Payroll Provisions of ARPA

What to Know About ARPA

The American Rescue Plan, 2021 (ARPA, 2021) was signed by President Biden on March 11, 2021 to address the continuing economic impact the COVID-19 pandemic has had on employers and employees. President Biden signed ARPA, 2021 into law on March 11. The legislation extends and expands provisions found in the Families First Coronavirus Relief Act (FFCRA), Coronavirus Aid, Relief and Economic Security (CARES) Act, and the Consolidated Appropriations Act, 2021 (CAA, 2021). 

Changes and expansions in ARPA, 2021 apply to the following categories:

  • Paid Sick and Family Leave Credits
  • Employee Retention Credit (ERC)
  • Unemployment
  • Paycheck Protection Program (PPP)
  • Earned Income Credit
  • Benefits
  • and Other Provisions

Paid Sick and Family Leave Credits

Paid Sick and Family Leave Credits
From March 31, 2021 through September 30, 2021, paid sick time and family leave credits will be extended through the FFCRA. These credits can be structured as refundable payroll tax credit against Medicare tax (1.45%) beginning March 31, 2021.

Employee Retention Credit (ERC)

Employee Retention Credit
ERC is extended from June 30, 2021 until December 31, 2021. The ERC rate of credit at 70% will be continued during this extended period of time. It also continues to allow up to $10,000 in qualified wages for any calendar quarter. An employer can potentially have up to $40,000 in qualified wages per employee through 2021.

Unemployment Provisions

Unemployment Provisions
Unemployment provisions are extended to September 6, 2021, including:
1. Pandemic Unemployment Assistance (PUA)
2. Federal Pandemic Unemployment Compensation (FPUC),
3. Pandemic Emergency Unemployment Compensation (PEUC),
4. Funding for waiving the one-week unemployment benefit waiting period,
5. Temporary financing of short-time compensations (STC) payments for states with programs,
6. STC agreements for states without programs, temporary assistance for states with general unemployment advances,
7. Full federal funding of extended unemployment compensation.

Taxability of Unemployment Benefits in 2020
The first $10,200 of unemployment benefits are tax free in 2020 for qualified taxpayers.

Paycheck Protection Program (PPP) Modifications

An additional $7.25 billion has been allocated toward PPP funding; however, the application period remains at March 31, 2021. An “additional covered nonprofit entity” has been added for First Draw and Second Draw PPP loans.

Additionally, First and Second Draw PPP loans used to determine the credit for COBRA premium assistance (as provided under Code Sec. 6432) are eligible for forgiveness.

Benefit-Related Provisions

Dependent Care Assistance has been increased from $5,000 to $10,500 for married couples filing jointly for the amount of taxable wage exclusion for dependent care benefits. Excludable wages for married couples filing separately is $5,250. This increase applies to any taxable year beginning after December 31, 2020 and before January 1, 2022, effective December 31, 2020.

Additional modifications have been put into place in regards to Assistance Eligible Individuals (AEIs), including a possible 85% subsidy for COBRA premiums paid during any period of COBRA coverage during the period beginning April 1, 2021 and ending September 30, 2021.

Take Full Advantage of ARPA

Ensure you’re reaping the full benefits of the American Rescue Plan Act (ARPA, 2021) that has been signed by President Biden. From PPP loans and ERC to employee benefits and unemployment, there are modifications that could align for your specific situation.

Contact your CTBK service team to learn more about how ARPA can impact you and your finances.

716-630-2400 | in**@ct**.com

"*" indicates required fields

Max. file size: 32 MB.