American Rescue Plan Act (ARPA) of 2021 — COVID-19 Emergency Relief Bill Key Highlights

American Rescue Plan Act (ARPA) of 2021 — COVID-19 Emergency Relief Bill Key Highlights

The third major pandemic relief bill was signed into law on March 11, 2021. This new legislation aims to help individuals, businesses and organizations. This is a $1.9 trillion package, which brings the overall combined three relief packages to over $5 trillion. The bill includes some anticipated measures such as direct payments to individuals, but it also included some unexpected measures, such as changes to the Affordable Care Act, which may particularly impact business owners.

We’ve chosen to focus on changes that specifically impact business owners and their employees. These changes include:

  • Payroll tax credits for Families First Coronavirus Response Act (FFCRA) leaves is expanded and extended through September 30, 2021. In general, this guarantees that employers who voluntarily continue to provide paid sick and family leaves in accordance with the prior FFCRA requirements will continue to receive payroll tax credits. The bill increases the limit on the credit for paid family leave to $12,000 from $10,000, and resets the limit on the number of days for paid sick leave on April 1, 2021.
  • Unemployment Benefits:
    • Extends existing federal unemployment supplement of $300 a week for initial claims related to COVID-19 through September 6, 2021.
    • Waives federal taxes on the first $10,200 of unemployment benefits received in 2020 for each individual earning under $150,000. Note: this exclusion only applies for taxpayers (both single and married) with adjusted gross income (AGI) of less than $150,000 regardless of filing status, such as single or married. Any AGI of $150,000 and above will not receive this exclusion – there is no phase-out.
  • Dependent Care FSA: For 2021, employees are able to contribute $10,500 into a dependent care account, instead of the normal $5,000 per family, if the employer agrees to modify their dependent care plan.  
  • Economic Impact Payments: Stimulus checks for 2021 amount to $1,400 per taxpayer plus $1,400 per dependent child. Qualifying dependents include full-time students under the age of 24 and adult dependents. Individual taxpayers earning an AGI up to $75,000 and married taxpayers earning an AGI up to $150,000 will receive $1,400 each, plus $1,400 for each dependent. The narrow phase-out range for individuals with an AGI $75,000-$80,000 and married taxpayers AGI of $150,000 - $160,000.
  • COBRA: The bill provides that individuals who have been laid off, involuntary terminated or had their hours cut and are eligible for and elect COBRA coverage qualify to receive 100% subsidy for COBRA insurance premiums for any period of COBRA coverage beginning April 1, 2021 and ending September 30, 2021. Under ARPA, the employer, insurer or multi-employer plan sponsor must pay eligible employee’s premiums, but may offset the cost by claiming a new federal tax credit.
  • Employee Retention Credit (ERC):
    • Recovery Startup Business: This credit is made available to new small businesses that began their business after February 15, 2020 and have annual gross receipts of $1 million of less. The ERC credit for startups is capped at $50,000 per quarter. Startup businesses are exempt from the two ERC eligibility tests, which are: (1) partial or full shutdown due to government order or (2) gross receipts decline.
    • ERC Extended Date: The bill extends the tax credit to include wages for eligible employers from June 30, 2021 through December 31, 2021.  
      • For 2021, an eligible employer can receive up to $7,000 per employee per quarter for a possible total of $28,000 (70% of wages up to $10,000 max).
    • For more guidance from the IRS, please see the following resource: IRS provides guidance for employers claiming the Employee Retention Credit for first two quarters of 2021 | Internal Revenue Service

Several changes gave a major boost to the Affordable Care Act (ACA) that expands subsidies to cut premiums.
As President Biden proposed during his campaign, the recent ARPA expands Marketplace subsidies above 400% of poverty and also increases subsidies for those making between 100% and 400% of the poverty level for the next two years (2021-2022). In addition, prior to ARPA, households had to contribute up to 9.83% of their annual income to pay for health insurance premiums to be eligible for the tax credits.  These changes go into effect April 1, 2021:

  • Maximum individual and family pay in premiums will be capped at 8.5% of their annual income.
  • Extending subsidies to individuals with incomes over 400% of the poverty level. The benefit would gradually phase out at higher incomes, as benchmark silver premiums no longer cross the 8.5% of income threshold.  
  • Guaranteeing access to a plan with a zero dollar premium payment for people with incomes between 100-150% of poverty.
  • Individuals approved to receive or receiving unemployment insurance (UI) at any point in 2021, and qualified to purchase insurance on the Marketplace will be eligible to get a silver plan with a $0 premium.

Also note that individual states may impose their own mandates in terms of insurance or other benefits. We’ll post additional updates on our website TRICOM.COM, as well as on our Twitter and Facebook feeds as they become available.

Be sure to check out TRICOM President & CEO Julie Ann Bittner’s recent discussion with John Walters, SR. VP of Business Development at Essential StaffCARE to understand future changes and potential costly impacts to the Affordable Care Act and more, on our podcast channel or YouTube!