Category: Coronavirus

COVID Stimulus Bill provides Free COBRA Coverage

On March 11, 2021, the American Rescue Plan Act of 2021 (“ARPA”) was signed into law by President Biden. The ARPA includes several significant health, pension funding, executive compensation and other tax changes. Notably, the ARPA provides temporary COBRA and Affordable Care Act subsidies intended to help people maintain health insurance during the pandemic.

Six months of free cobra

The ARPA provides employers a 100% COBRA subsidy for “assistance eligible individuals” where the qualifying event is an involuntary termination of employment or reduction in hours. An “assistance eligible individual” is any COBRA qualified beneficiary who loses group health coverage on account of a covered employee’s reduction in hours of employment or involuntary termination of employment. The subsidy applies not only to federal COBRA coverage, but also to state law programs that provide comparable continuation coverage.

For a period of up to six months, an “assistance eligible individual” is treated as having paid their COBRA coverage in full if the individual timely elects COBRA coverage. This means the person to whom the premiums are usually paid cannot collect the premium from the assistance eligible individual. One hundred percent of the premium is subsidized by the federal government via a tax credit mechanism.

Tax Credit

The tax credit works by allowing the “person to whom premiums are payable” (the employer for a self-insured plan and the insurer for a fully insured plan) to claim a tax credit for the COBRA premium assistance that was provided to an assistance eligible individual for any period of COBRA coverage during the subsidy period of April through September 2021.

This credit applies against that entity’s liability for the Medicare Hospital Insurance (“HI”) tax (i.e., the 1.45% Medicare payroll tax). It also applies as a credit against any applicable similar tax under the Railroad Retirement Tax Act (“RRTA”) imposed on compensation paid to railroad employees and representatives. The amount of the credit generally cannot exceed the HI tax (or RRTA tax), reduced by any credits otherwise allowed under other COVID-19 relief acts (the Coronavirus Aid, Relief, and Economic Security Act or the Families First Coronavirus Response Act).

The ARPA provides that the IRS could allow such credits to be advanced, and the IRS may issue further guidance about the mechanics of such an advance.

DURATION OF SUBSIDY PERIOD

The ARPA COBRA subsidy period is between April 1, 2021 and September 30, 2021. Importantly, the ARPA subsidy is available only to those whose initial COBRA period ends (or would have ended if COBRA had been elected/did not lapse) either during or after this six-month period.  The subsidy does not lengthen the COBRA period.

OPTIONAL New Election Right

Employers are permitted to allow individuals who are eligible for ARPA COBRA relief to change elections to other plan options that have the same or lower cost premiums. This election right is optional and employers are not required to offer it.

Notification Requirement

Plan administrators must notify eligible employees by May 31, 2021 (60 days after April 1, 2021), and the notice must include a description of the extended election options as well as certain plan information. The U.S. Department of Labor is required to issue model COBRA notices addressing the subsidy, and we expect the government agencies to issue guidance on various issues related to the subsidy in the coming weeks.

Please reach out to your ERISA Benefits Law contact if you have any questions about the implementation of this COBRA relief.

American Rescue Plan Act of 2021, H.R. 1319

ARPA Includes Voluntary Extension and Expansion of FFCRA Paid Leave

The American Rescue Plan Act of 2021 (ARPA), signed by President Biden on March 11, 2021, includes a voluntary 6-month extension of the refundable tax credits available to employers for providing Emergency Paid Sick Leave (EPSL) and Emergency FMLA (EFMLA) under the Families First Coronavirus Response Act (FFCRA). For employers that want to take advantage of the extension, the ARPA also expands the EPSL and EFMLA paid leave entitlements that must be provided. 

Background

The FFCRA paid leave provisions, which required employers with fewer than 500 employees to provide paid EPSL and EFMLA paid leave, originally expired on Dec. 31, 2020. The tax credits covering the cost of EPSL and EFMLA paid leave were extended through March 31, 2021 (see our post here), helping employers to voluntarily continue providing such paid leave for employees who did not use up all of their paid leave entitlement by December 31, 2020. 

The ARPA Extension and Expansion

An employer’s decision to extend EPSL and EFMLA paid leave is entirely voluntary. Employers are, therefore, not required to take any action in response to this aspect of the ARPA.

However, employers wishing to take advantage of the refundable tax credits will need to comply with the EPSL and EFMLA requirements, as modified by the ARPA. Employers should note the following key points in this regard:

  • The employer must provide every employee with a new grant of 10 days of Earned Paid Sick Leave as of April 1. This is 80 hours for full time employees and is pro rated for part time employees, as under the original FFCRA.
  • The qualifying reasons for leave are expanded. There were originally 5 qualifying reasons for an employee to take EPSL, including
    • three “personal” reasons: the employee is (1) subject to government quarantine or (2) has been advised by a health care provider to self-isolate or (3) is experiencing COVID-19 symptoms and is seeking a diagnosis, and
    • two “caring” reasons: the employee is (4) caring for someone who is subject to one of the three “personal” COVID-19 issues or (5) is caring for a child whose school or place of care is closed  or unavailable due to COVID-19 precautions.
    • EFMLA paid leave (i.e. paid leave after the first two weeks of EPSL) was only available for the two “caring” reasons).
    • The ARPA expands the qualifying reasons for paid leave in two ways:
  • The ARPA makes the three “personal” qualifying reasons for paid EPSL leave also available for paid EFMLA leave.
  • The ARPA adds three new “personal” reasons for taking paid EPSL and EFMLA leave: 
    • the employee is seeking or awaiting the results of a diagnostic test for, or a medical diagnosis of, COVID–19 and such employee has been exposed to COVID–19 or the employee’s employer has requested such test or diagnosis, or 
    • the employee is obtaining immunization related to COVID–19 or 
    • the employee is recovering from any injury, disability, illness, or condition related to immunization related to COVID-19 
  • The tax credit is available on paid leave taken with respect to the period from April 1 to September 30, 2021. An employer that elects to extend the EPSL and EFMLA paid leave can claim the credit for qualifying leave paid “with respect to the period beginning on April 1, 2021, and ending on September 30, 2021.” This covers leave taken between April 1 and September 30, even if the wages are paid after September 30 (i.e. on the last payroll covering the period up through September 30, 2021)
  • The aggregate amount of EFMLA wages that can be subject to the credit increased from $10,000 per employee to $12,000.
  • The first 10 days of EFMLA leave is now paid leave. Under the original FFCRA the first 10 days of EFMLA leave was unpaid (because it was paid as EPSL). Accordingly, the total available paid EFMLA leave is extended to 12 weeks (from 10). The law therefore appears on its face to require payment of both EPSL and EFMLA leave concurrently during the first 10 days, but this is unlikely the intention. More likely, the intention is to provide an additional 10 days of paid leave in total, on top of whatever an employee had “left over” when their EPSL and EFMLA leave entitlement otherwise expired (December 31, 2020 unless voluntarily extended to March 31, 2021).
  • The employer need NOT have voluntarily extended its EPSL and EFMLA leave policies to March 31, 2021 in order to take advantage of the new extension. expired on 
  • The employer must comply with all of the requirements of the FFCRA paid leave law (notice, documentation of leave requests and approvals, no retaliation for taking leave, etc…)
  • The ARPA explicitly denies a double tax benefit to the employer, providing that the employer’s gross income shall be increased by the amount of the tax credit received.
  • The extension includes a non-discrimination provision that disallows the credit for any employer that discriminates “with respect to the availability of the provision of qualified sick leave wages” in favor of:
    • highly compensated employees (within the meaning of Code section 414(q)), 
    • full-time employees, or 
    • employees on the basis of employment tenure with the employer. 
  • The credit does not apply to amounts that are taken into account as payroll costs in connection with certain specified relief programs:
    • a covered loan under section 7(a)(37) or 7A of the Small Business Act,
    • a grant under section 324 of the Economic Aid to Hard-Hit Small Businesses, Non-Profits, and Venues Act, or
    • a restaurant revitalization grant under section 5003 of the American Rescue Plan Act of 2021. 

