or even shut their doors for good, increasing the unemployment rate. One of the major benefits to business owners and other employers is the associated tax benefits. Here is a brief overview of some of the tax credits. If your employee has done any of the following you may qualify:

• Take leave because they are obtaining a COVID-19 vaccination.
• Recovering from any illness related to receiving the vaccine.
• Waiting for results.
• The employee is caring for someone who is recovering from any injury, disability, illness, or condition related to the immunization.

These are some of the reasons that your employee may take leave. If this case arises, employers have the option to offer their staff members another 10 days and up to 80 hours of paid sick leave. In addition, the employer can receive a premium tax credit for choosing to offer those paid sick days. 

Employers can also voluntarily offer Emergency Family and Medical Leave Act (EFMLA) leave for qualifying reasons. Under ARPA, the first two weeks of EFMLA is 66% cheaper than the regular rate. The max tax credit for this option is $10,000 to $12,000 per employee. It is important to note that these tax credits are only available to employers who do not discriminate based on employment status or length of employment. 

ARPA benefits and COBRA

Consolidated Omnibus Budget Reconciliation Act (COBRA) coverage is also impacted, due to many employees losing their health care insurance. Now, if you are forced to reduce an employee's hours, they can keep their COBRA health care coverage if they pay the entirety of their premiums. There is a chance your employee can also see if the government will cover any of your monthly health insurance premiums. Last year, APRA offered a COBRA subsidy that ended on September 30, 2021. If your employee is interested in keeping their COBRA continuation coverage, they may qualify to do so.

Dependent care FSA limit increase

APRA had previously adjusted its limit change to FSAs in 2022. Dependent care reimbursement accounts Congress increased the amount to $10,500 under ARPA, which is no longer the case. Employers established their employee assistance through their cafeteria plan or dependent care program and had to amend their documents by the end of 2021. Currently, the maximum amount you can put into your Dependent Care FSA for 2022 is back to $5,000.

2021 Multiemployer pension plans

In 2021, ARPA provided a large amount of relief, in the form of multiemployer pension plans. According to its website, “The Pension Benefit Guaranty Corporation (PBGC) created a Special Financial Assistance (SFA) Program. This program addresses the immediate financial crisis threatening the retirement security of over three million American workers, retirees, and their families.” The following is a short list of the relief offered:

• PBGC premiums: In 2021, per participant rate for flat-rate premium was $32 for a multiemployer plan.
• Funding programs: Some examples include the restaurant revitalization APRA fund and the targeted economic injury disaster loan (EIDL) advance.

Funding assistance for your small business

As previously mentioned, many small businesses fell under extreme stress during the pandemic. The Treasury Department, through ARPA, provides important assistance to American small businesses, “facilitating the urgent deployment of capital and support to help these organizations not just persevere, but recover on solid footing.” Here are some of their efforts:

Tax credit programs

The previously mentioned employee retention credit (ERC) is a great example of this. It was available all four quarters of 2021. The amount of the maximum tax credit was increased to “$7,000 per employee per quarter, and the level of qualifying business disruption has been reduced so that a 20% decline in gross receipts during a single quarter will make a business eligible, for a maximum employee benefit of $28,000 for the full year.” Paid leave credit is also an important component of the tax credit program.

Paycheck protection programs

The Paycheck Protection Program is a government program that provides small businesses with important tools that they may require to do basic functions. Some of these functions include:

• Maintain their payroll.
• Hire back employees.
• Cover applicable overhead.

Paycheck protection programs have helped many different businesses stay afloat in their time of need.

Tax reporting requirements in 2022

Effective Jan. 1, 2022, the tax reporting requirements for employees have changed. For example, the reporting thresholds have adjusted, financial transactions that were made through third-party payment services are now $600 annually. Those who use PayPal, Venmo or Zelle will be affected, which would mostly be small business owners.

Note that the refundable and non-refundable portions of the credit were claimed against Medicare taxes instead of against Social Security taxes. This is only applicable to paid wages after June 30, 2021. Regardless of this, credits are mostly not impacted.

Although most of the 2021 ARPA benefits as an employer have expired, they still impact this year's taxes. However, small businesses and other employers can still find support through government plans and benefits. From paid sick leave to providing your staff with days to become vaccinated, employers can find tax relief and other benefits from the plan. Contact a Lewis & Ellis consultant today to learn more.