FMLA Expansion, Paid Sick Leave & Child Care Leave

by | Mar 24, 2020 | Advice

FMLA Expansion, Paid Sick Leave & Child Care Leave

Families First Coronavirus Act

  • Employee eligibility expanded for FMLA
    • Normal rules: Employers with 50+ employees. Employee worked at least 12 months and 1,250 hours during last 12 months
    • Temporarily Expanded Rules: All employers with <500 employees. Employee worked at least 30 days.
  • Employers under <50 may be exempt from granting required leave, but can still take advantage of the tax credits if they want to pay employees under these provisions
  • 100% reimbursement available to employer for required paid sick leave and child care leave (explained below)
    • Health insurance (i.e., costs to maintain group plan coverage) are included
  • First 10 days of leave will be unpaid. Employee can use accrued paid sick leave or accrued vacation during this time. Employer cannot require this.
  • Eligible wages for credit to begin – within 15 days of March 18 – through December 31. Stay tuned for an effective start date, most likely April 1.

Paid Sick Leave

  • Up to 10 days (80 hours) paid sick leave available for all employees
  • 100% of pay when unable to work due to:
    • COVID-19 quarantine (Federal, State or local quarantine or isolation order related to COVID-19) As of yet, this does not include a shelter in place order.
    • Experiencing Symptoms and seeking medical diagnosis
    • Advised by a health care provider to self-quarantine
    • Tax Credit: $511/day; $5,110 total; 10 days total
  • ⅔ of employee’s pay when unable to work due to:
    • Caring for an individual subject to quarantine order or advised to self-quarantine (Sec 5102 – not for caring for someone experiencing symptoms and seeking diagnosis?)
    • Caring for son or daughter if school or daycare is closed, or if daycare provider unavailable due to COVID-19
    • (…experiencing any other substantially similar condition….Sec. 5102)
    • Tax Credit: $200/day; $2,000 total; 10 days total
  • Additional tax credit available for costs to maintain health insurance coverage.

Paid Child Care Leave

  • Up to 10 weeks of pay can be considered for this tax credit
  • ⅔ of employee’s regular pay
  • Additional credit for employees unable to work due to:
    • Caring for son or daughter if school or daycare is closed, or if daycare provider unavailable due to COVID-19
    • Tax Credit: $200/day or $10,000 total
  • Additional tax credit available for costs to maintain health insurance coverage.

Claiming the Tax Credit

  • Refundable tax credit available for wages paid according to above provisions and limits
    • Offset payroll taxes you would normally deposit with IRS
      • Applies to federal withholding tax, social security and Medicare taxes (both employee and employer’s share)
    • If wages paid are more than payroll taxes, you can claim an accelerated payment from the IRS for the excess. Details on this process coming some time the week of March 23.

Tax Credit examples in the IRS Announcement

If an eligible employer paid $5,000 in sick leave and is otherwise required to deposit $8,000 in payroll taxes, including taxes withheld from all its employees, the employer could use up to $5,000 of the $8,000 of taxes it was going to deposit for making qualified leave payments. The employer would only be required under the law to deposit the remaining $3,000 on its next regular deposit date.

If an eligible employer paid $10,000 in sick leave and was required to deposit $8,000 in taxes, the employer could use the entire $8,000 of taxes in order to make qualified leave payments and file a request for an accelerated credit for the remaining $2,000.

Equivalent child care leave and sick leave credit amounts are available to self-employed individuals under similar circumstances. These credits will be claimed on their income tax return and will reduce estimated tax payments.

Analysis by Eric Levenhagen

Sources:

IRS News Release IR-2020-57, March 20, 2020 https://www.irs.gov/newsroom/treasury-irs-and-labor-announce-plan-to-implement-coronavirus-related-paid-leave-for-workers-and-tax-credits-for-small-and-midsize-businesses-to-swiftly-recover-the-cost-of-providing-coronavirus

H.R. 6201 – 116th Congress (2019-2020), enrolled bill https://www.congress.gov/bill/116th-congress/house-bill/6201/text

New Law Grants Paid Leave and Employer Credits for COVID-19 Absences, March 20, 2020, Iowa State University-CALT https://www.calt.iastate.edu/blogpost/new-law-grants-paid-leave-and-employer-credits-covid-19-absences

Time To Hit Pause: What Employers Need To Know About Yesterday’s Families First Coronavirus Response Act, March 19, 2020, Forbes.com https://www.forbes.com/sites/michaelstudenka/2020/03/19/time-to-hit-pause-what-employers-need-to-know-about-yesterdays-families-first-coronavirus-response-act/#421d01e911cb