Pandemic Emergency Unemployment Compensation
Extends relief to September 6, 2021 and increases duration from 26 to 53 weeks.
Families First Coronavirus Response Act (FFCRA)
Extension of Tax Credits
FFCRA provided for two new emergency paid leave benefits in response to the COVID-19 pandemic. The Emergency Paid Sick Leave Act (EPSLA) entitled certain employees to take up to two weeks of paid sick leave. The Emergency Family and Medical Leave Expansion Act (EFMLEA), which amended the Family and Medical Leave Act, (FMLA), permits certain employees to take up to twelve weeks of emergency family and medical leave, ten of which are paid, for specified reasons related to COVID-19.
The mandatory leave and pay requirements of the FFCRA expired on December 31, 2020. The refundable tax credits were initially extended through March 31, 2021. These tax credits have been extended again, through September 30, 2021, for employers who voluntarily provide the leave/pay under the FFCRA framework.
The limit on the tax credit is increased to $12,000 total per employee for family leave wages, up from $10,000. The American Rescue Plan also expands the definition of qualifying paid family leave to allow a business to claim family leave payroll tax credits for all qualifying uses of paid sick time, including for leave provided if the employee is subject to a quarantine or isolation order due to COVID-19 or is caring for someone in a comparable situation.
Additional Reason for Emergency Sick Leave and Emergency Family Leave
When the employee is seeking or awaiting the results of a diagnostic test for, or a medical diagnosis of, COVID–19 and such employee has been exposed to COVID–19 or the employee’s employer has requested such test or diagnosis, or the employee is obtaining immunization related to COVID–19 or recovering from any injury, disability, illness, or condition related to such immunization.
New Bank of Credits Available
While it remains optional for employers to provide emergency paid sick leave under the FFCRA, the emergency paid sick leave tax credits, up to 10 days, resets as of April 1, 2021.
Non-discrimination
Employers may not claim the tax credit if the pay provided discriminates in favor of highly compensated employees, full-time employees or on the basis of an employee’s tenure with the employer.
COBRA Subsidy
General
The Consolidated Omnibus Budget Reconciliation Act (COBRA) requires that employees and dependents be allowed to continue their coverage of group health insurance plan when certain “qualifying events” would otherwise cause a loss of coverage under the terms of the plan - for example, termination, voluntary or involuntary, a reduction in the hours of work of a covered employee, the death of a covered employee, the divorce of a covered employee, or a dependent child of the covered employee ceases to be a dependent child under the terms of the plan. COBRA apples to employers with at least 20 employees (full-time and part-time) on at least 50% of the typical business days in the preceding calendar year.
COBRA requires that continuation coverage extend from the date of the qualifying event for a limited period of time of 18 or 36 months, depending on the reason coverage is lost.
Covered employees and dependents are given an election period of at least 60 days and pay 100% of the premium plus an additional 2 percent for administrative costs, if required by the employer/plan administrator.
Election periods had been extended during the public health crisis under a new rule.
New Jersey Small Employer COBRA
In New Jersey, small group health insurance policies ( employer with at least 2, but not more than 49, employees on 50% or more working days in the preceding calendar quarter, the majority of whom worked in New Jersey) are required to provide an employee and his spouse and dependents, the opportunity to elect to continue the insurance coverage would have been lost due to termination of employment for a reason "other than cause" or due to reduction in the employee's weekly hours of work to fewer than 25.
State law requires that continuation coverage extend from the date of the qualifying event for 18 or 36 months, depending on the reason coverage is lost.
Covered employees and dependents are given an election period of at least 30 days and pay 100% of the premium plus an additional 2 percent for administrative costs, if required by the employer/plan administrator
Premium Assistance
The American Rescue Plan Act of 2021 provides premium assistance in the full amount of the premium (plus any administrative fee) to “assistance eligible individuals” from April 1, 2021 through September 30, 2021.
Assistance eligible individuals are those qualified beneficiaries who trigger COBRA continuation because of an involuntary termination of employment or reduction in hours and whose current COBRA continuation period would cover some or all of the subsidy period, but only if they elect COBRA coverage and if they are not eligible for other group health coverage, including Medicare. This includes:
- Participants already on COBRA continuation coverage,
- Participants who are eligible for and elect COBRA continuation coverage on April 1, 2021, and
- Participants who previously declined COBRA coverage, or whose coverage was terminated because of nonpayment of premiums.
The subsidy period does not extend the maximum COBRA coverage period but rather suspends the assistance eligible individual’s obligation to make COBRA premium payments for up to 6 months. The subsidy will end sooner if the qualified beneficiary’s maximum COBRA coverage period ends or if the individual is eligible for another group health plan or Medicare.
The premium subsidy will also be applicable to NJ’s Small Employer COBRA (mini-COBRA).
Election Period
Participants may elect COBRA continuation coverage and premium assistance within 60 days of receiving a notice from the employer/plan administrator.
Plan Enrollment Option
If permitted by the employer, participants already on COBRA continuation and who are eligible for premium assistance may choose a less expensive plan offered by the employer. This option does not apply to employees who voluntarily terminated employment
Notice by Employer/Plan Administrator
Relevant government agencies will publish model notices no later than April 11, 2021.
Notice by Employee of Ineligibility
Relevant government agencies will publish model notices no later than April 11, 2021.
Premium Tax Credit
The assistance eligible individual does not pay the COBRA premium but rather the premium is “advanced” by the employer, plan or insurer and then reimbursed with a refundable tax credit.
A tax credit to offset the cost of the premium assistance is available:
- In the case of a multiemployer plan, to the plan itself, or
- In the case of an insured or self-funded group health plan, subject to COBRA, to the employer maintaining the plan, or
- The insurer providing coverage under the group health plan if none above.
The credit is limited to employment taxes on wages paid by the employer during any calendar quarter. Overpayments are refundable. Credits may be advanced.
Employers are advised to discuss the tax credit with their tax preparers and payroll services.