Congress passes spending bill

Highlights of how it may affect your business

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Congress passed a new spending bill, the Consolidated Appropriations Act of 2021 (“Spending Bill”) this week that includes multiple provisions to address the ongoing economic impact of the COVID-19 crisis. President Trump is expected to sign the bill. This update summarizes changes applicable to our clients and suggests best practices going forward in 2021.

Mandated paid leave ends but voluntary leave with tax credits is available to employers

This past spring, Congress passed the Families First Coronavirus Relief Act, which applies to employers with fewer than 500 employees. The law includes two main provisions: Emergency Paid Sick Leave (EPSL) and Emergency Family Medical Leave (EFML). The EPSL provision mandates that qualified employers provide up to 2 weeks of paid sick leave (in addition to any state/local/other sick leave you provide) to qualified employees. The EFML provision expands FMLA job-protected leave to employees who have been employed for at least 30 days, if they are unable to work (or telework) due to a need for leave to care for a child of such employee if the school or place of care has been closed, or the childcare provider of the employee’s child is unavailable, due to a public health emergency.

The Spending Bill extends and/or modifies certain provisions of the FFCRA through specified dates in 2021. However, it did not extend EPSL mandated leave. Therefore, mandated leave under the FFCRA ends on December 31, 2020. Instead, starting on January 1, 2021, qualifying employers may voluntarily provide paid sick leave, relying on the same criteria established in the EPSLA. In return for providing emergency paid sick leave or emergency paid FMLA leave, employers will receive a tax credit. However, that tax credit is only applicable for leave through March 31, 2021.

Many employers had employees who took all 80 hours of EPSLA available under the FFCRA in 2020. We do not believe that the Spending Bill requires employers to provide an additional 80 hours of EPSLA in 2021. However, if your business’s FMLA 12-month period resets on January 1, 2021, it is likely an employee would be entitled to emergency paid FMLA leave again. We hope the Department of Labor or the Internal Revenue Service will clarify this issue in the imminent future.

Employers should also be mindful of additional state and local requirements regarding paid leave, and their own paid leave and paid time off policies.

California employers with over 500 employees will continue to be subject to the FFCRA

While the FFCRA generally did not apply to employers with over 500 employees, California enacted Assembly Bill 1867 (“AB 1867”) in September, which effectively extended the paid leave provisions of the FFCRA to large employers in California. The California legislature included a caveat in AB 1867 that also extended the bill beyond 2020 if the FFCRA was amended. Therefore, because Congress extended the FFCRA in the Spending Bill, qualifying employers with 500 or more employees must continue to offer up to 80 hours of paid leave if an employee qualifies.

Additional PPP loans are available

The Spending Bill includes $285 billion to small businesses for first and second forgivable Paycheck Protection Program (“PPP”) loans. Small businesses are defined as businesses with no more than 300 employees and that demonstrate at least a 25% reduction in gross revenues between comparable quarters in 2019 and 2020. The maximum loan size is 2.5 times the average monthly costs, up to $2 million. Borrowers will receive full loan forgiveness if they spend at least 60% of their PPP second-draw loan on payroll costs over a time period of their choosing between 8 weeks and 24 weeks. Finally, the bill includes set-asides to support first-time PPP borrowers with 10 or fewer employees, second-time PPP borrowers with 10 or fewer employees, first-time PPP borrowers who have been made newly eligible, and second-time returning PPP borrowers.

Preventative tax credits were expanded

In addition to the tax credits for voluntarily providing paid leave, the Spending Bill expands the employee retention credit intended to prevent layoffs. It also includes a two-year tax break for business and rolls over a variety of temporary tax breaks known as “extenders,” some for multiple years. Deferred payroll tax payments may be paid throughout 2021. Finally, it boosts the Earned Income Tax Credit.

An additional $600 is available for each individual that qualifies

$600 is available to each individual making up to $75,000 annually, or $1,200 for couples making up to $150,000 annually. An additional $600 is available for each child dependent.

Unemployment benefits are extended for a variety of recipients

The Spending Bill provides an additional $300 each week for individuals receiving unemployment insurance benefits. However, this benefit is only extended through March 14, 2021. Pandemic Unemployment Assistance (“PUA”) is still available to non-traditional employees, such as self-employed or gig workers, as is Pandemic Emergency Unemployment Compensation (“PEUC”), which provides federal unemployment benefits to individuals who exhausted their state claims. The Spending Bill increased the maximum number of weeks to 50 weeks that an individual may claim benefits through regular state unemployment plus PEUC or PUA. Finally, an additional $100 each week is available to workers who have both wage and self-employment income but whose base unemployment insurance benefit calculations do not take into account their self-employment income.

Additional provisions that may affect you or your employees

  • If the employer allows it, unused flexible spending on health care or dependent care may be carried over into 2021. The same would apply for 2021 funds in 2022.
  • $25 billion is being provided to state and local governments to help renters who have fallen behind on their rent.
  • The Spending Bill extends a moratorium on renter evictions through January 31, 2021.
  • There are no changes to the federal student loan forbearance program, but they did extend the pause on payments through January 31, 2021. A similar extension seems likely once President-Elect Biden takes office, given his past support for student loan forgiveness initiatives.
  • Surprise medical bills, such as when an out of network emergency room physician treats you at a hospital in-network, are now illegal.
  • Consumers filing for bankruptcy under Chapter 13 can have their remaining debt discharged, even if they fall behind on three or fewer home mortgage payments on or after March 13, 2020. The same applies to consumers who temporarily stopped making mortgage payments through forbearance.