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Client Alert: American Rescue Plan Act

American Rescue Plan Act Extends and Modifies the Family First Coronavirus Act, Providing Tax Credits to Employers

Effective April 1, 2021, the American Rescue Plan of 2021 introduces a newer version of the Family First Coronavirus Response Act (FFCRA), which provides tax breaks to employers who grant sick leave to their employees. While employers are not obligated to provide FFCRA leave to employees, employers who offer FFCRA shall benefit from tax credits through September 30, 2021. Employers already providing the optional FFCRA benefits should be aware of the modifications to the new FFCRA to avoid discrimination claims. The FFCRA makes private employers with fewer than 500 employees and public employers with at least one employee eligible for tax credits. Modifications to the FFCRA include the following: 

  • Covered Sick Leave: The tax credit is now available for leave taken to obtain the COVID-19 vaccine or for “recovering from any injury, disability, illness, or condition related to such immunization; or seeking or awaiting results of a test or diagnosis of COVID-19;”

  • Reset Paid Sick Leave Clock: The new FFCRA allows employers to provide an additional 10 days of emergency paid sick leave to employees who previously took 10 days off;

  • Emergency FMLA Leave Cap Raised: Effective April 1, 2021, the cap is raised from $10,000 to $12,000;

  • Non-Discrimination Rules: The Rescue Plan prohibits tax credits for any employer who discriminates by offering leave in favor of highly compensated, full-time, or tenured employees. 

Essentially, these modifications to the FFCRA leave expand the ways in which employees may request sick leave. However, the increased and extended tax credits obtained by employers may counterbalance the costs associated with permitting sick leave.