Navigating The Families First Coronavirus Response Act

An overview of the key elements

On March 18, Congress passed and the President signed into law the Families First Coronavirus Response Act to address the impact of the coronavirus (COVID-19) pandemic. The final bill contains numerous provisions affecting businesses and individuals throughout the U.S. Business leaders and HR teams will need to review the bill and put the appropriate measures in place to comply in the months ahead as the law took effect for most covered employers on April 1, 2020, and remains through December 31, 2020. 
 

In general, the Families First Coronavirus Response Act dedicates tens of billions of dollars for paid sick and family leave, unemployment insurance, free COVID-19 testing, and other measures to help offset the financial burden this crisis is putting on many Americans. Two key general provisions of the law include: The Emergency Unemployment Insurance Stabilization and Access Act of 2020 and coverage of testing for COVID-19. The former provides $1 billion in emergency grants to states for activities related to facilitating unemployment insurance benefits under certain conditions. The latter mandates that diagnostic testing and provider visits related to COVID-19 testing, including office visits, urgent care visits, and emergency room visits be provided without any co-pays, coinsurance, or deductibles.

Here is an overview of the other key elements, which generally apply to private employers with fewer than 500 employees (as well as certain public employers):

Emergency Paid Sick Leave (PSL) Act:

Employers are required to provide paid sick time, available for immediate use, to each employee requiring such time for specific reasons associated with the COVID-19 pandemic, including quarantines, currently seeking a diagnosis due to symptoms, or caring for an individual who is under quarantine or for a child whose school/care is closed due to COVID-19.
 

• Provide up to 80 hours of paid sick leave (PSL) to eligible full-time employees and pro-rate part-time employees paid sick time based on the average number of hours regularly scheduled in a two-week period.
• The calculation and caps for compensation vary dependent on the reason for leave with a maximum of $511 per day if the employee is the individual directly impacted and up to $200 per day if it is for the care of someone else. Aggregate caps exist as well.
• Employees may not be required to use other available paid time off before using paid sick time under this Act.
• Employees covered under a multi-employer bargaining agreement are addressed separately in the legislation.
• Some exemptions apply for employers of health care workers and emergency responders.
• Employers are required to post a notice of employee rights; a model poster is available on the U.S. Department of Labor website.
• Paid sick time provided under this Act is not preempted by other federal, state, or local law.

Payroll Credit for Required Paid Sick Leave (PSL):

This refundable tax credit is designed to reimburse 100 percent of wages paid by the employer under the new Emergency PSL for each calendar quarter.
 

• The tax credit is allowed against the employer portion of the tax imposed Social Security rate of 6.2 percent and the Medicare rate of 1.45 percent. 
• The amount is capped at the maximums of $511 or $200 per day, depending on the reason.
• If the credit exceeds the employer’s total liability of the employer portion of Social Security and Medicare in any calendar quarter, the excess credit is refundable to the employer.
• Self-employed individuals may qualify for an equivalent credit, under certain circumstances
• Recent informal IRS guidance permits a dollar-for-dollar offset against payroll taxes owed (including taxes withheld from employees) and an expedited refund process. 
• Specific rules apply that prevent a double tax benefit.

Emergency Family Medical Leave (FML) Expansion Act:

Temporarily expands the provisions under the Federal Family and Medical Leave Act to include paid leave to care for a child whose school or place of care is closed (or whose childcare provider is unavailable) for reasons related to COVID-19.
 

• Eligible employees, who have worked for their employer for at least 30 calendar days prior to the beginning of the leave, who qualify for the expanded reason for leave, would be paid by their employer after the first 10 days of leave at a rate of no less than two-thirds of their current rate of pay.
• There is a cap of $200 per day, up to a maximum of $10,000, after the first 10 days, for up to 12 weeks. 
• Employers may permit if the employee chooses but cannot require the use of any other paid time off during leave taken under the Emergency FML Expansion Act.
• Employees covered under a multi-employer bargaining agreement are addressed separately in the legislation.
• Some exemptions apply for employers of health care workers and emergency responders.

Payroll Credit for Required Paid Family Leave:

This refundable tax credit is designed to reimburse 100 percent of wages paid by the employer under the new Emergency FML expansion for each calendar quarter.
 

• The tax credit is allowed against the employer portion of the tax-imposed Social Security rate of 6.2 percent and the Medicare rate of 1.45 percent.
• The amount is capped for each employee at $200 per day and $10,000 for all calendar quarters.
• If the credit exceeds the employer’s total liability of the employer portion of Social Security and Medicare in any calendar quarter, the excess credit is refundable to the employer.
• Self-employed individuals may qualify for an equivalent credit, under certain circumstances.
• Recent informal IRS guidance permits a dollar-for-dollar offset against payroll taxes owed (including taxes withheld from employees) and an expedited refund process.
• Specific rules apply that prevent a double tax benefit.

The Families First Coronavirus Response Act provides some clarity for businesses and individuals during this time of uncertainty. Now is also a time for HR professionals to lean on their HR solutions providers to help them better understand the tools available to them and their employees, especially as many switches to remote work for the time being. 

Note: The information contained within is not tax or legal advice. These issues are complex, and applicability depends on individual circumstances. Businesses should consult tax or legal counsel before taking action on any of the items identified above.

Laurie Savage is a Senior Compliance Analyst at Paychex. Visit www.paychex.com  Connect Laurie Savage Follow @Paychex