Next Steps

Employers wishing to adopt this latest extension and expansion of the FFCRA paid leave program will need to revise their policies and related leave request and leave determination forms and procedures. If you used ERISA Benefits Law’s model EPSL/EFML Policies, Leave Request Form and Leave Determination Form to administer your FFCRA paid leave program in 2020, email your contact at the firm to get details on how we can assist you in efficiently updating those documents to implement the extension.

Families First Coronavirus Response Act Paid Leave – Voluntary Extension Through March 31, 2021

The Consolidated Appropriations Act, 2021 (H.R. 133), which was signed into law on December 27, 2020, includes provisions that allow employers to voluntarily extend their Families First Coronavirus Response Act Emergency Paid Sick Leave and Emergency Paid FMLA leave through March 31, 2021 if they want to.

Importantly, the Act does NOT provide an additional 80 hours of Emergency PSL, and it does NOT provide an additional 10 weeks of EFMLA leave. Employers that decide to extend their leave should consider the following:

  1. Revise the end date in the Policies we previously provided, from December 31, 2020 to March 31, 2021 .
  2. Continue tracking the leave as before, and continue taking the tax credit, up through March 31, 2021, as you did in 2020.
  3. Anyone who used up their paid leave entitlement in 2020 will not benefit from the extension, because they already used it up. Anyone who did not use all the paid leave will have three more months to do so.
  4. Apply the extension to all employees.

Employee Benefits Relief in the Year-End COVID-19 Stimulus Legislation

The Consolidated Appropriations Act, 2021 (H.R. 133) (the “Act”) was passed by both houses of Congress on December 21, 2020, and signed into law by the President on December 27, 2020. The Act is an incredible 5,593 pages long and contains both an omnibus spending bill to fund the government through September 30, 2021 and a COVID-19 stimulus package that provides approximately $900 billion in emergency relief to individuals and businesses.

The Act contains numerous provisions that impact employee benefit plans. The principal takeaways from the Act that plan sponsors must consider are summarized below. In contrast to the length of the Act itself, this alert is intended to provide a high level summary. Please reach out to us if you have specific questions about the Act.

Health and Welfare Plan Related Provisions

This is the largest health care legislative package since the Affordable Care Act and the Act includes almost a dozen new patient protections with quickly approaching effective dates, which will result in significant new regulation being issued in 2021.

FSA Flexibility

The Act provides for significant additional flexibility for both health care flexible spending arrangements (“FSA”) and dependent care FSAs. These provisions are optional, not required, and employers will need to amend their plans to provide the new rights, if they choose to offer them.

Carryover. Any unused funds in FSAs from a plan year ending in 2020 or 2021 may be carried over and used at any time in the next plan year. These carryovers will be allowed under rules similar to the existing carryover rules for health FSAs (but without the dollar limit on carryovers).

Grace Periods. FSAs with grace periods may extend those grace periods to up 12 months for plan years ending in 2020 or 2021. Normally, grace periods have a maximum 2 ½-month period.

Post-Termination Reimbursement. If an employee terminates participation during calendar year 2020 or 2021, FSAs may also reimburse for otherwise eligible expenses incurred through the end of that year (plus any grace period).

Dependent Care Post-Age 13 Coverage. For dependent care FSAs, if a dependent became too old to have their care expenses reimbursed (age 13) due to the pandemic, any unused funds may be used for the remainder of the plan year in which they aged out. Further, if any funds remain unused at that time, those funds can be used until the child turns 14.

Prospective Changes Permitted. For plan years ending in 2021, employees may prospectively change their FSA contributions without incurring a permitted election change event.

“No Surprise” Medical Billing Provisions

Under a section titled the “No Surprises Act,” the Act includes several provisions to regulate surprise medical billing from certain non network providers, air ambulances and for emergency services. These provisions concern bills from out-of-network providers requiring more money from the patient after the health plan has paid its part. This can happen in an emergency setting or where a patient goes into an in-network hospital, but is treated there by an out-of-network provider.

Generally, the Act provides that individuals covered by a group health plan or individual/group health insurance receiving non-emergency services at a network facility cannot be balance billed by a non-network provider, unless the non-network provider provides notice to the individual and the individual consents. An exception exists for “ancillary services”, such as anesthesiology, pathology, and radiology, and the Act also fleshes out associated details, such as payment timelines and dispute resolution processes.

The agencies are required to begin finalizing implementing regulations regarding the methodology for making payments by July 1, 2021, with the rest to come by December 31, 2021. These provisions become effective January 1, 2022.

These rules replace the current Affordable Care Act rules governing the payment of emergency services and apply to both grandfathered and non-grandfathered plans.

Additional Health Plan Provisions

ID Card Information. ID cards for group health plans (physical or electronic) must include, in clear writing, the deductible, out-of-pocket limits, and consumer assistance information.

Continuity of Care. Patients undergoing treatment for a serious and complex condition, who are pregnant, receiving inpatient care, scheduled for non-elective surgery or terminally ill must be notified if their provider leaves the network and given the opportunity to continue care (at an in-network rate) for 90 days.

Cost Comparison Tools. Plans and carriers will be required to offer cost comparison tools (via phone or the internet) starting with plan years beginning on or after January 1, 2022.

Gag Clauses Prohibited. “Gag” clauses will be prohibited. These clauses prevent health plans from sharing provider-specific reimbursements and information. Prohibiting these clauses facilitates the creation of the cost-comparison tools.

Provider Directories. Group health plans must update provider directories at least every 90 days and establish a system to respond to inquiries about the network status of a provider within one business day.

Mental Health Parity. Plans will be required to analyze the nonquantitative treatment limitations that they apply to mental health and substance use disorder benefits to show that the limitations are comparable to those that are used for medical/surgical benefits.

