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American Rescue Plan Extends and Modifies FFCRA’s Tax Credit Provisions

March 12, 2021

As employers are already aware, the Families First Coronavirus Response Act’s (“FFCRA”) mandatory obligations expired on December 31, 2020.  Thereafter, employers were no longer required to provide Emergency Paid Sick Leave or Emergency Family Medical Leave under the FFCRA.  However, as a result of the 2021 Consolidated Appropriations Act (“CAA”), eligible employers (those with fewer than 500 employees) that voluntarily continued to provide paid leave after the FFCRA’s expiration were eligible for a payroll tax credit to offset some of the costs associated with providing the leave.  Under the CAA, these tax credits were available through March 31, 2021.  The newly enacted American Rescue Plan extends the availability of the FFCRA’s tax credits for paid emergency sick leave and emergency medical leave through September 30, 2021.

Paid Sick Leave

The American Rescue Plan also modifies the FFCRA to include two additional grounds for paid sick leave:  (1) obtaining a COVID-19 vaccination and (2) recovering from any injury, disability, illness or condition related to such vaccination.  Additionally, for any employee who previously took paid sick leave under the FFCRA, the limitation on the number of days for which the employer may seek a tax credit will reset on March 31.  Employers may provide employees an additional 10 days of paid sick leave beginning April 1.

Paid Family Leave

With regard to family leave, the American Rescue Plan expands the available tax credits to encompass family medical leave necessitated by any of the reasons set forth in the FFCRA for paid sick leave and no longer limits the credits only to leave resulting from inability to work due to the closure or unavailability of schools or childcare facilities.  Therefore, employers may claim family leave payroll tax credits for leave provided if the employee is subject to a quarantine or isolation order or is caring for someone with COVID-19.  The Plan also increases the limit on the credit for Family Medical Leave to $12,000 and resets the limit on the number of weeks of family leave per employee on March 31.  An additional ten weeks of family leave may be counted towards the family leave credit beginning April 1 notwithstanding any previous paid leave taken by the employee.

Prohibition on Discrimination

In addition to these expansions, employers should be aware of new non-discrimination rules imposed by the American Rescue Plan to ensure that paid leave benefits are offered uniformly to all employees.  Employers who seek to take advantage of the tax credits may not discriminate in favor of highly compensated employees, full time employees, or length of employment when establishing paid leave policies.

Steps for Employers

In light of these developments, employers should review their current policies and make a decision whether they will continue to provide (or begin providing) paid sick and family leave to employees and, if so, review eligibility requirements to ensure that leave is offered on a uniform basis in order to take advantage of the available tax credits. Employers should also keep an eye out for guidance from the Department of Labor that further explains and refines the American Rescue Plan’s provisions.


Written By:  Amber Whillock


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