The Senate has passed the Coronavirus Aid, Relief, and Economic Security Act (Cares Act). The bill is comprehensive and includes payroll and non-payroll related items and does not contain an employee payroll tax cut. The bill makes some changes to the recently signed Families First Coronavirus Response Act, H.R. 6201 (P.L. 116-127), specifically the family and medical leave and sick pay provisions, noted below. The House is expected to consider the bill on Friday, March 27.
Family and medical leave. Maximum amounts.—Current law states that the paid leave cannot not exceed $200 per day and $10,000 in the aggregate. The Senate bill clarifies that language slightly. An employer could not be required to pay more than $200 per day and $10,000 in the aggregate for each employee for paid leave.
Sick leave. Under current law, an employer is required to provide paid sick time to the extent that the employee is unable to work (or telework) due to:
- the employee is subject to a federal, state, or local quarantine or isolation order related to COVID-19;
- the employee has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
- the employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis;
- the employee is caring for an individual who is subject to an order as described in subparagraph (1) or has been advised as described in paragraph (2);
- the employee is caring for a son or daughter of such employee if the school or place of care of the son or daughter has been closed, or the child care provider of such son or daughter is unavailable, due to COVID-19 precautions; or
- the employee is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor. Except that an employer of an employee who is a health care provider or an emergency responder may elect to exclude such employee from the application of the bill.
Maximum sick pay amounts. The maximum amount of the sick pay cannot exceed $511 per day ($5,110 in the aggregate for sick leave use described in paragraphs (1), (2), or (3) above and $200 per day ($2,000 in the aggregate) for sick leave use described in paragraphs (4), (5), or (6).
The Senate bill adds the following language, but does not delete the current law language: An employer would not be required to pay more than either $511 per day and $5,110 in the aggregate for each employee, when the employee is taking leave for a reasons described in paragraphs (1), (2), or (3) above, or $200 per day and $2,000 in the aggregate for each employee, when the employee is taking leave for a reasons described in paragraphs (4), (5), or (6).
Leave expiration requirement. The Senate bill, as introduced, stated that employer paid leave would expire at the earlier of the time when the employer has paid that employee for paid leave an equivalent of 80 hours of work or upon the employee’s return to work after taking paid leave. This provision is not in the final version that passed the Senate.
Exclusions or exemptions. Under current law, the Secretary of Labor can exempt small businesses with fewer than 50 employees when the imposition of the requirements (paragraphs 1 through 5 above) would jeopardize the viability of the business as a going concern.
The prior Senate bill narrowed the provision to provide that the Secretary of Labor could exclude certain health care providers and emergency responders from the definition of eligible employee and could exempt small businesses with fewer than 50 employees only when the imposition of the requirements (paragraphs 4 and 5 above) would jeopardize the viability of the business as a going concern. This provision is not the final version that passed the Senate.
Government and civil service employees. The Senate measure adds some exemption authority. Thus, the Director of the Office of Management and Budget would have the authority to exclude certain employers from complying with the law. It does this by allowing the removal of some employees from the definition of “employee.” It would apply to some federal government employees.
Eligible employee. Under current law, eligible employee means an employee who has been employed for at least 30 calendar days by the employer. The Senate adds a provision for rehired employees. Under the Senate provision, the definition would include an employee who was laid off by that employer not earlier than March 1, 2020, who had worked for the employer for not less than 30 of the last 60 calendar days prior to the employee’s layoff, and who was rehired by the employer.
Data collection and investigations. The Secretary of Labor or his designee would be authorized to investigate and gather data to ensure compliance with the Act.
Family and medical leave and sick pay technical corrections. The Senate bill contains several non substantive technical corrections, such as references to sections of the law that don’t exist and changes a reference to which federal employees could be exempted.
Deposit penalty waiver. The Secretary of the Treasury could waive any penalty for any failure to make a deposit of the payroll taxes if the Secretary determines that such failure was due to the anticipation of the credits allowed under the law. It does not include personal income tax withheld as there is no reference to Code Sec. 3402.
Advance payment of payroll credit. Under the Senate measure, employers could get the payroll tax credit in advance. The Secretary of the Treasury (or the Secretary’s delegate) would be required to issue forms and instructions as are necessary to allow the advance payment of the credit to be calculated through the end of the most recent payroll period in the quarter.
