Families First Coronavirus Response Act
On March 18, 2020 the Families First Coronavirus Response Act (FFCRA) was passed to help employees and employers who are impacted by the coronavirus (COVID-19). This Act has three major components:
(1) expands the scope of the Family Medical Leave Act (EFMLA),
(2) creates the Emergency Paid Sick Leave Act (EPSLA) and
(3) provides for employer payroll tax credits.
These provisions become effective April 1, 2020 and are required for employers with fewer than 500 employees. An employer with less than 50 employees may be exempt from the provisions for child-care related payments if by doing so will jeopardize the viability of the business as a going concern.
Expansion of the Family Medical Leave Act (EFMLA)
The expansion of the EFMLA is effective beginning April 1, 2020 through December 31, 2020. Employees who have been employed for at least 30 calendar days have the right to 12 weeks of job-protected leave under EFMLA if the employee is unable to work or telework because the employee must care for a son or daughter under 18 years of age because the child’s school or daycare is closed.
The first 10 days of leave provided under the EFMLA Expansion Act is unpaid, but employees may elect to substitute accrued leave (such as sick and vacation leave) for unpaid leave. After the initial 10 day period, leave is paid at 2/3 the employee’s regular rate of pay for the number of hours the employee would normally work, but is capped at $200 per day per employee and an overall limit of $10,000 per employee.
Emergency Paid Sick Leave Act (EPSLA)
The EPSLA is also effective beginning April 1, 2020, and expires on December 31, 2020. Employees are immediately eligible for paid sick time, regardless of how long they have been employed provided they meet the criteria discussed below.
The employer must pay sick leave, at the employee’s regular rate of pay, to the extent the employee is unable to work or telework for any one of the following reasons:
- The employee is subject to federal, state or local quarantine or isolation order related to COVID-19
- The employee has been advised to self-quarantine by a healthcare provider related to COVID-19
- The employee is experiencing symptoms of COVID-19 and is seeking a medical diagnosis
The employer must pay 2/3 the employee’s regular pay rate if the employee is unable to work or telework for any one of the following reasons:
- The employee is caring for an individual who is subject to circumstances described in 1 or 2 above
- The employee is caring for his/her son or daughter if the school or daycare has been closed due to COVID-19 precautions
- The employee is experiencing any other substantially similar condition specified by the U.S. Department of Health and Human Services
There are limits, both in number of hours and dollar amount, regarding sick leave that is required to be paid. These limits per employee are as follows:
A. Limit as to total number of hours of sick leave paid:
i. Full-time employees: 80 hours
ii. Part-time employees: Average number of hours an employee would normally work in a two week period
B. Limit as to dollar amount of sick leave paid:
i. For any circumstance described in 1 through 3 above: $511 per day or $5,110 aggregate
ii. For any circumstance described in 4 through 6 above: $200 per day or $2,000 aggregate
NOTE: Wages that are paid under EFMLA and EPSLA are not considered wages for the purposes of the employer portion of OASDI tax (6.2% Social Security)
Employer Payroll Tax Credits
Employer tax credits related to the FFCRA consists of three components:
A. Credit for the employee’s required leave pay, calculated per employee with the following limitations:
a. The portion of the credit associated with required leave paid under the EFMLA is the amount of the employee’s leave pay, limited to $200 per day per employee with a maximum of $10,000 per employee.
b. The portion of the credit associated with required leave paid under the EPSLA is equal to the lesser of the amount of each employee’s leave pay or either:
i. $511 per day (for a maximum of 10 days) if the leave is paid due to circumstances described in 1 through 3 above or
ii. $200 per day (for a maximum of 10 days) if the leave is paid due to circumstances described in 4 through 6 above.
B. Credit for the employer’s qualified health plan expenses that are allocable to the qualified leave wages paid under the EFMLA or EPSLA for which the credit is allowed.
C. Credit for employer portion of the Medicare taxes paid on leave wages paid under the EFMLA or EPSLA
The employer will receive these credits through a credit against its payroll tax deposit (form 941 deposit), a refundable credit, or a combination of both. As the law is written today, the credit against its payroll tax deposit is limited to the amount of the employer portion of OASDI taxes (the 6.2% Social Security taxes). If the total credit exceeds the employer portion of the OASDI taxes, the employer will file for a refund of the remaining credit on a quarterly basis.
In contrast, the news release IR-2020-57 posted to the IRS’s website states “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”. This news release leads one to believe that the form 941 deposit can be offset by the credit without any limitation as to the employer portion of the OASDI taxes.
Self-employed individuals can also receive credits against their income tax equal to:
A. The number of days (limited to 10 for EPSLA leave and 50 for EFMLA leave) that the individual is unable to perform services for a reason that the person would be entitled to sick leave or family leave, multiplied by the lesser of:
a. $200 (or $511 if the leave would be paid due to circumstances described in 1 through 3 above), or
b. 67% (or 100% if the leave would be paid due to circumstances described in 1 through 3 above) of the average daily self-employment income