Families First Coronavirus Response Act H.R. 6201

Alert COVID-19 – Shannon & Associates LLP _ Kent, WA

Families First Coronavirus Relief Act #2

Emergency Paid Sick Leave and Emergency Family Medical Leave Act

The Act responds to the coronavirus outbreak by requiring paid leave and providing tax credits for people affected by COVID-19. 

Effective April 2, 2020, the Act requires all employers with fewer than 500 employees to pay for up to 10 workdays (80 hours for full-time employees) of qualified family leave or sick leave at the employee’s current rate of pay up to $511 per day ($5,100 maximum) for sick leave; and $200 per day ($2,000 maximum) to care for another qualified person.  The Act also provides for extended FMLA coverage capped at the lower of two-thirds of the employee’s regular rate of pay or $200 per day ($10,000 per employee).

*FMLA may be subject to an optional 10-day unpaid leave period; employees may elect to use accrued PTO days during this time period if permitted by their employer.

*Paid leave for wages paid prior to April 2nd should comply with company employment agreements or assistance provided by the specific states, counties, or cities.

The link below contains up to date information on this Act.

https://www.irs.gov/coronavirus

US Department of Labor Employer Requirements
US Department of Labor Poster
US Department of Labor Commonly Asked Questions

Summary of Paid Sick Leave

Employers are required to provide up to 10 Days (80 hours for full-time employees) of paid-sick-leave benefits if an employee can’t work, either onsite or remotely, for any of the following reasons:

  1. Has been ordered by the government to quarantine or isolate because of COVID-19
  2. Has been advised by a health care provider to self-quarantine because of COVID-19
  3. Has symptoms of COVID-19 and is seeking a medical diagnosis
  4. Is caring for someone who is subject to #1 and #2 above
  5. Needs to care for their child because school or childcare service is closed due to COVID-19
  6. The employee is experiencing any other condition substantially similar to the coronavirus, as specified by the U.S. Department of Health and Human Services

For circumstances #1-3 above:

  • Paid sick leave must be paid at the greater of an employee’s regular rate of pay, or minimum wage.
  • Paid sick leave paid out is limited to $511 a day, and $5,110 maximum per employee. 
  • Employees may start utilizing this leave on April 2, 2020

For circumstances #4-6 above:

  • Paid sick leave must be paid at the greater of two-thirds of an employee’s regular rate of pay, or minimum wage.
  • Paid sick leave paid out is limited to $200 a day, and $2,000 maximum per employee.

For all circumstances #1-6 above:

  • The entire paid sick leave is due immediately to employees.
  • Accrued time is not taken into consideration and employers cannot require an employee to use other paid leave before using the paid sick time provided in this new legislation.
  • Part-time employees must be paid the number of hours they would normally work during a two-week period;
  • The Employer is not required to pay unused paid sick leave if an individual is no longer an employee;
  • Eligible workers are anybody on payroll, regardless of how long they have been employed.

Summary of Paid Family and Medical Leave (FMLA)

Also known as Public Health Emergency Leave, the legislation updated the FMLA to provide workers with up to 12 weeks of leave when they can’t work, either onsite or remotely, because their child’s school or childcare service is closed due to a public health emergency.

  • The first 10 days of leave can be unpaid. Employees may elect to use accrued PTO days during this time period if the employer permits that option.
  • Eligible workers will receive up to two-thirds of their regular rate of pay up to $200/day ($10,000 maximum per employee) over the remaining 10 weeks
  • Eligible workers are workers who have been on the payroll for at least 30 calendar days.

Considerations for Both Paid Sick Leave and Paid FMLA

Variable work hours

  • For employees with variable work hours, paid leave would be equal to the average number of hours worked per day over the last six months.
  • If the employee did not work in the last six months, the paid leave rate should equal a reasonable expectation of the employee at the time of hiring, then taking into consideration the average number of hours.

Timeframe of paid leave

Once an employee is no longer in need of using the emergency paid leave, then the employer may terminate the paid leave time. Paid leave will not carry over from one year to the next.

Employee Notice

Employer may require the employee to follow reasonable notice procedures in order to continue receiving paid leave. Employers will be required to post a notice (or email to employees working remotely) regarding leave rules.  The Poster can be found Here.

