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Everything Small Businesses Need to Know About the Families First Coronavirus Response Act

Caleb Newquist Editor-at-Large, Gusto 
Families First Coronavirus Response Act Employer Guide - Gusto

Everything that changed on December 27, 2020, at-a-glance: 

This is a little confusing but we’ll get through it together. Here’s what’s happened: The Families First Coronavirus (FFCRA) was enacted in March of 2020 and was set to expire on December 31st, 2020. 

Just under the wire, on December 27, 2020 President Trump signed the Consolidated Appropriations Act, 2021, which extended certain provisions of the FFCRA, but not all of it. 

Here’s what is continuing and what’s going away:

  • Food assistance: the new bill extends SNAP benefits and provides funding for The Emergency Food Assistance Program
  • Emergency Paid Leave and Expanded FMLA: starting on January 1, 2021, employers are no longer required to provide paid leave under FFCRA, but they may volunteer to do so
  • Tax Credits: employers are no longer required to provide paid leave under FFCRA, but those who do will receive tax credits
  • COVID-19 testing: under FFCRA, individuals would not be charged for COVID-19 tests; this provision expired on December 31, 2020 and will not be renewed 

For details on each of these provisions, read on.

Overview of the FFCRA

In March 2020, in response to the novel coronavirus outbreak, President Trump signed into law emergency legislation known as the Families First Coronavirus Response Act (FFCRA) to assist American families and businesses. You could read the law and try to understand it for yourself, or you could read our analysis of it below. No need to thank us; that’s what we’re here for.

Real quick: The primary intent of the law was to provide emergency paid sick leave and paid family and medical leave, as well as additional funding to food assistance and unemployment programs, in response to COVID-19. According to Pew Research, almost a quarter of American workers do not have paid sick leave. Many of these people work for small businesses that employ between 1 and 100 employees. Likewise, the US doesn’t have nationally mandated paid family and medical leave.

The Families First Coronavirus Response Act (FFCRA) stepped in to close the gap for these workers by providing two weeks of paid sick leave. It also provided up to 12 weeks of family and medical leave by making amendments to the Family and Medical Leave Act (FMLA).

Because this is an additional cost for small businesses, exemptions and tax credits are offered to those businesses that qualify. These benefits are also available to the self-employed and gig workers through tax credits, although the FFCRA has a few extra requirements for demonstrating that such workers comply with the rules.

Timing

The FFCRA was signed into law on March 18, 2020 and took effect 15 days after that date. Many FFCRA benefits expired on December 31, 2020.

However, on December 27, 2020, the Consolidated Appropriation Act, 2021 was signed and this bill amended and extended certain FFCRA provisions.

Food assistance for low-income families

Food assistance programs under FFCRA expired December 31, 2020, however, the new bill has extended certain nutrition programs and provides funding for new ones:

  • Funding will be provided to continue school meal programs and  childcare meal programs
  • Monthly SNAP benefits are increased by 15% through June 20, 2021
  • There will be a simplified process for getting increased state SNAP benefits 
  • College students eligible for work study programs will now be eligible for SNAP
  • $400 million will be going to The Emergency Food Assistance Program to help distribute food to those in need. 

How families qualify

If schools for children of these families are consecutively closed for five days or more, the families will be eligible for additional food assistance through meals at home. 

How it’s administered

These benefits will likely be provided through the regular electronic benefit transfer (EBT) system currently used for these programs.

Emergency paid leave 

One of the benefits created by the FFCRA is “emergency paid leave.” If an individual is unable to work because COVID-19 has affected them in one of the ways detailed below, they may be able to take up to two weeks (10 workdays) off and still get paid.

As of January 1, 2021, under the Consolidated Appropriations Act, 2021, an employer is no longer required to provide emergency paid leave. However, employers who choose to provide this will be eligible for tax credits through March 31, 2021. 