Retirement Plan Related Provisions

Partial Plan Terminations. The Act provides for temporary relief from the 100% vesting requirement for partial plan terminations caused by employee turnover under Code section 411(d)(3) if the turnover is due to COVID-19. A qualified plan will not incur a partial termination during any plan year which includes the period beginning on March 13, 2020, and ending on March 31, 2021, if the number of active participants covered by the plan on March 31, 2021, is at least 80% of the number of active participants covered by the plan on March 13, 2020.

Coronavirus-Related Distributions. The Act extends the COVID-19 in-service distribution relief under the CARES Act to money purchase pension plans.

Disaster Relief (Not Including COVID). The Act provides special disaster related distribution and loan rules (similar to prior natural disaster relief, including a distribution right, increase in loan limits, loan suspensions, etc.) for FEMA declared disasters (other than COVID-19) from January 1, 2020 through 60 days after enactment of the Act. 

Consolidated Appropriations Act, 2021

DOL Issues Revised FFCRA Leave Regulations in Response to Court Decision

The U.S. Department of Labor’s Wage and Hour Division (WHD) today posted revisions to regulations that implemented the paid sick leave and expanded family and medical leave provisions of the Families First Coronavirus Response Act (FFCRA).

The revisions made by the new rule clarify workers’ rights and employers’ responsibilities under the FFCRA’s paid leave provisions, in light of the U.S. District Court for the Southern District of New York’s August 3, 2020 decision in State of New York v Department of Labor, which found portions of the regulations invalid.

Background

The DOL issued its temporary rule to carry out the paid leave provisions of the FFCRA on April 1, 2020. See 85 FR 19326 (published April 6, 2020); see also 85 FR 20156 (April 10, 2020 correction and correcting amendment to April 1 rule).

On April 14, 2020, the State of New York filed suit in the United States District Court for the Southern District of New York (“District Court”) challenging certain parts of the temporary rule. On August 3, 2020, the District Court ruled that four parts of the temporary rule are invalid:

(1) the requirement under § 826.20 that paid sick leave and expanded family and medical leave are available only if an employee has work from which to take leave;

(2) the requirement under § 826.50 that an employee may take FFCRA leave intermittently only with employer approval;

(3) the definition of an employee who is a “health care provider,” set forth in § 826.30(c)(1), whom an employer may exclude from being eligible for FFCRA leave; and

(4) the statement in § 826.100 that employees who take FFCRA leave must provide their employers with certain documentation before taking leave.

The DOL’s Revised Rules

Today’s revisions to the temporary rules, effective immediately, reaffirm the prior regulations in part, revise the regulations in part, and further explain the DOL’s positions. Specifically, the DOL’s revised rules:

(1) Reaffirm that paid sick leave and expanded family and medical leave may be taken only if the employee has work from which to take leave and explains further why the DOL believes this requirement is appropriate. This temporary rule clarifies that this requirement applies to all qualifying reasons to take paid sick leave and expanded family and medical leave.

(2) Reaffirms that, where intermittent FFCRA leave is permitted by the regulations, an employee must obtain his or her employer’s approval to take paid sick leave or expanded family and medical leave intermittently under § 825.50 and explains further the basis for this requirement.

(3) Revises the definition of “health care provider” under § 825.30(c)(1) to mean employees who are health care providers under 29 CFR 825.102 and 825.125,3 and other employees who are employed to provide diagnostic services, preventive services, treatment services, or other services that are integrated with and necessary to the provision of patient care.

(4) Revises § 826.100 to clarify that the information the employee must give the employer to support the need for his or her leave should be provided to the employer as soon as practicable.

(5) Revises § 826.90 to correct an inconsistency regarding when an employee may be required to give notice of expanded family and medical leave to his or her employer.

More…

DOL and IRS Extend Certain Timeframes for Employee Benefit Plans, Participants, and Beneficiaries Affected by the COVID-19 Outbreak

On May 4, 2020, the Employee Benefits Security Administration (EBSA, which is part of the U.S. Department of Labor) and the Internal Revenue Service (IRS) issued joint guidance extending certain timeframes otherwise applicable to group health plans, disability and other welfare plans, pension plans, and their participants and beneficiaries under ERISA and the Code.

This guidance will require Plan Sponsors to temporarily revise their administrative practices and their form notices used in connection with COBRA, HIPAA’s Special Enrollment rights, and ERISA Claim Procedures.

I. Background

HIPAA requires group health plans to provide special enrollment rights for certain people upon the loss of eligibility for other coverage, or upon the addition of a dependents due to birth, adoption, etc. Generally, group health plans must allow such individuals to enroll in the group health plan if they are otherwise eligible and if enrollment is requested within 30 days of the occurrence of the event.

COBRA permits qualified beneficiaries who lose coverage under a group health plan to elect continuation health coverage. COBRA generally provides a qualified beneficiary a period of at least 60 days to elect COBRA continuation coverage under a group health plan. Plans are required to allow payment of premiums in monthly installments, and plans cannot require payment of premiums before 45 days after the day of the initial COBRA election. COBRA continuation coverage may be terminated for failure to pay premiums timely.

Under the COBRA rules, a premium is considered paid timely if it is made not later than 30 days after the first day of the period for which payment is being made. Notice requirements prescribe time periods for employers to notify the plan of certain qualifying events and for individuals to notify the plan of certain qualifying events or a determination of disability. Notice requirements also prescribe a time period for plans to notify qualified beneficiaries of their rights to elect COBRA continuation coverage.

ERISA requires plans to establish and maintain reasonable claims procedures and imposes additional rights and obligations with respect to internal claims and appeals and external review for non-grandfathered group health plans.

II. Temporary Extensions Under the Guidance

All of the foregoing provisions include timing requirements for certain acts in connection with employee benefit plans, some of which have been temporarily modified by the new guidance. These changes, and the implications for Plan Sponsors, are summarized below.

A. Relief for Plan Participants, Beneficiaries, Qualified Beneficiaries, and Claimants

Subject to a one year statutory duration limitation, all group health plans, disability and other employee welfare benefit plans, and employee pension benefit plans subject to ERISA or the Code must disregard the period from March 1, 2020 until sixty (60) days after the announced end of the National Emergency (the “Outbreak Period”) for all plan participants, beneficiaries, qualified beneficiaries, or claimants wherever located in determining the following periods and dates—

(1) The 30-day period (or 60-day period, if applicable) to request special enrollment under ERISA section 701(f) and Code section 9801(f)

Implications for employers:

  • Work with your third-party administrator and insurance carriers to ensure the extended special enrollment period is implemented for the duration of the Outbreak Period, which could require retroactive coverage as far back as March 1.
  • Determine whether and how to communicate the extension to employees.

