On December 27, 2020, the Consolidated Appropriations Act (CAA) was signed into law. The CAA provides an extension of many of the COVID-19 relief measures in the FFCRA, CARES Act, and other regulations addressing the virus. Since we're all playing catch and getting into the swing of 2021, below is a brief summary of some key parts of this new legislation that impacts HR and payroll teams.
EXTENSION OF THE FAMILIES FIRST CORONAVIRUS RELIEF ACT (FFCRA)
The CAA extended the FFCRA provisions through March 31, 2021, with no requirement for employers to offer paid sick leave after December 31, 2020. While it's no longer required that organizations offer FFCRA emergency sick and family leave, the American Rescue Plan that was passed on March 11, 2011 expanded tax credit eligibility to organizations that opt into paid sick and family leave. The Plan resets the eligible amount of paid sick and family leave as of April 1, 2021 and extends through September 30th, 2021. The Plan also adds to the reasons for taking FFCRA eligible leave to include vaccination events.
EXTENSION AND ENHANCEMENT OF THE EMPLOYEE RETENTION CREDIT
Eligible businesses with less than 500 employees can receive a refundable tax credit on employee wages and the employer portion of health benefits. The credit is extended to cover wages paid after December 31, 2020 through June 30, 2021. Eligible wages are increased to 70 percent instead of the original 50 percent. Your company can claim an employee retention credit for wages, regardless if the employee was performing services or not.
Organizations can now claim an employee retention credit even if they previously received Paycheck Protection or other business interruption loans. The CAA also expands coverage to include companies that were not in business in 2019.
ADDITIONAL PAYCHECK PROTECTION PROGRAM (PPP) FUNDING
PPP funding has been expanded to allow certain businesses to receive a second forgivable PPP loan called a “PPP second draw.” Eligibility is limited to small businesses with 300 or less employees who have lost more than 25 percent of revenues in any quarter of 2020, and who have used or will use the entire amount of their first PPP loan.
There are now more forgivable expenses for existing PPP loans – and those loans that have not already been forgiven may use the expanded definition of forgivable expenses. Borrowers with PPP loans of $150,000 or less now have access to a simplified loan forgiveness process.
The CAA cover period is for all PPP loans through March 31, 2021.
CHANGES TO STUDENT LOANS
The CARES Act had a provision that enabled employees to defer the interest on their student loans. There was also a provision that enabled employers to make tax free payments toward their employees’ student loans up to the annual limit of $5,250. The CAA expands tax exemption to include tuition reimbursement programs.
The CAA extends the tax exemption program for student loan and tuition repayments through January 1, 2026. Employees must start repaying deferred student loan interest after January 31, 2021. And employers offering student or tuition reimbursement programs can do so, tax free, until January 1, 2026.
CHANGES TO DEFERRAL OF EMPLOYEE SOCIAL SECURITY TAX
On August 8, 2020, employees were allowed to defer the employee portion of social security tax through the end of 2020. Most employees are eligible, but employers have the option to offer this deferral to their employees. Your company is not required to offer the deferral to your employees. Deferred employee social security taxes may be recollected through December 31, 2021 and the deferred taxes must be repaid before January 1, 2022.
HR and payroll teams need to make sure their processes adapt to align to the new legislation. For many businesses, this may seem like another layer of inefficient, manual process, but it doesn't have to be that way. With a modern HR solution with automatic legislative updates and flexible settings, companies like yours can quickly adapt to manage these changes with more efficient and compliant processes. Learn more about our HCM solution at www.csphcm.com.