Job protection

Both the paid sick leave and paid family and medical leave entitle eligible employees to be restored to their position or equivalent position. Exemption: for employers with less than 25 employees, employer does not need to return the employee to their position if:

  1. The position no longer exists due to changes in the employer’s economic or operating condition that affect employment and were caused by this emergency
  2. The employer makes reasonable efforts to restore the employee to an equivalent position, and
  3. The employer makes an additional reasonable effort to contact the employee if an equivalent position becomes available the earlier of (a) Date when employee no longer needs to take leave or (b) 12 weeks after the employee’s paid leave commences

Non-enforcement period

A temporary non-enforcement policy has been put into place, stating that no enforcement action against any employer for violations of the Act if the employer has acted reasonably and in good faith to comply within a 30-day period.

How will employers pay for this leave?

Based on qualifying leave paid from April 2, 2020, through December 31, 2020.

  • Eligible employers who pay qualifying wages will be able to retain an amount of the payroll taxes equal to the amount of qualifying wages that they paid, rather than deposit them with the IRS.
  • Payroll taxes that can be retained include withheld federal income taxes, and the employee and employer portion of Social Security and Medicare taxes.
  • If there are not enough taxes to cover the paid leave wages, companies can submit a request to the IRS to expedite a refund, which will be processed within two weeks.

Example: An eligible employer paid $5,000 in sick leave and is otherwise required to deposit $8,000 in payroll taxes – the employer would only deposit the difference of $3,000

Example: An eligible employer paid $10,000 in sick leave and is otherwise required to deposit $8,000.  The employer would deposit nothing and apply for an accelerated credit for the remaining $2,000.

***More details on this topic will be released in the coming weeks***

Existing health plan expenses

  • Additional tax credit is available for employer’s cost to maintain group health insurance for eligible employees during periods of coverage.

***More details on this topic will be released in the coming weeks***

Credit refundability and limitation

These refundable tax credits are available on qualified wages paid from April 2, 2020, to December 31, 2020. The credit will be equal to 100 percent of the qualified wages paid by an employer for each calendar quarter, not exceeding the total tax obligation.

Employers may not receive the tax credit if they are also receiving a credit for paid family and medical leave under the 2017 Tax Cuts and Jobs Act (P.L. 115-97). Employers would instead have to include the credit in their gross income.

Wage Time Period:  These credits apply only to days during the period beginning on a date selected by the Secretary of the Treasury, which is during the 15-day period beginning on the date of the enactment of this Act (March 18, 2020), and ending on December 31, 2020. 

Employer FICA exclusion: Sick leave and family and medical leave paid under the Act will not be considered wages under Code Sec. 3111(a)

Tax credits for self-employed Individuals- Refundable Credits to help offset self-employment tax. 

  • Covering 100% of SE individual’s sick-leave equivalent amount, or 
  • 67% of the individual’s sick-leave equivalent amount if they are taking care of a family member for up to 10 days
  • Wage limitation: lesser of average daily self-employment income, or $511 per day to care for themselves, or $200 to care for family member

Self-employed individuals receive equivalent credits. Current guidance says these credits will be claimed on their tax returns and reduce estimated tax payments. 
***More details on this topic will be released in the coming weeks***

Family leave credit for self-employed Individuals: for as many as 50 days multiplied by the lesser of $200 or 67% their average self-employment income. (Act Sec. 7004)

 I’m Self-Employed. Do I Qualify?

Self-employed individuals qualify, although unfortunately, they won’t feel any positive financial effects until tax season in 2021. What you’ll get is far better than nothing, but you would be struggling this year if you were to get sick with the coronavirus.

If you get sick with coronavirus and can’t work, you’ll receive a tax credit equal to your pay (up to $511 per day for up to 10 days).

Like your counterparts who are employed with a company, you also may be eligible for a coronavirus emergency family leave tax credit for up to 50 days. So if you lose a lot of work time because your child is out of school because it closed and you’re home-schooling, or if you’re taking care of a family member with the coronavirus, you may be able to get as much as a $10,000 tax credit (that would be $200 a day for 50 days).

If that ends up being your situation, you’ll want to stay in touch with your tax preparer, if you have one, and keep your medical records or documentation pertaining to a child’s school closing in case the IRS would like to see them.

*Families First Act #3 will extend and modify some of these provisions and updates will be made available on our website as soon as information is released.

Please also see our listing of additional resources available here

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