(2) The 60-day election period for COBRA continuation coverage under ERISA section 605 and Code section 4980B(f)(5)

(3) The date for making COBRA premium payments pursuant to ERISA section 602(2)(C) and (3) and Code section 4980B(f)(2)(B)(iii) and (C)

(4) The date for individuals to notify the plan of a qualifying event or determination of disability under ERISA section 606(a)(3) and Code section 4980B(f)(6)(C)

Implications for Employers:

  • This exacerbates the adverse selection issue inherent in COBRA because Plans may have to provide retroactive coverage for many months.
  • The problem is made worse by the fact that, even though qualified beneficiaries theoretically have to pay for the retroactive coverage, if they elect COBRA right after the qualifying event, they do not have to pay until after the Outbreak Period ends. This means a qualified beneficiary could elect COBRA and receive the coverage) and then subsequently decide not to pay for it. Plan Sponsors and insurers will then have the option of retroactively terminating the coverage and trying to adjust the claims already paid.
  • Work with your third-party administrator and insurance carriers to ensure they have implemented the extended COBRA periods.
  • Either temporarily revise your COBRA notices and forms or ensure a temporary cover is added to all COBRA communications as necessary to inform employees and qualified beneficiaries of the extended timeframes.

(5) The date within which individuals may file a benefit claim under the plan’s claims procedure pursuant to 29 CFR 2560.503-1

(6) The date within which claimants may file an appeal of an adverse benefit determination under the plan’s claims procedure pursuant to 29 CFR 2560.503-1(h)

Implications for Employers:

  • Work with your third-party administrator and insurance carriers to ensure they have implemented the extended claims periods.
  • Either temporarily revise your claims notices and forms or ensure a temporary cover is added to all claims communications as necessary to inform employees and qualified beneficiaries of the extended timeframes.
  • This will impact health flexible spending accounts (“FSAs”) and health reimbursement arrangements (“HRAs”) that have run-out periods that extended beyond March 1, 2020. Because the Outbreak Period began on March 1, 2020, any health FSAs and HRAs that have March or April deadlines for submitting prior-year expenses for reimbursement, will need to extend the deadline until 60 days after the Outbreak Period ends to submit expenses for reimbursement for the 2019 plan year.

(7) The date within which claimants may file a request for an external review after receipt of an adverse benefit determination or final internal adverse benefit determination pursuant to 29 CFR 2590.715-2719(d)(2)(i) and 26 CFR 54.9815-2719(d)(2)(i), and

(8) The date within which a claimant may file information to perfect a request for external review upon a finding that the request was not complete pursuant to 29 CFR 2590.715-2719(d)(2)(ii) and 26 CFR 54.9815-2719(d)(2)(ii)

Implications for employers:

  • Work with your third-party administrator and insurance carriers to ensure they have implemented the extended claim review periods.
  • Either temporarily revise your claims notices and forms or ensure a temporary cover is added to all claims communications as necessary to inform employees and qualified beneficiaries of the extended timeframes.

B. Relief for Group Health Plans

With respect to group health plans, and their sponsors and administrators, the Outbreak Period shall be disregarded when determining the date for providing a COBRA election notice under ERISA section 606(c) and Code section 4980B(f)(6)(D).

Implication for Employers:

  • Plan administrators are not required to provide the COBRA election notice during the Outbreak Period. As a practical matter, however, plan administrators likely will want to timely provide election notices to encourage qualified beneficiaries to timely elect and pay for COBRA coverage.

DOL Issues FFCRA Guidance on Stay-At-Home Orders, Relationship Necessary to Support Caring Leave, and Caring for Children Over 18

The Department of Labor has issued more Q&As providing helpful guidance on issues under the Families First Coronavirus Response Act leave programs. We now have answers to the questions below. Our comments on the implications of these answers are also provided.

Shelter-In-Place and Stay-At-Home Orders Qualify as “Quarantine or Isolation” Orders

Question: How do I know if I can receive paid sick leave for a Federal, State, or local quarantine or isolation order related to COVID-19?

Answer: For purposes of the FFCRA, a Federal, State, or local quarantine or isolation order includes quarantine or isolation orders, as well as shelter-in-place or stay-at-home orders, issued by any Federal, State, or local government authority that cause you to be unable to work (or to telework) even though your employer has work that you could perform but for the order. You may not take paid sick leave for this qualifying reason if your employer does not have work for you as a result of a shelter-in-place or a stay-at-home order.

Comments:

To the extent a stay-at-home order causes the employer not to have work for the employee, the employee cannot base a leave request on the employee’s inability to work or telework.

However, if the employer has work for the employee, and the proximate cause of the employee not being able to work is that the employee (or someone they need to care for) is subject to a stay-at-home order, then the employee can take paid leave under the FFCRA.

Caring for Others in Quarantine or Isolation Only Qualifies if the Employee’s Relationship Creates an Expectation that the Employee Would Care for the Individual, and the Individual is Unable to Care for Them Self

Question: When am I eligible for paid sick leave to care for someone who is subject to a quarantine or isolation order?

Answer: You may take paid sick leave to care for an individual who, as a result of being subject to a quarantine or isolation order, is unable to care for him or herself and depends on you for care and if providing care prevents you from working and from teleworking. Furthermore, you may only take paid sick leave to care for an individual who genuinely needs your care. Such an individual includes an immediate family member or someone who regularly resides in your home. You may also take paid sick leave to care for someone if your relationship creates an expectation that you would care for the person in a quarantine or self-quarantine situation, and that individual depends on you for care during the quarantine or self-quarantine.You may not take paid sick leave to care for someone with whom you have no relationship. Nor can you take paid sick leave to care for someone who does not expect or depend on your care during his or her quarantine or self-quarantine.

Question: Can I take paid sick leave to care for any individual who is subject to a quarantine or isolation order or who has been advised to self-quarantine?

Answer: No. You may take paid sick leave under the FFCRA to care for an immediate family member or someone who regularly resides in your home. You may also take paid sick leave under the FFCRA to care for someone where your relationship creates an expectation that you care for the person in a quarantine or self-quarantine situation, and that individual depends on you for care during the quarantine or self-quarantine.

However, you may not take paid sick leave under the FFCRA to care for someone with whom you have no relationship. Nor can you take paid sick leave under the FFCRA to care for someone who does not expect or depend on your care during his or her quarantine or self-quarantine due to COVID-19.

Comment: employers are permitted to ask what the employee’s relationship is with the person they need to care for due to quarantine or isolation. Presumably, employers could inquire further if (i) the relationship provided is not obviously one that creates an expectation that the employee will care for the person in quarantine or isolation, and (ii) that individual depends on the employee for care during the quarantine or isolation.

Caring for a Child Over 18 Due to a School or Place of Care Closure only Qualifies if the Child is Disabled and Cannot Care for Themselves

Question: May I take paid sick leave or expanded family and medical leave to care for my child who is 18 years old or older?

Answer: It depends. Under the FFCRA, paid sick leave and expanded family and medical leave include leave to care for one (or more) of your children when his or her school or place of care is closed or child care provider is unavailable, due to COVID-19 related reasons. This leave may only be taken to care for your non-disabled child if he or she is under the age of 18. If your child is 18 years of age or older with a disability and cannot care for him or herself due to that disability, you may take paid sick leave and expanded family and medical leave to care for him or her if his or her school or place of care is closed or his or her child care provider is unavailable, due to COVID-19 related reasons, and you are unable to work or telework as a result.

