The $1.9 trillion relief bill, known as the American Rescue Plan, was signed by President Biden on Thursday, March 11, 2021. Additional information surrounding Emergency Paid Leave and Health Insurance in response to the COVID-19 pandemic is included in the bill and outlined below.
Emergency Paid Leave
Signed into law on March 18, 2020, the Families First Coronavirus Response Act (FFCRA) required certain employers to provide employees with paid sick leave or expanded family and medical leave for specified reasons related to COVID-19. That requirement expired December 31, 2020.
The American Rescue Plan maintains the requirement’s expiration, in that it does not require employers to offer leave under FFCRA. However, the bill does provide tax credits for employers that voluntarily provide leave under FFCRA through the end of September 2021; and raises the limits on tax credits to offset leave costs for affected employers (i.e. those with fewer than 500 employees). The intention of the tax credits is to offset employer costs for paid leave taken for COVID-19 vaccinations and related health issues.
Opportunities for Health Insurance Coverage
The relief bill subsidizes private health insurance premiums for unemployed workers through the Consolidated Omnibus Budget Reconciliation Act (COBRA). The provision allows individuals eligible for COBRA insurance coverage to maintain their employer-sponsored coverage after losing employment, without having to pay any portion of the premiums through the end of September 2021.
Additionally, the bill invests nearly $35 billion in premium subsidy increases for those who buy coverage on the ACA Marketplace. The bill increases the subsidies provided to currently eligible individuals, and removes the 400% federal poverty level cap (equal to approximately $51,000 for an individual) on subsidy eligibility.
Expansion of Dependent Care for 2021
The bill increases the income exclusion for employer-provided dependent care assistance programs. For example, employee pretax contributions to dependent care FSAs increase from $5,000 to $10,500, and from $2,500 to $5,250 for a married individual filing a separate return for 2021.
In addition, the bill significantly increases the value of the dependent care tax credit for 2021. The credit is fully refundable, and the maximum credit percentage increases from 35% to 50%. This credit percentage gradually phases down to 20% for individuals with incomes between $125,000 and $400,000, and further phases down by 1% for each $2,000 by which an individual’s adjusted gross income exceeds $400,000. The amount of expenses eligible for the credit increases from $3,000 to $8,000 for one qualifying individual and from $6,000 to $16,000 for two or more qualifying individuals. Therefore, the maximum credits would be $4,000 and $8,000.
To learn more about the provisions included in the bill, please click here.
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