COVID-19 Consolidated Appropriations Act Updates for 2021

This article provides pertinent updates to the Paid Sick Leave and Paid Family Leave, Employee Retention Credits, and PPP Loans based on the Consolidated Appropriations Act for 2021.

BACKGROUND

The Consolidated Appropriations Act provides extensions to employers to claim credits for retaining employees and providing paid sick and family leave based on the Coronavirus Aid, Relief, and Economic Security (CARES) Act and Families First Coronavirus Relief (FFCR) Acts. Updates were made to the Paid Sick Leave and Paid Family Leave, Employee Retention Credits, and Paycheck Protection Program Loans for 2021 based on the Consolidated Appropriations Act.  

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Refer to the COVID-19: FAQs - Consolidated Appropriations Act Updates for 2021 for answers to frequently asked questions related to the updates from the Consolidated Appropriations Act for 2021. 
 

Please note the Federal Employee Retention Credit (ERC) is scheduled to expire December 31, 2021; however, H.R. 3684: Infrastructure Investment and Jobs Act, which now resides with the Senate, will sunset the ERC as of September 30, 2021. The bill is expected to pass on or around September 30, 2021.

If the law is enacted after September 30, 2021, but is made retroactive, companies that have already claimed the ERC for fourth-quarter 2021 will be liable for additional taxes, as well as penalties and interest.

Please note that this change is expected to impact only established companies, and not recovery startup businesses.

In preparation for the bill being passed, Namely Payroll will not have a Pay Code available for Q4 ERC Credits. Q4 ERC credits will no longer be allowed if this bill is passed.
 

PAID SICK LEAVE AND PAID MEDICAL LEAVE

Namely implemented the following Pay Type Codes for Paid Sick Leave and Paid Family Medical Leave for COVID-19 in March 2020:

  • Federal Paid Medical Leave - Tier 1

  • Federal Paid Medical Leave - Tier 2

  • Federal Paid Family Leave

Under the Consolidated Appropriations Act, the earnings will now expire on March 31, 2021 —an extension from the original December 31, 2020 deadline. These limits are based on the lifetime of the earning opposed to annually.
 

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The original per-employee limits for these earnings as defined in the 2020 CARES Act remain unchanged, and there is no automatic cap in Namely to prevent their overuse. Exceeding the federal limits could subject you to penalties and interest.


Things to Consider

The original limits for these earnings and tax benefits will remain unchanged for 2020 and 2021. These earnings can be used up to the federal limit even if you pay an employee with these earnings for both years. 

Examples:

Federal Paid Medical Leave - Tier 2 has a maximum of $2,000. 

  • If you paid an employee $2,000 using the earning code in 2020, you cannot use this earning for this employee in the 2021 calendar year.

  • If you did not use this earning code to pay an employee in 2020, you may pay the employee up to $2,000 by March 31, 2021. These earnings will be eligible for a credit and will be exempt from employer Social Security taxes.

  • If you paid an employee $1,000 using the earning code in 2020, you may pay the employee up to $1,000 by March 31, 2021. These earnings will be eligible for a credit and will be exempt from employer Social Security taxes.
     

More to Come

Namely will be implementing a Tooltip in Step 1 of Payroll Processing under the Recurring Wage section of the employee payroll profile in Employee > Wage > Edit. A warning will display to remind you to not exceed the limits for these earnings. 

The COVID-19 Pay History Report will be available in Namely Payroll to provide a breakdown of each employee who has been paid with these earnings along with the amount to keep your employees within the respective earning limits. This report can be found under Reports > Date Range.

EMPLOYEE RETENTION CREDITS

Namely implemented earnings for the Employee Retention Credit for COVID-19 in March 2020. Under the Consolidated Appropriations Act, the amount of qualified wages remains at $10,000 but the tax credit has been increased from 50% to 70% of qualified wages that employers are eligible to pay their employees. The wage cap is now per quarter instead of per year. Clients can use this earning for Q1, Q2, and Q3 of 2021 until the limit is reached. The earnings will now expire on September 30, 2021 opposed to the December 31, 2020 deadline.

Namely has created three additional earning codes to accommodate these updates.

  • Q1 2021 Employee Retention Credit

  • Q2 2021 Employee Retention Credit

  • Q3 2021 Employee Retention Credit

PAYCHECK PROTECTION PROGRAM LOAN REPORTS

Under the CARES Act, businesses have the opportunity to apply for the Paycheck Protection Program (PPP Loan) administered by the Small Business Administration (SBA). Namely created reports to help your organization track payroll costs when applying for forgiveness.
 

Based on the Consolidated Appropriations Act, the below provisions to the PPP Loan have been extended:

  • PPP loans are available through March 31, 2021, or until allocated funds are exhausted.

  • Organizations can now apply for a second PPP loan, even if they had already received the first PPP loan.

  • No changes were made to eligible payroll costs.

  • PPP funds can only be used for individual employees up to $100,000.

  • The covered forgiveness period has been modified to 8 to 24 weeks following the disbursement. Organizations can select the duration between 8 to 24 weeks.

More to Come

Namely will be creating a new report to accommodate these changes, including flexibility on payroll costs depending on the length of your PPP Loan. Find the SBA Loan - In Business 2019 - Seasonal - 2021 Report under Reports > Date Range.