New Year, New Relief: COVID relief package and supplemental Biden proposal aid families, small businesses
At the eleventh hour of 2020, then President Donald Trump signed supplemental COVID-19 relief legislation into law. This included a $900 billion economic stimulus package as well as additional relief for business owners.
With a month of 2021 under our belts and a new administration in the White House, it is important for business owners to understand how this relief package and the future relief proposed by President Joe Biden will impact their operations.
Key December Relief Provisions
One of the most prominent provisions of the relief package is the authorization of additional direct stimulus payments to individuals and families.
However, the relief package also includes, but is not limited to, several other provisions directly impacting business owners.
- Paycheck Protection Program (PPP) loans and other assistance. An additional $280 billion has been designated for businesses that have not previously utilized PPP loans and businesses that may need a “second draw.” Of this amount, $12 billion has been set aside for minority-owned and small businesses; $15 billion has been dedicated for cultural institutions, live venues and certain movie theaters. Further, the eligibility factors for non-profits, certain local newspapers, and television and radio broadcasters were expanded to help this relief reach even farther than its spring 2020 counterpart. Notably, businesses that were not in operation on February 15, 2020 are not eligible for PPP loans. The PPP second draw is available for employers with no more than 300 employees who used all of their first PPP loan and can demonstrate at least a 25% reduction in gross receipts in any given 2020 quarter, or annually, as compared to 2019. Institutions began generally accepting applications for this round of PPP on or around Jan. 15, 2021. Additionally, $20 billion has been provided to enable Economic Injury Disaster Loan (EIDL) Grants to be made to businesses in low-income communities. Another $43.5 billion has been dedicated to the Small Business Administration debt relief payments, as well as $2 billion for further SBA lending.
- Unemployment assistance. The Pandemic Emergency Unemployment Compensation (PEUC) and the Pandemic Unemployment Assistance (PUA) programs have been extended until March 14, 2021. A federal $300 per week payment has been authorized to supplement unemployment benefits received between Dec. 26, 2020 and March 14, 2021. This amount was reduced from the $600 weekly payment under the CARES Act passed in the spring after some employers claimed the larger amount made it challenging to get employees to return to work.
- FFCRA tax credit extension. The tax credit established under the Families First Coronavirus Relief Act (FFCRA) has been extended past the sunset date for the FFCRA, which was Dec. 31, 2020. Thus, employers who voluntarily continue to provide FFCRA leave in line with its requirements can recognize the related tax credit through March 31, 2021. Importantly, the U.S. Department of Labor has clarified that this tax credit extension does not extend any rights or obligations under the FFCRA, but it does permit employers to use the tax credit when they allow employees to exhaust any FFCRA leave that was not previously used in 2020. The tax credit continues to be subject to the daily and aggregate maximums established in the FFCRA. Employers choosing to offer FFCRA leave in 2021 should be sure their policies and leave procedures have been updated to reflect the continuation.
- Retirement disaster distributions and loans. Certain qualified disaster distributions of up to $100,000 may be made to participants in tax-qualified retirement plans and IRAs for up to 180 days, effectively extending similar provisions authorized under the CARES Act. Participants are also permitted to make re-contribution payments to these plans to make up for certain distributions previously taken but not used. Additionally, the prior CARES Act provisions increasing retirement plan loan amounts and the loan repayment periods are extended for a period of 180 days. Employers and plan administrators should ensure that their retirement plans are amended to reflect these provisions.
Biden Administration Proposals
On Jan. 14, 2021, President-Elect Biden unveiled a $1.9 trillion proposal referred to as the American Rescue Plan, which is intended to supplement and/or expand the late-December relief package. The proposed plan includes a supplemental direct stimulus payment of $1,400 for each eligible recipient, bringing the total to $2,000 (with the December relief payment.) Additionally, the plan seeks to increase the federal unemployment supplemental assistance from $300 per week to $400 weekly and extend the PEUC and PUA unemployment programs beyond March 2021.
President Biden’s plan also proposes to effectively reinstate the FFCRA through September 2021; however, the paid leave requirements would apply to not only those same businesses covered by the FFCRA, but also to businesses with more than 500 employees, who were previously excluded. Eligible employees would receive 14 weeks of paid leave (as opposed to a possible 12 weeks under the FFCRA) and the government would fully reimburse employers with fewer than 500 workers for the full cost of providing such leave.
For those businesses that may not be eligible for the PPP second draw but that may still require some relief, the plan also calls for the creation of a new $15 billion grant program for small business owners separate from the existing Paycheck Protection Program.
The American Rescue Plan contains numerous other proposed relief programs as well. Although these programs are mere proposals at this time, they do offer business owners much-needed insight into the Biden administration’s vision for relief in 2021.
Lindsay J. Raymond of Danbrook Adams Raymond PLC is an experienced employment law attorney and business owner. Reach her at lraymond@darlawyers.com.