How employees qualify

There are several instances where an employee will qualify for emergency paid leave, including the following: 

  1. The employee works for an organization that employs fewer than 500 people.
  2. The employee is subject to a federal, state, or local quarantine or isolation order related to COVID-19.
  3. The employee is quarantined at the direction of a health authority or healthcare provider to prevent spread of COVID-19.
  4. The employee is experiencing symptoms of COVID-19 and is seeking a diagnosis.
  5. The employee is caring for another person who is subject to #1 or #2 above.
  6. The employee is caring for a child or another person due to closure of a school or other facility due to COVID-19.
  7. The employee is experiencing similar conditions that have been specified by the US Department of Health and Human Services (HHS). 

How much paid leave 

Full-time employees are eligible for 80 hours and part-time folks get their average number of hours worked in a two-week period. Under the new law, this remains the same: an employee is only entitled to take one allotment of 80 hours emergency paid leave.  

Rate of pay

The amount of the benefit depends on how the employee qualifies. For example, if an individual is subject to #1, #2, or #3 above, they will be paid the greatest of:

  • Their regular rate of pay;
  • The Fair Labor and Standards Act (FLSA) minimum wage rate; or
  • The state or locality’s minimum wage rate.

The maximum benefit is $511 per day for 80 total hours (i.e., two work-weeks), which works out to a total maximum benefit of $5,110.

If an employee qualifies because of #4, #5, or #6 above, then the amount is two-thirds of the applicable rate, with a maximum benefit of $200 per day and a total max benefit of $2,000. 

Conditions apply

Always! Both employers and employees are subject to some conditions under this new kind of leave. We’re breaking them out to keep things clear.

For employees:

  • Emergency paid leave does not carry over from one year to the next. 
  • Emergency paid leave ends as soon as the employee’s next scheduled shift starts after they no longer qualify for the paid time.
  • Employees don’t have to find anyone to cover for them if they’re taking emergency paid leave.
  • Employees can use emergency paid leave before their regular accrued paid sick time, if they have it. 
  • Emergency paid leave does not reduce other accrued leave that an employee may have already. 

For employers:

  • Employers have to post all this information in a conspicuous place, like a break room. The US Department of Labor (DOL) provides posters that most employers can use.
  • An employer cannot fire, discipline, or discriminate against any employee for using or requesting emergency paid leave.
  • Employers who are subject to bargaining agreements must contribute expected amounts to a fund, and the union will distribute to its members as requested.

Tax credit for emergency paid leave

Employers who choose to offer emergency paid leave can have 100% of it covered by payroll tax credits on a quarterly basis, but only for a maximum of 10 days for each employee (including days in previous quarters) through March 31, 2021.

Recall, the amount of emergency paid leave per day for an employee is limited to $511 if the employee is qualified because of #1, #2, or #3 (i.e., self care), or $200 per day if the employee is qualified because of #4, #5, or #6.

Just like the credit for leave under the FMLA, this quarterly tax credit cannot exceed the employer’s share of Social Security taxes in that quarter. The excess tax credit can be used by the business as an overpayment of taxes that can be applied to tax in a future period. 

The qualified health plan expenses an employer pays in order to provide and maintain the group health plan while an employee is on emergency leave can also be counted above the 100% paid in wages to the employee. Again, all of this should be done on a pro rata basis for each employee and must be directly related to additional costs the employer had to take on as a result of supporting these new paid leave options.

Who qualifies for the tax credit?

Self-employed individuals are eligible for a tax credit within the same limits as if they were an employee at another business. 

How much is the credit?

If an individual is unable to work, they can get the lesser of $511 or 100% of their average daily self-employment income (or $200 or 67% as noted above). 

Conditions apply

Self-employed individuals should maintain documentation to prove eligibility for all of this. 

Emergency paid leave amendments to the Family and Medical Leave Act

During normal business circumstances, the FMLA protects workers by preventing businesses from dismissing them for certain medical or family situations. 

The FFCRA amends the FMLA to include paid leave for public health emergencies when an employee is unable to work (or telework) due to a school or child care facility closure, or if the individual is unavailable as a result of COVID-19 precautions; this is known as PHE leave under FMLA or as Expanded FMLA

So FFCRA not only provides paid sick leave for employees who have been impacted by COVID-19, it also protects them from losing their jobs. 

