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Associated HCM: Breaking Down the Families First Coronavirus Response Act

On March 18, Congress passed and the President signed into law the Families First Coronavirus Response Act to address the economic impact of the coronavirus (COVID-19) pandemic. The Families First Coronavirus Response Act allocates billions of dollars for paid sick and family leave, unemployment insurance, free COVID-19 testing, and other measures to help Americans impacted by the crisis. The final bill, which takes effect April 1, 2020 and expires on December 31, 2020, contains many provisions affecting businesses and individuals.

The Families First Coronavirus Response Act contains three sections of particular interest for employers:

  • Emergency Family and Medical Leave Act Expansion
  • Emergency Paid Sick Leave
  • Tax Credits for Paid Sick and Paid Family and Medical Leave

Which Employers Are Affected?

  • Generally, the legislation affects private-sector employers with under 500 employees. The Department of Labor (DOL) will issue regulations to exempt certain health-care providers and emergency responders from requirements that they offer paid family leave and paid sick leave; as well as small businesses with fewer than 50 employees, if such requirements would jeopardize the viability of the small business.
  • Here is a high level summary of the key provisions below which generally apply to public employers with less than 500 employees.

Tax Treatment of Paid Sick Leave and Paid Family and Medical Leave Payments

  • Covered sick and family leave payments under the Act are taxable wages for income and employment tax purposes, except that such wages are exempt from Employer Social Security taxes.
  • Such payments are subject to Medicare taxes, but the tax credit is increased by the amount of employer Medicare taxes (i.e., 1.45%) paid on such wages.

Notices

  • Employers must post a notice of the requirements described in this Act, “in conspicuous places where notices to employees are customarily posted.”
  • The DOL is to publish a model notice within seven days of enactment.

Emergency Family Medical Leave (FMLA) Expansion Act: Temporarily expands the provisions under the Federal Family and Medical Leave Act specifically to address COVID-19-related absences.

  • Eligible employees, who have worked for their employer for at least 30 days, who qualify for leave under the expanded reasons for leave, would be paid by their employer after the first 10 days of leave at a rate of no less than two-thirds of their current rate of pay.
  • The first 10 days of the leave can be unpaid. An employee may elect to use accrued vacation, personal or medical or sick leave for those days, including paid sick leave as provided by this Act.
  • Employees are permitted to take, but employers cannot require the use of, any other paid time off during their leave.
  • There is cap of $200 per employee per day, up to a maximum $10,000, for up to 12 weeks in the benefit year.
  • Employees covered under a multi-employer bargaining agreement are addressed separately in the legislation.
  • Some exemptions apply for employers of health care workers.

Payroll Credit for Required Paid Family Leave: This refundable tax credit is designed to reimburse 100 percent of wages paid by the employer under the new Emergency FML expansion for each calendar quarter.

  • The employer credit for these paid wages will be offset by your 941 tax liability.
  • The amount is capped for each employee at $200 per day and $10,000 for all calendar quarters.
  • If the credit exceeds the total payrolls’ 941 tax liability, the excess credit is refunded after filing of the quarterly 941 tax return.
  • Specific rules apply that prevent a double tax benefit.

Emergency Paid Sick Leave (PSL) Act: Employers are required to provide paid sick time, available for immediate use, to each employ requiring such time for specific reasons associated with the COVID-19 pandemic, including quarantines, currently seeking a diagnosis due to symptoms, or caring for an individual who is under quarantine or for a child whose school/care is closed due to COVID-19.

  • Provide up to 80 hours of paid sick leave (PSL) to eligible full-time employees and pro-rate part-time employee paid sick time based on the average number of hours regularly scheduled in a two-week period.
  • The calculation and caps for compensation vary dependent on the reason for leave with a maximum of $511 per day if the employee is the individual directly impacted and up to $200 per day if it is for care of someone else. Aggregate caps exist as well.
  • Employees may not be required to use other available paid time off before using paid sick time under this Act.
  • Employees covered under a multi-employer bargaining agreement are addressed separately in the legislation.
  • Some exemptions apply for employers of health care workers.
  • Employers will be required to post a notice of employee rights; the U.S. Secretary of Labor will provide a model notice within seven days of enactment.
  • Paid sick time provided under this Act is not preempted by other federal, state, or local law.

Payroll Credit for Required Paid Sick Leave (PSL): This refundable tax credit is designed to reimburse 100 percent of wages paid by the employer under the new Emergency PSL for each calendar quarter.

  • The employer credit for these paid wages will be offset by your 941 tax liability.
  • The amount is capped at the maximums of $511 or $200 per day, depending on the reason.
  • If the credit exceeds the total payrolls’ 941 tax liability, the excess credit is refunded after filing of the quarterly 941 tax return.
  • Specific rules apply that prevent a double tax benefit.

Emergency Unemployment Insurance Stabilization and Access Act of 2020: The bill provides $1 billion in emergency grants to states for activities related to facilitating unemployment insurance benefits, under certain conditions.

  • $500 million will be used to provide immediate additional funding to all states for staffing, technology, systems, and other administrative costs, provided certain requirements are met.
  • The remaining $500 million would be set aside in reserve for emergency grants to states which experienced at least a 10 percent increase in unemployment. Those states would be eligible to receive an additional grant, if certain conditions are met.
  • The U.S. Secretary of Labor will also work with states that want to implement work-sharing programs.

Coverage of Testing for COVID-19: Diagnostic testing and provider visits related to COVID-19 testing, including office visits, urgent care visits, and emergency room visits, must be provided without any co-pays, coinsurance, or deductibles.

  • Additionally, no prior authorizations may be required for testing.
  • These provisions would apply to any health insurance plans, including individual and group health plans, Medicare, and Medicaid.
  • Additionally, federal funding will be provided for uninsured individuals to receive reimbursement for COVID-19 testing and related services.
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