March 12, 2021
This week, the President’s signing of the American Rescue Plan Act of 2021 into law (H.R. 1319 or the Act) dominated the news media (reported in the New York Times, Washington Post, and others). This law, which includes the largest COVID-19 relief package to date and a substantial health coverage expansion, will have wide-ranging short and long-term effects on employers and employees alike, including in the area of employee benefits.
Why Your CEO May Care
Your CEO will want to know how the American Rescue Plan Act affects your company and its employees. At a high level, the health care system as a whole will benefit from additional funding for COVID-19 testing, contact tracing, vaccination, and other public health investments.
Benefits teams will need to focus on the following provisions that will affect (directly or indirectly) group health plan enrollment and costs:
- COBRA subsidy. A 100% COBRA premium subsidy from 4/1/2021 through 9/30/2021 for employees who are COBRA-eligible due to involuntary termination or reduction in hours. Employers will receive this subsidy in the form of a payroll tax credit.
- DCAP. An option, for the 2021 plan year only, to increase the dependent care assistance program employee contribution limit from $5,000 to $10,500.
- Public exchanges. Two-year increase in subsidies for individual market coverage offered through public exchanges, as well as expanded eligibility for subsidies.
- Medicaid. Two-year increase in incentives for states to expand Medicaid eligibility.
The Act also, among other things:
- Extends the tax credit for employers providing paid family and medical leave;
- Extends the employee retention tax credit through the end of 2021;
- Provides funding to sustain failing multiemployer pension plans; and
- Increases federal income supports for individuals and households such as cash assistance, unemployment benefits, the child tax credit, and the earned income tax credit.
Notably, the Act did not extend paid leave requirements from the Families First Coronavirus Response Act. Although many of the Act’s benefits-related provisions are temporary, Congress likely will consider renewing many of them.
What Should Large Employers Be Doing?
In the coming weeks, employers will want to take the following steps:
- Begin discussions on implementation of the COBRA subsidy with HR, benefits, payroll, legal, and third-party vendors;
- Determine whether to increase the $5,000 limit on employee DCAP contributions for the 2021 plan year (and amend plan documents if necessary);
- Evaluate how expanded public exchange subsidies may affect uptake of and potential reporting obligations for employer-sponsored group health plans; and
- Evaluate eligibility for the various tax credits available under the Act.
We will provide a more detailed discussion of this and other new COVID-19 guidance in our next regulatory and compliance webinar on March 18, 2021 at 12:00PM ET. Members can register here.
In the coming weeks and months, federal agencies will undertake extensive rulemaking and guidance to implement the American Rescue Plan Act. The Business Group will continue to work with the agencies, submit comments, and welcome input from members. We also will keep our members updated on any new regulations and guidance.