COVID-19 Relief Bill Signed Into Law – Guidance on Paid Leave Provisions

Wednesday evening, President Trump signed into law a second COVID-19 aid bill – the Families First Coronavirus Response Act. The bill is designed to provide economic relief from the numerous impacts related to the coronavirus epidemic. It contains a number of important components, including free COVID-19 testing, increased Medicaid funding and nutrition assistance for low income families, and expanded unemployment insurance.

Perhaps the largest and most complex components of this bill involve emergency paid sick leave and expanded FMLA benefits. The requirements go into effect April 2, 2020 and expire December 31, 2020. The coverage of the paid leave and FMLA provisions in many news outlets has been somewhat vague. Below is a more detailed summary:

Emergency Paid Sick Leave Act

Applicability: Employers with fewer than 500 employees and all government employers will have to provide all employees who cannot work or telework due to certain qualifying COVID-19 related absences with paid sick time off for up to two weeks.

Eligibility:

    1. An employee who is subject to a coronavirus quarantine or isolation order;
    2. An employee who has been advised by a health care provider to self-quarantine due to coronavirus concerns;
    3. An employee who is experiencing symptoms of coronavirus and is seeking a medical diagnosis
    4. An employee caring for an individual who is subject to government quarantine or isolation order or who has been advised by a health care provider to self-quarantine;
    5. An employee caring for a child whose school or place of care is closed or whose care provider is unavailable due to coronavirus precautions;
    6. An employee who is experiencing any other substantially similar condition specified by the Department of Health and Human Services in consultation with the Treasury and Labor Departments.

Wages: Employee wages for Emergency Sick Leave will be determined based upon whether the leave is being taken for the employee’s illness, or time off to care for a family member. For those employees who are taking leave to care for themselves, employers are required to pay the greater of their normal wage, or the applicable minimum wage capped at $511/day or $5,110 in total. Employees taking time off to care for family members must be paid at two-thirds of the foregoing rate, capped at $200 per day or $2,000 in total. The wages required to be paid for emergency sick leave are not taken into account for purposes of determining Social Security taxes owed by the employer.

Employer Tax Credits: Employers will receive a refundable tax credit against the employer’s share of Social Security taxes (FICA and Medicare) equal to 100 percent of qualified paid sick leave wages (including qualified health plan expenses relating to those wages) paid for each calendar quarter and paid by the Emergency Paid Sick Leave Act. Tax credits are not available to government employers.

Family and Medical Leave Act (FMLA) Expansion

Applicability: FMLA has been expanded to require employers with fewer than 500 employees and all government employers to provide employees who have been on the job for at least 30 days with 12 weeks of job-protecting leave. This leave is applicable for an employee who is caring for a child under 18 years of age if the child’s school or place of care has been closed, or if the child’s care provider is unavailable due to a coronavirus emergency.

Eligibility: The first 10 days of leave can be unpaid (an employee could opt to use paid emergency sick leave before using existing sick days, accrued vacation days, or other available paid leave for those days). For subsequent days of leave up to the 12 week maximum, workers will receive a benefit from their employers equal to at least two-thirds of their normal pay rate. The paid leave is capped at $200 per day and $10,000 in total. Wages required to be paid during the FMLA leave (after the first ten days) are not taken into account for purposes of determining Social Security taxes owed by the employer.

Employer Tax Credits: Similar to the Emergency Paid Sick Leave Act, employers will receive a refundable tax credit against the employer’s share of Social Security taxes (FICA and Medicare) equal to 100 percent of qualified paid sick leave wages paid for each calendar quarter and paid by the FMLA expansion. The credit for each employee will be for wages (including qualified health plan expenses relating to those wages) of as much as $200 per employee per day, and $10,000 in the aggregate for all calendar quarters. In order to prevent a double benefit, employers must include the amount of credits received in their gross income. Tax credits are not available to government employers.

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The Families First Coronavirus Response Act is the second stage of a broader relief plan. Earlier this month, Congress passed an initial $8.3 emergency spending package to contain the outbreak and fund development of a new vaccine.

The Senate now turns its attention to the third stage – a proposal for a potential $1 trillion in economic rescue and stimulus. On Thursday, Senate Majority Leader Mitch McConnell released the Republicans’ proposal, which calls for direct cash payments to Americans. The one-time payments would be on a tiered scale, based on family size and income. The Trump administration had earlier proposed two rounds of direct payments.

The Republican proposal includes emergency aid for small businesses and hard hit industries. The White House proposal also included support for the hard-hit airline industry and other severely distressed sectors of the U.S. economy. Plus, it included a proposal for a small business interruption loan program to help businesses temporarily cover employee payroll costs.

The full Senate will now take up the debate on this new proposal. We are continuing to monitor this evolving legislation and will keep you informed as more details become available. If you have any questions about this or any other matters, please do not hesitate to contact your Kreischer Miller professional or any member of our Tax Strategies team.

Information contained in this alert should not be construed as the rendering of specific accounting, tax, or other advice. Material may become outdated and anyone using this should research and update to ensure accuracy. In no event will the publisher be liable for any damages, direct, indirect, or consequential, claimed to result from use of the material contained in this alert. Readers are encouraged to consult with their advisors before making any decisions.