Delay of payment of employer payroll taxes. The Senate bill would allow employers to delay the payment of the employer share of payroll taxes until 2021 and 2022, with half of payroll taxes for 2020 due by Dec. 31, 2021, and the other half due by Dec. 31, 2022. The provision does not include personal income tax withheld as there is no reference to Code Sec. 3402 and there is no employer-share for withheld income tax. Employers generally are responsible for paying a 6.2% social security tax on employee wages.
Paycheck protection. Eligible small businesses could obtain loans to cover employee payroll costs. The term payroll costs would mean the sum of: salary, wages, commissions, or similar compensation, payment of cash tip or equivalent; payment for vacation, parental, family, medical, or sick leave, allowance for dismissal or separation, payment required for the provisions of group health care benefits, including insurance premiums; payment of any retirement benefit; or payment of state or local tax assessed on the compensation of employees. The loan program would apply to employers not more than the greater of 500 employees; or if applicable, the size standard in number of employees established by the Administration for the industry in which the business concern, nonprofit organization, veterans organization, or tribal business concern operates. Employers with more than one physical location include those that employ not more than 500 employees per physical location and that is assigned a North American Industry Classification System code beginning with 72 at the time of disbursal are eligible to receive a covered loan.
Health savings accounts (HSAs). The bill would allow a high-deductible health plan (HDHP) with a health savings account (HSA) to cover telehealth services prior to a patient reaching the deductible, increasing access for patients who may have the COVID-19 virus and protecting other patients from potential exposure.
This section would allow patients to use funds in HSAs and Flexible Spending Accounts (FSAs) for the purchase of over-the-counter medical products, including those needed in quarantine and social distancing, without a prescription from a physician.
Short-time compensation (unemployment benefits). Funding would be provided to support “short-time compensation” programs, where employers reduce employee hours instead of laying off workers and the employees with reduced hours receive a pro-rated unemployment benefit. This provision would pay 100% of the costs incurred in providing this short-time compensation through December 31, 2020. The Department of Labor would be required to disseminate model legislative language for states, provide technical assistance, and establish reporting requirements related to “short-time compensation” programs.
Unemployment insurance applications. States would be required to make sure that applications for unemployment compensation and assistance with the application process are accessible, to the extent practicable, in at least two of the following: in person, by phone, or online.
Exclusion for certain employer payments of student loans. The provision enables employers to provide a student loan repayment benefit to employees on a tax-free basis. Under the provision, an employer may contribute up to $5,250 annually toward an employee’s student loans, and such payment would be excluded from the employee’s income. The $5,250 cap applies to both the new student loan repayment benefit as well as other educational assistance (e.g., tuition, fees, books) provided by the employer under current law. The provision applies to any student loan payments made by an employer on behalf of an employee after date of enactment and before January 1, 2021.
Employee retention credit. The provision provides a refundable payroll tax credit for 50 percent of wages paid by employers to employees during the COVID-19 crisis. The credit is available to employers whose (1) operations were fully or partially suspended, due to a COVID-19-related shut-down order, or (2) gross receipts declined by more than 50 percent when compared to the same quarter in the prior year.
The credit is based on qualified wages paid to the employee. For employers with greater than 100 full-time employees, qualified wages are wages paid to employees when they are not providing services due to the COVID-19-related circumstances described above. For eligible employers with 100 or fewer full-time employees, all employee wages qualify for the credit, whether the employer is open for business or subject to a shut-down order. The credit is provided for the first $10,000 of compensation, including health benefits, paid to an eligible employee. The credit is provided for wages paid or incurred from March 13, 2020 through December 31, 2020.
10% penalty on early distributions waived. Consistent with previous disaster-related relief, the bill would waive the 10-percent early withdrawal penalty for distributions up to $100,000 from qualified retirement accounts for coronavirus-related purposes made on or after January 1, 2020. In addition, income attributable to such distributions would be subject to tax over three years, and the taxpayer may recontribute the funds to an eligible retirement plan within three years without regard to that year’s cap on contributions. Further, the provision would provide flexibility for loans from certain retirement plans for coronavirus-related relief.
A coronavirus-related distribution would be one made to an individual: (1) who is diagnosed with COVID-19, (2) whose spouse or dependent is diagnosed with COVID-19, or (3) who experiences adverse financial consequences as a result of being quarantined, furloughed, laid off, having work hours reduced, being unable to work due to lack of child care due to COVID-19, closing or reducing hours of a business owned or operated by the individual due to COVID-19, or other factors as determined by the Treasury Secretary.
Required minimum distributions waived. The provision would also waive the required minimum distribution rules for certain defined contribution plans and IRAs for calendar year 2020.
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