In addition, paid sick leave is available to care for an individual who is subject to a Federal, State, or local quarantine or isolation order related to COVID-19 or has been advised by a health care provider to self-quarantine due to concerns related to COVID-19. If you have a need to care for your child age 18 or older who needs care for these circumstances, you may take paid sick leave if you are unable to work or telework as a result of providing care. But in no event may your total paid sick leave exceed two weeks.

Comment: Presumably, if an employee asks for paid FFCRA leave to care for a child over 18, and does not allude to the child being disabled, the employer could ask for an explanation as to why it is necessary to care for the child. Generally, employers will not ask for a detailed explanation, such as the nature and extent of the child’s disability, or any other documentation of the disability.

Employee Self-Diagnosis Does Not Qualify

Question: I am an employee. I become ill with COVID-19 symptoms, decide to quarantine myself for two weeks, and then return to work. I do not seek a medical diagnosis or the advice of a health care provider. Can I get paid for those two weeks under the FFCRA?

Answer: Generally no. If you become ill with COVID-19 symptoms, you may take paid sick leave under the FFCRA only to seek a medical diagnosis or if a health care provider otherwise advises you to self-quarantine. If you test positive for the virus associated with COVID-19 or are advised by a health care provider to self-quarantine, you may continue to take paid sick leave. You may not take paid sick leave under the FFCRA if you unilaterally decide to self-quarantine for an illness without medical advice, even if you have COVID-19 symptoms. Note that you may not take paid sick leave under the FFCRA if you become ill with an illness not related to COVID-19. Depending on your employer’s expectations and your condition, however, you may be able to telework during your period of quarantine.

Comment: This is not very helpful as a practical matter, because the DOL Rules do not permit employers to ask for any documentation when an employee asks for leave on the grounds that the employee is experiencing COVID-19 symptoms and is seeking a medical diagnosis. Perhaps the DOL will change its mind on this.

Guide to Employer Tax Credits Under the Families First Coronavirus Response Act – Webinar

ERISA Attorney Erwin Kratz of ERISA Benefits Law, PLLC discusses the steps private businesses with less than 500 Employees need to take to document and claim refundable tax credits that reimburse them, dollar-for-dollar, for the cost of providing paid sick and family leave wages to their employees for leave under the Families First Coronavirus Response Act.

Download the PowerPoint Employer-Tax-Credits-Under-the-Families-First-Coronavirus-Response-ActDownload

ERISA Benefits Law Model Paid Sick Leave and Expanded FMLA Leave Policies, Leave Request and Leave Determination Forms Available March 28, 2020

IRS Q&As on COVID-19-Related Tax Credits for Required Paid Leave Provided by Small and Midsize Businesses

On March 31, 2020, the IRS issued 66 Q&As providing guidance regarding refundable tax credits available to reimburse employers with less than 500 employees small and midsize employers dollar-for-dollar for the cost of providing paid sick and family leave wages to their employees for leave related to COVID-19.

Highlights of the Q&As are below.

The full Q&As are available here.

Webinar “Guide to Employer Tax Credits Under the Families First Coronavirus Response Act”

Register to join us for one of our two webinar sessions where ERISA Benefits Law attorney Erwin Kratz will discuss the steps private businesses with less than 500 Employees need to take to document and claim the refundable tax credits.

First opportunity: Saturday, April 4, 2020, 11:00 AM Arizona (11:00 am PDT; noon MDT; 1:00 pm CDT; 2:00 pm EDT). Register in advance for this webinar:
https://zoom.us/meeting/register/vpEtc-uhpjguuGQpGFcjhlA7aJJvjDpNSQ

Second opportunity: Monday, April 6, 2020, 11:00 AM Arizona (11:00 AM PDT; noon MDT; 1:00 PM CDT; 2:00 pm EDT). Register in advance for this webinar:
https://zoom.us/meeting/register/v5ctc–qrj4u8iZJx-CbnY2g-c7zZeigKg

Highlights of the Q&As

Determining the Amount of Allocable Qualified Health Plan Expenses

“Qualified health plan expenses” are amounts paid or incurred by the Eligible Employer to provide and maintain a group health plan (as defined in section 5000(b)(1) of the Internal Revenue Code (the “Code”)), but only to the extent that those amounts are excluded from the gross income of employees by reason of section 106(a) of the Code.

Generally, the tax credits for qualified sick leave wages and qualified family leave wages are increased by the qualified health plan expenses allocable to each type of qualified leave wages.  Qualified health plan expenses are properly allocated to the qualified sick or family leave wages if the allocation is made on a pro rata basis among covered employees (for example, the average premium for all employees covered by a policy) and pro rata on the basis of periods of coverage (relative to the time periods of leave to which such wages relate).

31. Does the amount of qualified health plan expenses include both the portion of the cost paid by the Eligible Employer and the portion of the cost paid by the employee?

The amount of qualified health plan expenses taken into account in determining the credits generally includes both the portion of the cost paid by the Eligible Employer and the portion of the cost paid by the employee with pre-tax salary reduction contributions.  However, the qualified health plan expenses should not include amounts that the employee paid for with after-tax contributions.

32. For an Eligible Employer that sponsors more than one plan for its employees (for example, both a group health plan and a health flexible spending arrangement (health FSA)), or more than one plan covering different employees, how are the qualified health plan expenses for each employee determined?

The qualified health plan expenses are determined separately for each plan.  Then, for each plan, those expenses are allocated to the employees who participate in that plan.  In the case of an employee who participates in more than one plan, the allocated expenses of each plan in which the employee participates are aggregated for that employee.

33. For an Eligible Employer who sponsors a fully-insured group health plan, how are the qualified health plan expenses of that plan allocated to the qualified sick or family leave wages on a pro rata basis?

An Eligible Employer who sponsors a fully-insured group health plan may use any reasonable method to determine and allocate the plan expenses, including (1) the COBRA applicable premium for the employee typically available from the insurer, (2) one average premium rate for all employees, or (3) a substantially similar method that takes into account the average premium rate determined separately for employees with self-only and other than self-only coverage.

If an Eligible Employer chooses to use one average premium rate for all employees, the allocable amount for each day an employee covered by the insured group health plan is entitled to qualified leave wages could be determined using the following steps:

  1. The Eligible Employer’s overall annual premium for the employees covered by the policy is divided by the number of employees covered by the policy to determine the average annual premium per employee.
  2. The average annual premium per employee is divided by the average number of work days during the year by all covered employees (treating days of paid leave as a work day and a work day as including any day on which work is performed) to determine the average daily premium per employee. For example, a full-year employee working five days per week may be treated as working 52 weeks x 5 days or 260 days. Calculations for part-time and seasonal employees who participate in the plan should be adjusted as appropriate.  Eligible Employers may use any reasonable method for calculating part-time employee work days.
  3. The resulting amount is the amount allocated to each day of qualified sick or family leave wages.

