The $1.9 trillion relief bill, known as the American Rescue Plan, has passed Congress and will head to President Joe Biden for a signature. Highlights of the bill include extended unemployment benefits, direct checks to individuals and more. While some of the bill was changed during its time in the Senate, it’s largely similar to the initial version passed by the House. While there are many provisions in this nearly $2 trillion relief bill, it contains the following relief for employers and individuals:
- SMALL BUSINESS ASSISTANCE
The bill invests billions toward small business assistance. Here is the current funding breakdown:
- $15 billion for the Economic Injury Disaster Loan program
- $28 billion for a new grant program specifically for bars and restaurants
- $7.25 billion for the Paycheck Protection Program (Employers that received loans through the program last year may be eligible for a second loan if they meet certain criteria. Eligible employers can now apply for a first or second loan through March 31.)
- DIRECT PAYMENTS
Just like the two other COVID-19 relief bills passed during the pandemic, this version also features direct payments to Americans. This time around, eligible recipients can expect $1,400 per person ($2,800 for couples), including adult dependents—a family of four could receive up to $5,600. However, payment parameters are stricter this time around than with the previous direct payment. The full amount will go to individuals earning under $75,000 (or $150,000 for couples), with payments cut off entirely for individuals earning over $80,000 (or $160,000 for couples). Individuals earning an amount between those figures will receive a reduced sum.
- UNEMPLOYMENT AID
The bill extends two previously established pandemic unemployment assistance efforts: the Pandemic Unemployment Assistance Program and the Pandemic Emergency Unemployment Compensation program. Unemployed gig workers, freelancers, contractors and others who previously qualified for aid will continue to be eligible under these programs. The financial assistance provided by these two programs is currently set to expire in mid-March, which pressured legislators to act quickly. The bill also provides for enhanced unemployment assistance payments of $300 per week. Under the bill, these programs and their financial aid are extended through Sept. 6.
- HEALTH INSURANCE PREMIUM ASSISTANCE
Increased ACA subsidies are available to individuals in the exchange, realized by capping the cost of premiums at 8.5% of household income for the benchmark plan. Subsidy enhancements will be retroactive to the start of 2021. Individuals who are currently enrolled in an exchange plan will be able to start claiming any extra subsidy immediately, or they can wait and claim it on their 2021 tax return. The additional premium subsidies will extend through 2022.
- HOUSING ASSISTANCE
The bill sets aside billions in financial aid to homeowners and renters. Here is the funding breakdown:
- Aid for emergency rental assistance: $22 billion
- Aid for mortgages, utilities and property taxes: $10 billion
- Aid to states and localities to help individuals at risk of becoming homeless: $5 billion
- TAX CREDITS FOR PAID LEAVE
The Families First Coronavirus Response Act (FFCRA), signed into law on March 18, 2020, required certain employers to provide employees with paid sick leave or expanded family and medical leave for specified reasons related to COVID-19. That requirement expired Dec. 31, 2020. The American Rescue Plan maintains the status quo, in that it does not require employers to offer leave under the FFCRA framework. However, the bill does provide tax credits for employers that voluntarily provide leave under the FFCRA framework through the end of September 2021.
- INCREASED CHILD TAX CREDITS
The relief bill provides an overhaul of the child tax credit for the 2021 tax year. The bill increases the amount of the credit to $3,000 for each child under the age of 18 and $3,600 for children under the age of 6. The credit will also become fully refundable, meaning low-income individuals would receive the benefit.
- INCREASED DEPENDENT CARE FSA AMOUNTS
For 2021, the increased threshold is $10,500 in a dependent-care account instead of the normal $5,000. Employers must adopt this provision in order for employees to increase their elected funds for their dependent-care FSA - it is not mandatory for them to do this.
- COBRA SUBSIDIES
The bill subsidizes private health insurance premiums for unemployed workers through the Consolidated Omnibus Budget Reconciliation Act (COBRA). The provision allows individuals eligible for COBRA insurance coverage to maintain their employer-sponsored coverage after losing employment without having to pay any portion of the premiums from April 1 through the end of September 2021. (HHS, Treasury and the DOL are now tasked with providing guidance as to how the full COBRA subsidies will be administered and how employers will be reimbursed through tax credits.)
We are expecting more action from Congress and the Administration to address other aspects of the pandemic and to put regulations in place in order to implement certain aspects of The American Rescue Plan. Higginbotham will continue to provide updates as we receive information.