Tax Credits Extended through September 2021 for Employers Voluntarily Providing Employees with Paid FFCRA Leave

Just short of the one year anniversary of President Trump signing the Families First Coronavirus Response Act (FFCRA) into law on March 18, 2020, Congress and the Biden Administration granted employers tax incentives to voluntarily continue to provide paid time off under the FFCRA. 

The FFCRA required private employers with less than 500 employees to provide Emergency Paid Sick Leave (EPSL) and Emergency Family and Medical Leave (EFMLA) to their employees under certain circumstances relating to COVID-19. The mandatory obligation to provide such leave ceased on December 31, 2020.

In December 2020, the Coronavirus Response and Relief Supplemental Appropriations Act 2021 (CRRSA) authorized employers to receive tax credits if they voluntarily provided employees with FFCRA leave between January 1, 2021 and March 31, 2021

On March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 (American Rescue Plan) into law. Section 9641 of the American Rescue Plan authorizes the IRS to continue to provide tax credits to employers who voluntarily provide FFCRA leave through September 30, 2021, and also expanded FFCRA benefits in the following respects:

• Basis for Leave Expanded

  • Employees may utilize leave if they are seeking medical testing or diagnosis of COVID-19 because of exposure or because the employer requires the testing or diagnosis.
  • Employees may utilize leave if they are seeking a vaccination.
  • Employees may utilize leave if they are recovering from any injury, disability, illness, or condition resulting from the vaccination.

• Reset 10-Day Limit

  • Employers may now claim tax credits for voluntarily offering an additional 10 days of FFCRA Sick Leave between April 1, 2021 and September 30, 2021, even if employees previously exhausted their FFCRA leave.

• Family Leave Pay Cap Extended

  • Employers may now claim tax credits for offering paid FFCRA Family Leave taken between April 1, 2021 and September 30, 2021 up to a maximum of $200 per day or an aggregate of $12,000 (the prior aggregate cap was $10,000).

Voluntarily providing paid FFCRA leave between April 1, 2021 and September 30, 2021, can benefit both employers and employees. As we previously advised in our webinar, “Vaccine Mandates in the Workplace – Roll it Out or Roll it Back?,” employers should strongly encourage employees to get vaccinated rather than instituting a mandatory vaccination policy. The expanded FFCRA eligibility criteria affords employees the opportunity to get vaccinated and recover from possible side effects without any worries related to wages or what type of paid or unpaid time off would be available. For employers, by providing the voluntary paid FFCRA leave, they become eligible to claim tax payroll credits. 

Additionally, while employers can choose whether to continue to offer paid Sick Days and/or paid FMLA leave, to secure tax credits for the payments, they must make the paid time off available for all of the stated reasons, including the new ones mentioned above.  Therefore, employers who choose to continue to provide paid FFCRA leave through September 30, 2021 should update their policies to reflect the new grounds for leave, the additional 10 paid Sick Days, and the expanded $12,000 cap on paid Family Leave that are available.