Example: An Eligible Employer sponsors an insured group health plan that covers 400 employees, some with self-only coverage and some with family coverage.  Each employee is expected to have 260 work days a year. (Five days a week for 52 weeks.)  The employees contribute a portion of their premium by pre-tax salary reduction, with different amounts for self-only and family.  The total annual premium for the 400 employees is $5.2 million.  (This includes both the amount paid by the Eligible Employer and the amounts paid by employees through salary reduction.)

For an Eligible Employer using one average premium rate for all employees, the average annual premium rate is $5.2 million divided by 400, or $13,000.  For each employee expected to have 260 work days a year, this results in a daily average premium rate equal to $13,000 divided by 260, or $50.  That $50 is the amount of qualified health expenses allocated to each day of paid sick or family leave per employee.

34. For an Eligible Employer who sponsors a self-insured group health plan, how are the qualified health plan expenses of that plan allocated to the qualified leave wages on a pro rata basis?

An Eligible Employer who sponsors a self-insured group health plan may use any reasonable method to determine and allocate the plan expenses, including (1) the COBRA applicable premium for the employee typically available from the administrator, or (2) any reasonable actuarial method to determine the estimated annual expenses of the plan.

If the Eligible Employer uses a reasonable actuarial method to determine the estimated annual expenses of the plan, then rules similar to the rules for insured plans are used to determine the amount of expenses allocated to an employee.  That is, the estimated annual expense is divided by the number of employees covered by the plan, and that amount is divided by the average number of work days during the year by the employees (treating days of paid leave as work days and any day on which an employee performs any work as work days).  The resulting amount is the amount allocated to each day of qualified sick or family leave wages.

35. For an Eligible Employer who sponsors a health savings account (HSA), or Archer Medical Saving Account (Archer MSA) and a high deductible health plan (HDHP), are contributions to the HSA or Archer MSA included in the qualified health plan expenses?

The amount of qualified health plan expenses does not include Eligible Employer contributions to HSAs or Archer MSAs.  Eligible Employers who sponsor an HDHP should calculate the amount of qualified expenses in the same manner as an insured group health plan, or a self-insured plan, as applicable.

36. For an Eligible Employer who sponsors a health reimbursement arrangement (HRA), a health flexible spending arrangement (health FSA), or a qualified small employer health reimbursement arrangement (QSEHRA), are contributions to the HRA, health FSA, or QSEHRA included in the qualified health plan expenses?

The amount of qualified health plan expenses may include contributions to an HRA (including an individual coverage HRA), or a health FSA, but does not include contributions to a QSEHRA.  To allocate contributions to an HRA or a health FSA, Eligible Employers should use the amount of contributions made on behalf of the particular employee.

How to Claim the Credits

37. How does an Eligible Employer claim the refundable tax credits for qualified leave wages (plus any allocable qualified health plan expenses and the amount of the Eligible Employer’s share of Medicare tax)?

Eligible Employers will report their total qualified leave wages and the related credits for each quarter on their federal employment tax returns, usually Form 941, Employer’s Quarterly Federal Tax Return.  Form 941 is used to report income and social security and Medicare taxes withheld by the employer from employee wages, as well as the employer’s portion of social security and Medicare tax.

In anticipation of receiving the credits, Eligible Employers can fund qualified leave wages (and allocable qualified health plan expenses and the Eligible Employer’s share of Medicare tax on the qualified leave wages) by accessing federal employment taxes, including withheld taxes, that are required to be deposited with the IRS or by requesting an advance from the IRS.

For more information on ways Eligible Employers can access funds for the credit before filing the Form 941, see “How can an Eligible Employer that is required to pay qualified leave wages fund the payment of these wages if the Eligible Employer does not have sufficient federal employment taxes set aside for deposit to cover those payments? Can the employer get an advance of the credits?”

38. Can an Eligible Employer required to pay qualified leave wages fund these payments before receiving the credits by reducing its federal employment tax deposits?

An Eligible Employer may fund the qualified leave wages (and allocable qualified health plan expenses and the Eligible Employer’s share of Medicare tax on the qualified leave wages) by accessing federal employment taxes, including those that the Eligible Employer already withheld, that are set aside for deposit with the IRS, for other wage payments made during the same quarter as the qualified leave wages.

That is, an Eligible Employer that pays qualified leave wages to its employees in a calendar quarter before it is required to deposit federal employment taxes with the IRS for that quarter may reduce the amount of federal employment taxes it deposits for that quarter by the amount of the qualified leave wages (and allocable qualified health plan expenses and the Eligible Employer’s share of Medicare tax on the qualified leave wages) paid in that calendar quarter.  The Eligible Employer must account for the reduction in deposits on the Form 941, Employer’s Quarterly Federal Tax Return, for the quarter.

Example: An Eligible Employer paid $5,000 in qualified sick leave wages and qualified family leave wages (and allocable health plan expenses and the Eligible Employer’s share of Medicare tax on the qualified leave wages) and is otherwise required to deposit $8,000 in federal employment taxes, including taxes withheld from all of its employees, for wage payments made during the same quarter as the $5,000 in qualified leave wages.  The Eligible Employer may keep up to $5,000 of the $8,000 of taxes the Eligible Employer was going to deposit, and it will not owe a penalty for keeping the $5,000.  The Eligible Employer is then only required to deposit the remaining $3,000 on its required deposit date. The Eligible Employer will later account for the $5,000 it retained when it files Form 941, Employer’s Quarterly Federal Tax Return, for the quarter.

For more information about relief under the FFCRA from failure to deposit penalties for failure to timely deposit certain federal employment taxes, see Notice 2020-22 (PDF) and “May an Eligible Employer reduce its federal employment tax deposit by the qualified leave wages that it has paid without incurring a failure to deposit penalty?”

39. Is an Eligible Employer that reduces its federal employment tax deposits to fund qualified leave wages that it has paid subject to penalty for failing to deposit federal employment taxes?

No, provided the Eligible Employer does not claim an advance for the same portion of the anticipated credits it relied upon to reduce its deposits.  That is, without being subject to a penalty for failing to deposit federal employment taxes under section 6656 of the Internal Revenue Code, an Eligible Employer that has paid qualified leave wages to its employees in a calendar quarter before it is required to deposit federal employment taxes with the IRS may reduce the amount of the federal employment tax deposit by the amount of the qualified leave wages (and allocable qualified health plan expenses plus the Eligible Employer’s share of Medicare tax on the qualified leave wages) paid by the employer in that calendar quarter, as long as the employer does not also seek an advance credit for the same amount.  The total amount of any reduction in any required deposit may not exceed the total amount of qualified leave wages (and allocable qualified health plan expenses and the Eligible Employer’s share of Medicare tax on the qualified leave wages) in the calendar quarter, minus any amount of qualified leave wages (and allocable qualified health plan expenses and the Eligible Employer’s share of Medicare tax on the qualified leave wages) that had been previously used (1) to reduce a prior required deposit in the calendar quarter and obtain the relief provided by this notice or (2) to seek payment of an advance credit.

For more information about relief under the FFCRA from failure to deposit penalties for failure to timely deposit certain federal employment taxes, see Notice 2020-22 (PDF), and “May an Eligible Employer reduce its federal employment tax deposit by the qualified leave wages that it has paid without incurring a failure to deposit penalty?”

