The Department of Treasury, the Department of Labor, and the IRS announced impending regulations that will help covered businesses with fewer than 500 employees and all government employers navigate the paid family and sick leave provisions of the Families First Coronavirus Response Act, including available tax credits, a small employer exemption, and a 30-day non-enforcement grace period.
The Act provides that eligible employees of covered employers can receive:
Oswald Observations: All paid sick leave provided by the Act are available effective April 1, 2020, the date of implementation of the law. The benefits from the Act are not available for COVID-19-related absences occurring before April 1.
The government agencies need to supply guidance defining how businesses with fewer than 500 employees will be determined. Specific questions include: Will the controlled group regulations apply, or will the number of employees be determined on an EIN-by-EIN basis? Will the 500 number include both full-time and part-time employees?
Paid Leave Tax Credits
The Act makes available the following tax credits to help employers pay for this paid sick and family leave:
Eligible employers who pay qualifying sick or childcare leave will be able to retain an amount of the federal income taxes, the employee and employer shares of Social Security and Medicare taxes equal to the amount of qualifying sick and child care leave that they paid, instead of depositing them with the IRS.
Oswald Observation: Treasury and the IRS need to provide details regarding the reporting of payroll taxes withheld that pertain to the credits. Additionally, guidance is needed regarding the additional tax credits equal to the cost to maintain health insurance coverage for eligible employees during the leave periods, e.g., what costs can be included?
If there are not enough payroll taxes to cover the cost of qualified sick and childcare leave paid, employers will be able to file a request with the IRS for accelerated payment. The IRS expects to process these requests in two weeks or less, with further guidance on this issue coming in the next two weeks.
Small Business Exemption
Businesses with less than 50 employees will be eligible for an exemption from the leave requirements relating to school closings or childcare unavailability, provided that the employer can show that compliance would jeopardize the ability of the business to continue. The DOL will be providing emergency guidance establishing simple and clear criteria defining the circumstances that will meet the criteria of jeopardy to the viability of an employer’s business as a going concern.
The DOL will be issuing a temporary non-enforcement policy. Under the policy, the DOL will not enforce the Act until May 2, 2020 (30 days after its effective date), against employers that have acted reasonably and in good faith to comply.
Disclaimer: Materials are solely for informational purposes as an educational resource. Please contact counsel to obtain advice with respect to any specific issue.