As one of the longest pieces of legislation ever passed by Congress, the COVID relief legislation signed into law in December has a lot of information for businesses to navigate. Not only does the Consolidated Appropriations Act, 2021 extend and expand provisions from previous relief bills, but it adds new initiatives to the mix. As a leader in all things HR, it’s Synergy’s responsibility to interpret what this legislation means for you.
Paycheck Protection Program
The PPP has reopened until March 31st, 2021 with an additional allocation of $248 billion. Eligible borrowers who already relied on the PPP before may be able to receive a second loan. That second loan can be two-and-a-half times average monthly payroll costs, up to a maximum of $2 million. To be eligible, companies must have less than 300 employees and demonstrate at least a 25% reduction in gross receipts compared to the previous year’s same quarter.
Of particular note is the “Covered Operations Expenditures” portion of the updated PPP, which includes expenses for software related to HR and accounting. It also covers property damage, supplier costs, and costs of PPE to protect workers. Also, the definition of payroll costs has been broadened to include life, disability, vision, and dental insurance. There is also more flexibility for businesses to determine the “covered period” that determines the loan amount. Thankfully, the government also simplified the forgiveness application for loans less than $150,000.
Employee Retention Tax Credit
Through the end of the 2020, the ERTC represented a credit of 50% of qualified wages. It has been raised to 70% for wages between January 1st and June 30th of this year. The maximum credit is $5,000 per employee during each quarter of 2020 and $7,000 per employee during each of the first two quarters of 2021. For employers to be eligible, they must have had operations at least partially suspended or experienced a decline of at least 50% in gross receipts.
Flexible Spending Arrangements
With the new law, FSA balances from the end of 2020 can be rolled over into 2021. Participants can also make election changes in the middle of 2021, and the typical grace period for claim reimbursement has been extended from March 31st to the end of the year. The age limit for dependent care has also increased from 13 to 14 years old.
Paid Sick and Family Leave
Previous laws required certain employers to provide paid sick and family medical leave for reasons related to COVID-19 through the end of 2020. Employers were then eligible for tax credits. Now, those who continue to voluntarily offer paid sick and family medical leave receive a tax credit extension through March 2021.
Student Loan Repayment
The previous CARES Act allowed employers to provide student loan repayment as a benefit through the end of 2020. This has been extended to the end of 2025.
Family and Medical Leave Tax Credit
This tax credit that was placed into law in 2017 has also been extended through the end of 2025.
Work Opportunity Tax Credit
Intended to encourage employers to hire individuals from certain groups that have faced significant barriers to employment, the WOTC has been extended through the end of 2025.
Interpreting the Consolidated Appropriations Act, 2021 for SMBs
For small and medium-sized businesses, this new legislation holds many opportunities and added flexibility. The above is only an overview of the changes. Within each provision, there are many more specific parameters to be aware of. We encourage you to leverage any parts of the Consolidated Appropriates Act, 2021 that will help your business as the effects of the pandemic continue.
If you’re thinking about applying for a PPP loan, retention tax credit, or are unsure what the latest law means for your business, then let’s discuss your unique situation.