41. If the qualified leave wages (and any allocable qualified health plan expenses and the Eligible Employer’s share of Medicare tax on the qualified leave wages) exceed the Eligible Employer’s share of social security tax owed for a quarter, how does the Eligible Employer get a refund of the excess credits? Does this affect what the Eligible Employer puts on its Form 941?

The amount of qualified leave wages (and any allocable qualified health plan expenses and the Eligible Employer’s share of the Medicare tax on the qualified leave wages) in excess of the social security tax the Eligible Employer owes for the quarter is refundable.  If the amount of the credits exceeds the employer portion of social security tax, then the excess is treated as an overpayment and refunded to the employer under sections 6402(a) or 6413(a) of the Internal Revenue Code.  Consistent with its treatment as an overpayment, the excess will be applied to offset any remaining tax liability on the Form 941, Employer’s Quarterly Federal Tax Return, and the amount of any remaining excess will be reflected as an overpayment on the Form 941.  Like other overpayments of federal taxes, the overpayment will be subject to offset under section 6402(a) of the Code prior to being refunded to the employer.

42. How does an Eligible Employer obtain Form 7200 and where should it send its completed form to receive the advance credit?

An Eligible Employer may obtain the Form 7200, Advance Payment of Employer Credits Due to COVID-19, and may fax its completed form to 855-248-0552.

How Should an Employer Substantiate Eligibility for Tax Credits for Qualified Leave Wages? 

44. What information should an Eligible Employer receive from an employee and maintain to substantiate eligibility for the sick leave or family leave credits?

An Eligible Employer will substantiate eligibility for the sick leave or family leave credits if the employer receives a written request for such leave from the employee in which the employee provides:

  1. The employee’s name;
  2. The date or dates for which leave is requested;
  3. A statement of the COVID-19 related reason the employee is requesting leave and written support for such reason; and
  4. A statement that the employee is unable to work, including by means of telework, for such reason.

In the case of a leave request based on a quarantine order or self-quarantine advice, the statement from the employee should include the name of the governmental entity ordering quarantine or the name of the health care professional advising self-quarantine, and, if the person subject to quarantine or advised to self-quarantine is not the employee, that person’s name and relation to the employee.

In the case of a leave request based on a school closing or child care provider unavailability, the statement from the employee should include the name and age of the child (or children) to be cared for, the name of the school that has closed or place of care that is unavailable, and a representation that no other person will be providing care for the child during the period for which the employee is receiving family medical leave and, with respect to the employee’s inability to work or telework because of a need to provide care for a child older than fourteen during daylight hours, a statement that special circumstances exist requiring the employee to provide care.

45. What additional records should an Eligible Employer maintain to substantiate eligibility for the sick leave or family leave credit?

An Eligible Employer will substantiate eligibility for the sick leave or family leave credits if, in addition to the information set forth in FAQ 44 (“What information should an Eligible Employer receive from an employee and maintain to substantiate eligibility for the sick leave or family leave credits?”), the employer creates and maintains records that include the following information:

  1. Documentation to show how the employer determined the amount of qualified sick and family leave wages paid to employees that are eligible for the credit, including records of work, telework and qualified sick leave and qualified family leave.
  2. Documentation to show how the employer determined the amount of qualified health plan expenses that the employer allocated to wages. See FAQ 31 (“Determining the Amount of Allocable Qualified Health Plan Expenses”) for methods to compute this allocation.
  3. Copies of any completed Forms 7200, Advance of Employer Credits Due To COVID-19, that the employer submitted to the IRS.
  4. Copies of the completed Forms 941, Employer’s Quarterly Federal Tax Return, that the employer submitted to the IRS (or, for employers that use third party payers to meet their employment tax obligations, records of information provided to the third party payer regarding the employer’s entitlement to the credit claimed on Form 941).

46. How long should an Eligible Employer maintain records to substantiate eligibility for the sick leave or family leave credit?

An Eligible Employer should keep all records of employment taxes for at least 4 years after the date the tax becomes due or is paid, whichever comes later.  These should be available for IRS review.

Periods of Time for Which Credits are Available

48. Are wage payments for qualified leave wages made after December 31, 2020, but for periods of leave taken before December 31, 2020, eligible for the credits?

Yes.  Notice 2020-21 provides that the payroll credits for paid qualified sick leave wages and paid qualified family leave wages apply to those wages paid for periods beginning on April 1, 2020 and ending on December 31, 2020.  While the wages can only be for periods of leave between April 1, 2020, and December 31, 2020, a payment of qualified leave wages that is made after the end of this period may nonetheless be eligible for the credits if the wages are for leave that an employee took between April 1, 2020, and December 31, 2020.

For more information, see Notice 2020-21 (PDF).

Special Issues for Employers: Taxation and Deductibility of Tax Credits

49. What amount does an Eligible Employer receiving tax credits for qualified leave wages (and allocable qualified health plan expenses and the Eligible Employer’s share of Medicare tax on the qualified leave wages) need to include in income?

An Eligible Employer must include the full amount of the credits for qualified leave wages (and any allocable qualified health plan expenses and the Eligible Employer’s share of the Medicare tax on the qualified leave wages) in gross income.

50. May an Eligible Employer deduct as a business expense an amount paid to an employee for qualified leave wages (and allocable qualified health plan expenses and the Eligible Employer’s share of Medicare tax on the qualified leave wages) for which it expects to claim the tax credits?

Generally, an Eligible Employer’s payments of qualified leave wages (and any allocable qualified health plan expenses and the Eligible Employer’s share of the Medicare tax on the qualified wages) are deductible by the Eligible Employer as ordinary and necessary business expenses in the taxable year that these wages are paid or incurred.  An Eligible Employer may deduct as a business expense the amounts paid to an employee for qualified leave wages (and any allocable qualified health plan expenses and the Eligible Employer’s share of Medicare tax on the qualified leave wages) for which the Eligible Employer expects to claim the tax credits under sections 7001 or 7003 of the FFCRA, if the Eligible Employer is otherwise eligible to take the deduction.

51. Do the tax credits under sections 7001 and 7003 of the FFCRA reduce the amount deductible as federal employment taxes on an Eligible Employer’s income tax return?

Generally, an employer’s payment of certain federal employment taxes is deductible by the employer as an ordinary and necessary business expense in the taxable year that these taxes are paid or incurred, and the amount deductible is generally reduced by credits allowed.  Although the tax credits under sections 7001 and 7003 of the FFCRA are allowed against the Eligible Employer’s portion of the social security tax, the credits are treated as government payments to the employer that must be included in the Eligible Employer’s gross income.  If the employer is otherwise eligible to deduct its portion of the social security tax on all wages, the proper amount deductible by the employer is the amount of federal employment taxes before reduction by the tax credits.

Special Issues for Employers: Other Issues

54. Can employees make salary reduction contributions from the amounts paid as qualified leave wages for their employer sponsored health plan, a 401(k) or other retirement plan, or any other benefits?

