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Signed into law on March 18, 2020, the Families First Coronavirus Response Act (FFCRA) contains several provisions relevant to employers. The legislation aims to help offset the growing economic crisis of the coronavirus pandemic. This act will be but one in a number of pieces of legislation that the federal and state governments are currently discussing, refining, and will be voting on or implementing in the coming week. Each of these new developments may have an impact on previous legislation.
Delap is committed to bringing you information as it becomes available and has been confirmed. To that end, we are providing you with a brief overview of the provisions of the bill as of Sunday, March 22, 2020.
The Families First Coronavirus Response Act provides three major provisions for employers:
Wages paid under either of these provisions are considered W-2 wages to the recipient. These wages are exempt from the employer portion of the Social Security tax but are subject to the 1.45% Medicare tax. This act does not preclude existing state and local paid sick leave requirements, and employers cannot require employees to use other leave first. The requirements of sick leave under this act expire December 31, 2020.
Employers that are subject to the provisions of the Families First Coronavirus Response Act are eligible for employment tax credits. These credits were established to help offset the added financial burden on employers.
Employers with less than 500 employees are allowed a refundable credit against employer Social Security tax liability equal to 100% of the qualified sick leave wages paid by the employer, subject to certain limits. The credit is increased by specified health expenses (e.g., employer-paid health plan premiums), but limited to qualified health plan expenses that are excluded from employees’ income as coverage under an accident or health plan.
The credit is effective for sick leave paid beginning April 1, 2020, and applies to both the emergency FMLA expansion and the emergency sick leave.
The basic logistics of the credit are as follows:
The base credit is equal to:
Wages paid under either of these provisions are considered W-2 wages to the recipient. These wages are exempt from the employer portion of the Social Security tax but are subject to the 1.45% Medicare tax. When calculating the credit, the employer portion of Medicare tax paid on the wages and employer-paid health plan costs for a qualified employee for the period during which the sick leave is paid may be included to determine the credit base.
In order to avoid a double benefit, the employer's gross taxable income is increased by the amount of the credit received. The employer will receive the full tax deduction of all wages paid. No credit will be allowed for wages where the IRC §45S FMLA credit, which is not related to COVID-19, is taken.
As additional guidance becomes available, Delap anticipates releasing updates. Stay tuned to our COVID-19 Blog to stay informed.