Same deal here: Under the new law, employers are no longer required to offer PHE leave under FMLA, but those who do, will be eligible for tax credits through March 31, 2021. 

The benefits of PHE leave under FMLA

Paid family and medical leave under the FMLA will be slightly different from the emergency paid leave that we described above. Here are the details:

  • Employees are eligible for two-thirds of their regular pay based on the hours they’d normally work. 
  • Benefit cannot exceed $200 per day or the aggregate of $10,000 and 50 days. 
  • Variable-hour employees will be eligible based on the average number of hours they worked in the six months prior to the start of their leave.   
  • If the employee didn’t work the last six months, then it will be based on the amount that was anticipated when they were hired.

Who’s eligible?

Employees are eligible if they have been employed for at least 30 days and are unable to work because of the need to care for a child under 18 years of age whose school or place of care has been closed, or if they are unavailable due to a COVID-19 PHE. Just like the emergency paid leave, employees who are healthcare providers and emergency responders are not eligible for this benefit. 

Who’s subject to these new rules?

These FMLA amendments will apply to employers with fewer than 500 employees. 

Conditions apply

Just like for emergency leave, we’ve broken out the conditions between employers and employees.

For employees:

  • An employee may elect to use other accrued paid sick, personal, or vacation time during the first 10 days of leave. This would allow employees to still get paid during the initial period of emergency leave under FMLA.
  • An employee must provide the employer with notice as soon as is practical, and the employer may require documentation to support the need.

For employers:

  • Like all leave under the FMLA, the employer must restore the employee to their position after the leave has ended. 
  • An employer does not have to pay an employee for their first 10 days of leave, but must pay for every day of leave after the first 10 days have passed.
  • Employers of unions must contribute to a fund that will be distributed by the union to its members based on their hours worked.

Tax credits for PHE leave under FMLA

Under the Consolidated Appropriations Act 2021, employers who voluntarily provide PHE paid leave under the FMLA can be 100% covered by way of a tax credit on an employer’s share of Social Security taxes on a quarterly basis through March 31, 2021.

Remember, the amount per paid day for an employee shall not exceed $200 with a $10,000 maximum for the year.

The quarterly tax credit cannot exceed the employer’s share of Social Security taxes in that quarter, however, any excess credit can be used by the business as an overpayment against future tax.

In addition to the paid leave, health plan expenses paid by the employer while the employee is on leave can also be counted toward the 100% paid in wages to the employee. This should be done on a pro rata, or proportional, basis for each employee and must be directly related to additional costs the employer had to take on as a result of supporting these new emergency paid leave options.

Understand everything you need to know about the new tax credit extensions here.

Who’s eligible for the tax credit?

All employers are eligible if they pay wages related to the new types of emergency leave mentioned above. Self-employed individuals are also eligible for a tax credit within the same limits as if they were an employee at another business. If they’re unable to work due to the same factors as a qualified employee, they can get either $200 per day or 67% of their average daily self-employment income, whichever is lower. 

Conditions apply

Self-employed individuals have a maximum of 50 days for use of the credit for FMLA PHE leave. Those who are self-employed should maintain documentation to prove their eligibility for all of this.

Coverage for COVID-19 testing

Expired December 31, 2020.

Under the FFCRA, all health insurance plans had been required to provide Food & Drug Administration-approved COVID-19 testing and any related office, urgent, emergency care, or telehealth visits related to a COVID-19 diagnosis free of charge.

However, this expired on December 31, 2020 and will not be extended or renewed.

This post was originally published on March 19, 2020.

Caleb Newquist
Caleb Newquist Caleb is Editor-at-Large at Gusto. In 2009, he became the founding editor of Going Concern, the one-of-a-kind voice on the accounting profession, serving in the role for 9 years. Prior to Going Concern, Caleb worked as a CPA for nearly 6 years in New York and Denver. He lives in Denver with his wife, two daughters, and two cats.
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