The FFCRA does not distinguish qualified leave wages from other wages an employee may receive from the employee’s standpoint as a taxpayer; thus, the same rules that generally apply to an employee’s regular wages (or compensation, for RRTA purposes) would apply from the employee’s standpoint.  To the extent that an employee has a salary reduction agreement in place with the Eligible Employer, the FFCRA does not include any provisions that explicitly prohibit taking salary reduction contributions for any plan from qualified sick leave wages or qualified family leave wages.

55. Should Eligible Employers withhold federal employment taxes on qualified leave wages paid to employees?

Yes.  Qualified leave wages are wages subject to withholding of federal income tax and the employee’s share of social security and Medicare taxes.  Qualified leave wages are also considered wages for purposes of other benefits that the Eligible Employer provides, such as contributions to 401(k) plans.

Specific Provisions Related to Self-Employed Individuals

60. Who is an eligible self-employed individual for purposes of the qualified sick leave credit and the qualified family leave credit?

An eligible self-employed individual is defined as an individual who regularly carries on any trade or business within the meaning of section 1402 of the Code, and would be entitled to receive qualified sick leave wages or qualified family leave wages under the FFCRA if the individual were an employee of an Eligible Employer (other than himself or herself) that is subject to the requirements of the FFCRA.

Eligible self-employed individuals are allowed an income tax credit to offset their federal self-employment tax for any taxable year equal to their “qualified sick leave equivalent amount” or “qualified family leave equivalent amount.”

61. How is the “qualified sick leave equivalent amount” for an eligible self-employed individual calculated?

For an eligible self-employed individual who is unable to work or telework because the individual:

  1. Is subject to a Federal, State, or local quarantine or isolation order related to COVID-19;
  2. Has been advised by a health care provider to self-quarantine due to concerns related to COVID-19; or
  3. Is experiencing symptoms of COVID-19 and seeking a medical diagnosis,

the qualified sick leave equivalent amount is equal to the number of days during the taxable year that the individual cannot perform services in the applicable trade or business for one of the three above reasons, multiplied by the lesser of $511 or 100 percent of the “average daily self-employment income” of the individual for the taxable year.

For an eligible self-employed individual who is unable to work or telework because the individual:

  1. Is caring for an individual who is subject to a Federal, State, or local quarantine or isolation order related to COVID-19, or has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
  2. Is caring for a child if the child’s school or place of care has been closed, or child care provider is unavailable due to COVID-19 precautions; or
  3. 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,

the qualified sick leave equivalent amount is equal to the number of days during the taxable year that the individual cannot perform services in the applicable trade or business for one of the three above reasons, multiplied by the lesser of $200 or 67 percent of the “average daily self-employment income” of the individual for the taxable year.

In either case, the maximum number of days a self-employed individual may take into account in determining the qualified sick leave equivalent amount is ten.

Note:  The only days that may be taken into account in determining the qualified sick leave equivalent amount are days occurring during the period beginning on April 1, 2020, and ending on December 31, 2020.

62. How is the “average daily self-employment income” for an eligible self-employed individual calculated?

Average daily self-employment income is an amount equal to the net earnings from self-employment for the taxable year divided by 260.  A taxpayer’s net earnings from self-employment are based on the gross income that he or she derives from the taxpayer’s trade or business minus ordinary and necessary trade or business expenses.

63. How is the “qualified family leave equivalent amount” for an eligible self-employed individual calculated?

The qualified family leave equivalent amount with respect to an eligible self-employed individual is an amount equal to the number of days (up to 50) during the taxable year that the self-employed individual cannot perform services for which that individual would be entitled to paid family leave (if the individual were employed by an Eligible Employer (other than himself or herself)), multiplied by the lesser of two amounts: (1) $200, or (2) 67 percent of the average daily self-employment income of the individual for the taxable year.

65. How does a self-employed individual claim the credits for qualified sick leave equivalent amounts or qualified family leave equivalent amounts?

The refundable credits are claimed on the self-employed individual’s Form 1040, U.S. Individual Income Tax Return, tax return for the 2020 tax year.

66. How can a self-employed individual fund his or her qualified sick leave equivalent and qualified paid family leave equivalent amounts before filing his or her Form 1040?

The self-employed individual may fund sick leave and family leave equivalents by taking into account the credit to which the individual is entitled and will claim on Form 1040, U.S. Individual Income Tax Return, in determining required estimated tax payments. This means that a self-employed individual can effectively reduce payments of estimated income taxes that the individual would otherwise be required to make if the individual was not entitled to the credit on the Form 1040.

DOL Guidance on “Health Care Providers and Emergency Responders” Exemption from Emergency Paid Sick and FMLA Expansion Leave Requirements

The Department of Labor (DOL) has issued two Q&A’s providing more detail regarding the “health care provider” exemption from the from the requirements to provide paid sick leave or expanded family and medical leave under the Families First Coronavirus Response Act (FFCRA)

Who is a “health care provider” who may be excluded by their employer from paid sick leave and/or expanded family and medical leave?

For the purposes of employees who may be exempted from paid sick leave or expanded family and medical leave by their employer under the FFCRA, a health care provider is anyone employed at any doctor’s office, hospital, health care center, clinic, post-secondary educational institution offering health care instruction, medical school, local health department or agency, nursing facility, retirement facility, nursing home, home health care provider, any facility that performs laboratory or medical testing, pharmacy, or any similar institution, employer, or entity. This includes any permanent or temporary institution, facility, location, or site where medical services are provided that are similar to such institutions.

This definition includes any individual employed by an entity that contracts with any of the above institutions, employers, or entities institutions to provide services or to maintain the operation of the facility.

This also includes anyone employed by any entity that provides medical services, produces medical products, or is otherwise involved in the making of COVID-19 related medical equipment, tests, drugs, vaccines, diagnostic vehicles, or treatments.

Who is an emergency responder?

For the purposes of employees who may be excluded from paid sick leave or expanded family and medical leave by their employer under the FFCRA, an emergency responder is an employee who is necessary for the provision of transport, care, health care, comfort, and nutrition of such patients, or whose services are otherwise needed to limit the spread of COVID-19.

This includes but is not limited to military or national guard, law enforcement officers, correctional institution personnel, fire fighters, emergency medical services personnel, physicians, nurses, public health personnel, emergency medical technicians, paramedics, emergency management personnel, 911 operators, public works personnel, and persons with skills or training in operating specialized equipment or other skills needed to provide aid in a declared emergency as well as individuals who work for such facilities employing these individuals and whose work is necessary to maintain the operation of the facility.

Additional People as Designated by State Governors

The DOL also provides that both definitions also include “any individual that the highest official of a state or territory, including the District of Columbia, determines is a [health care provider or emergency responder] necessary for that state’s or territory’s or the District of Columbia’s response to COVID-19.”

To minimize the spread of the virus associated with COVID-19, the DOL encourages employers to be judicious when using this definition to exempt health care providers and emergency responders from the provisions of the FFCRA.