Armanino Blog

H.R. 6201: What Employers Need to Know

by Shannon Oswald
March 23, 2020

The information below has been updated to reflect additional details we've received.

H.R. 6201, also known as the Families First Coronavirus Response Act (FFCRA), applies to employers with fewer than 500 employees and covers the period from April 1 to December 31, 2020.(Have 500 or more staff? You can stop reading, it doesn't apply to you.)

The larger FFCRA includes two pieces of leave-related legislation, the Emergency Family and Medical Leave Expansion Act and the Emergency Paid Sick Leave Act, and requires employers to provide two kinds of paid leave related to COVID-19. Keep in mind a leave is paid to employees who cannot perform their job duties and who are not working.

  • You must provide 80 hours of paid sick leave for the following COVID-19 related reasons if the employee:
  • Is under a federal, state, or local quarantine or isolation order (this is the question of the week...)
  • Has been advised by a health care provider to self-quarantine
  • Is experiencing symptoms and is seeking medical diagnosis
  • Is caring for an individual under a quarantine or isolation order or caring for an individual who has been advised by a health care provider to self-quarantine
  • Is caring for a child whose school or daycare is closed or unavailable
  • Is experiencing any other similar condition specified by the Secretary of Health and Human Services
  • You must also provide an additional 10 weeks of pay if the employee is unable to work due to caring for a child under 18 years of age whose school or daycare is closed or unavailable.

One employee may qualify for both types of leave.The maximum pay, in this circumstance, is $12,000.

Note: Small employers with fewer than 50 employees can exempt themselves from the 10 additional weeks of family leave if business viability is threatened. We don't know what "viable" is defined as. For now, if you're going to go completely broke, it's safe to say you can skip it. Threatened viability should be relatively easy to prove later.

The Math: Calculating Leave

Overall, a person can qualify for up to 12 weeks of paid leave across both kinds of leave covered. The leave calculations are different depending on why the employee is on leave.

  • For leave reasons (1), (2) or (3) above: It is paid at their regular rate up to $511 per day (for up to 10 days) and is capped at$5,110
  • For leave reasons (4) or (6): It is paid at 2/3 of their regular rate up to $200 per day (for up to 10 days) and is capped at $2,000
  • For leave reason (5): It is paid at 2/3 their regular rate up to $200 per day and is capped at $12,000 €” This includes 10 days of paid sick leave plus the 10 weeks of emergency leave
  • If a person qualifies for both types of leave, the amount paid is capped at $12,000

How Reimbursement Works

According to the IRS, you get it all back if you keep good records (we recommend using timesheets) and have good payroll and liability accounting processes. Your business will get 100% reimbursement (up to the maximums required to be paid) for:

  • Leave wages paid
  • Health insurance costs
  • Payroll tax liability

Employers can take this credit against their overall employer withholding for the rest of their healthy and working staff. This tax is withheld and paid every payroll and reported on a quarterly Form 941. This means that the employer can take these credits against the total due on a Form 941, and that includes income taxes and the employee portion of FICA too.

Note: Even self-employed people are eligible, although the mechanism for getting this credit is still unclear.

The IRS promises that a refund will be processed quickly when the credit is larger than the company's total payroll tax. That scenario could happen in cases where a majority of your staff are ill.

In practical terms, this means:

  • Your payroll processors need to figure out how to stop processing the 6.2% on COVID-19 leaves
  • The IRS needs to change the Form 941 for second-quarter reporting
  • You also have to find a mechanism for tracking/reporting COVID-19 eligible leave wages, health insurance costs, and FICA taxes that are to be credited and getting those figures to your payroll provider (This will require different payroll accounting for liabilities, and accounting teams will need to work with HR and payroll teams closely)

We'll keep you posted as we learn more.

Have questions or need some help? Don't hesitate to reach out to our experts. For more COVID-19 information, visit our COVID-19 Resource Center.

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Shannon Oswald - Director, Consulting | Armanino
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