Emergency Paid Sick Leave Credits (FFCRA)

Paying for COVID-19 Required Paid Sick Leave

When employers pay their employees, they are required to withhold from their employees’ paychecks federal income taxes and the employees’ share of Social Security and Medicare taxes. The employers then are required to deposit these federal taxes, along with their share of Social Security and Medicare taxes, with the IRS and file quarterly payroll tax returns (Form 941 series) with the IRS.
Under guidance that will be released next week, eligible employers who pay qualifying sick or child care leave will be able to retain an amount of the payroll taxes equal to the amount of qualifying sick and child care leave that they paid, rather than deposit them with the IRS. The payroll taxes that are available for retention include withheld federal income taxes, the employee share of Social Security and Medicare taxes, and the employer share of Social Security and Medicare taxes with respect to all employees. If there are not sufficient payroll taxes to cover the cost of qualified sick and child care leave paid, employers will be able file a request for an accelerated payment from the IRS. The IRS expects to process these requests in two weeks or less. The details of this new, expedited procedure will be announced next week.

Examples

If an eligible employer paid $5,000 in sick leave and is otherwise required to deposit $8,000 in payroll taxes, including taxes withheld from all its employees, the employer could use up to $5,000 of the $8,000 of taxes it was going to deposit for making qualified leave payments. The employer would only be required under the law to deposit the remaining $3,000 on its next regular deposit date. If an eligible employer paid $10,000 in sick leave and was required to deposit $8,000 in taxes, the employer could use the entire $8,000 of taxes in order to make qualified leave payments and file a request for an accelerated credit for the remaining $2,000. Equivalent child care leave and sick leave credit amounts are available to self-employed individuals under similar circumstances. These credits will be claimed on their income tax return and will reduce estimated tax payments. The Families First Coronavirus Response Act was signed into law on March 18, 2020. In the coming days and weeks, federal regulatory agencies, including the Department of Labor (DOL) and Health and Human Services (HHS), will provide guidance on how to execute or implement the new requirements. In the meantime, employers and advisors must rely on a good faith interpretation of the act’s text. We are sharing everything we know below and will not be able to answer follow up questions about the act until agency guidance has been released, which will take some time. We will update this page when we have more information, and we encourage you to check here.

Summary

For certain circumstances related to COVID-19, employees will be eligible for:
  • Up to two weeks of sick leave (full pay for self, 2/3 pay for family care) for illness, quarantine, or school closures.
  • Up to 12 weeks of Family and Medical Leave Act (FMLA) leave for school closures (10 days unpaid and then up to 10 weeks at 2/3 pay).

Effective Date of Law

  • The FMLA and Paid Sick Leave sections discussed below will go into effect on April 1, 2020 and expire December 31, 2020.
  • It appears there is no retroactive application.

Key Elements for Employers

  • FMLA expansion
  • Paid sick leave
  • Payroll tax credit
  • Group health plan benefit mandate

Covered Employers

Employers with fewer than 500 employees.


Covered Employees

All employees (no matter how long they have been employed), though employers may be able to exclude employees who are health care providers or emergency responders.


Covered Leave Purposes:

  1. When quarantined or isolated subject to federal, state, or local quarantine/isolation order;
  2. When advised by a health care provider to self-quarantine (due to concerns related to COVID-19);
  3. When experiencing symptoms of COVID-19 and seeking a medical diagnosis;
  4. When caring for an individual doing #1 or #2 (2/3 pay);
  5. When caring for a child whose school or place of care is closed due to COVID-19 (2/3 pay); or
  6. When the employee is experiencing any other substantially similar condition (2/3 pay).

Duration of Leave:

  • Full time employees are entitled to 80 hours of paid sick leave.
  • Part time employees are entitled to sick leave equal to the number of hours worked on average over a typical two-week period.

Rate of Pay:

  • Sick leave must be paid at the employee’s regular rate of pay for leave used for the employee’s own illness, quarantine, or care.
  • Sick leave must be paid at two-thirds of the employee’s regular rate if taken to care for a family member or to care for a child whose school has closed, or if the employee’s childcare provider is unavailable due to the coronavirus.
  • Pay is capped at $511/day and $5,110 total for reasons 1, 2, and 3 described above.
  • Pay is capped at $200/day and $2,000 total for reasons 4, 5, and 6 described above.

Interaction with Other Employer-Provided Paid Sick Leave and other Paid Leave:

  • This act does not preempt existing state and local paid sick leave requirements.
  • Employers cannot require employees to use other leave first.
  • Sick leave provided for under the act does not carry over from year to year, and the requirements expire December 31, 2020.

Notice Requirements:

  • Employers must post a model notice, which will be provided by the federal government.
Note: The act reserves the right for the secretary to exclude certain care providers and first responders from the list of eligible employees and to exempt small businesses with fewer than 50 employees from providing paid leave for child care if business viability is jeopardized.

Payroll Tax Credit

  • Applies to both the emergency FMLA expansion and the emergency sick leave.
  • Dollar for dollar credit for sick leave and paid FMLA wages against the employer portion of Social Security taxes.
  • Refund is possible for amounts that exceed what is available as a credit.
  • Limits on what can be claimed mirror the caps for what must be paid.

Health Plan Benefit Mandate

  • The act requires all insured and self-funded medical plans, including grandfathered plans, to cover diagnostic testing-related services for COVID-19 at 100 percent without any deductibles or co-pays.
  • Examples include services provided by doctors, emergency rooms, and urgent care centers leading up to the decision that testing is needed, along with the actual lab-based testing.
  • The mandate does not apply to treatment.

Are You Ready for Simple, Comprehensive Human Capital Management?

Request More Info

199 North 290 W, Ste 200
Lindon, UT 84042

Magellan HCM Partners

We partner with CPAs and insurance brokers all over the country. Request more information or log in below.