You aren’t alone. Many questions still exist surrounding the regulations and required calculations of the Families First Coronavirus Response Act (FFCRA) which was signed into law by President Trump on March 18, 2020. The IRS recently released a lengthy FAQ to help organizations navigate the new Emergency Paid Sick Leave Act (EPSL) and Emergency Family and Medical Leave Expansion Act (Expanded FMLA or EFMLA). Below are some of the questions we’ve been asked the most, and you can view the full Q&A here.
Note: Throughout this article, the term “Eligible Employer” refers to any employer with less than 500 employees who is therefore subject to the FFCRA.
Q: What is the amount of the refundable tax credit available to Eligible Employers?
A: The credit available is 100% up to applicable maximums, which are up to $2,000 for EPSL and up to $10,000 for EFMLA.
Q: How do Eligible Employers claim the tax credit?
A: Eligible Employers can retain the federal employment taxes they would otherwise have deposited, including:
- Withholding tax
- Employee’s share of Social Security and Medicare taxes
- Employer’s share of Social Security and Medicare taxes
Q: Are amounts other than wages included in the credit for the EPSL and EFMLA?
A: Yes. Qualified health plan expenses paid or incurred by the Eligible Employer to provide and maintain a group health plan are included, to the extent that the amounts are excluded from the employees’ gross income. This includes both the Eligible Employer’s portion and the employees’ portion if the contributions are pre-tax.
Q: For Eligible Employers who sponsor a fully-insured group health plan, how are qualified health plan expenses allocated?
A: There is some flexibility here. Eligible Employers may use any reasonable method to determine and allocate the plan expenses, including:
- The COBRA applicable premium for the employee
- One average premium rate for all employees
- Similar method – have one rate for any self-only insured employee and another rate for anything other than self-only
Q: If we’re paying people under EFMLA because they’re taking 10 weeks off, should we continue to deduct their health premiums?
A: Yes, those wages are considered normal wages, which you can continue to deduct healthcare premium expenses from.
Q: What is the rate of pay for EPSL and EFMLA?
A: The Eligible Employer must pay qualified EPSL and/or EFMLA leave at an hourly rate based on the greatest of the following:
- Employee’s regular rate of pay
- Federal minimum wage
- State minimum wage
Some EPSL and all EFMLA leaves are paid at a rate of two-thirds of the greatest rate and you would still pay at the two-thirds rate even if it took the employee below minimum wage.
Q: How are employees’ hours determined for purposes of EPSL?
A: Full-time employees are entitled to up to 80 hours of EPSL (4/1 – 12/31/20). Hours for part-time employees can be based on:
- Employee’s normal scheduled hours (if known),
- Average hours the employee works in a normal two-week period (6-month lookback), or
- Alternate option (hours agreed upon)
Q: What information should an Eligible Employer receive and maintain from an employee to substantiate eligibility for EPSL or EFMLA?
A: The employer may require a written request for such leave from the employee, in which the employee provides:
- The employee’s name
- The date or dates for which leave is requested
- A statement of the COVID-19 related reason and written support for such reason, and
- A statement that the employee is unable to work, including by means of telework, for such reason
Q: How long should I keep the records?
A: Records should be kept for four years.
Q: Is an employee who is on EFMLA leave counted in the FTE calculation?
A: The current understanding is that their hours paid under EFMLA would be counted in the FTE calculation. However, the dollars paid to them under the EFMLA would not get counted towards your total wage base paid because you’re getting credits back for that EFMLA pay.
Q: If an employee works 45 hours in one week, are they counted as 1.5 FTEs?
A: Anyone who works 30 or more hours counts as one FTE, regardless of how many hours they worked beyond 30 hours.
If you have questions that have not been answered here or on the IRS Q&A (here), contact your legal counsel. Visit our COVID-19 Resources Page for the latest news on legislation and assistance for businesses.
This content was created during a snapshot in time and should be relied upon as such. Legislation and guidance continue to change as we progress through the current fluid environment and the information may not be applicable at a later date. All content and materials are for general information purposes only. If you have questions regarding your specific situation, please contact us.