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Families First Coronavirus Response Act (FFCRA)

On March 18, 2020, the Senate passed and the President signed into law the Families First Coronavirus Response Act (FFCRA). Here are some notes you may need to know as it relates to FFCRA (for self-employed individuals, please scroll to the section titled Self-Employed Individuals):

  • The law is effective 4.2.2020 thru 12.31.2020
  • FFCRA covers all employers with less than 500 employees including nonprofits and government agencies
    • Employers with less than 50 employees are eligible for an exemption from the requirements to provide leave to care for a child whose school or child care is closed where the requirements would jeopardize the ability of the business to continue.
  • Credit is not available to employers that are already receiving the pre-existing credit for paid family and medical leave under Internal Revenue Code Section 45S
  • The Department of Labor (DOL) is preparing posters required for posting in the workplace and for internal employee communication

Employees that qualify for FFCRA include:

  1. Employee is subject to federal, state or local quarantine order related to Covid-19
  2. Employee has been advised by a health care provider to self-quarantine
  3. Employee is experiencing symptoms of Covid-19 and is seeking a medical diagnosis
  4. Employee is caring for an individual who is subject to quarantine or has been advised by a health care provider to self-quarantine
  5. Employee is caring for a son or daughter because the child’s school or place of care has been closed or childcare is unavailable due to Covid-19
  6. Employee is experiencing any other substantially similar condition specified by the US Department of Health and Human Services

What is FFCRA coverage?

  • Two weeks (up to 80 hours) of expanded family and medical leave at the employee’s regular rate of pay up to a max amount of $511 per day where the employee is unable to work because the employee is quarantined (pursuant to Federal, State, or local government order or advice of a health care provider), and/or experiencing COVID-19 symptoms and seeking a medical diagnosis; or
  • Two weeks (up to 80 hours) of expanded family and medical leave at two-thirds the employee’s regular rate of pay up to a max amount of $200 per day because the employee is unable to work because of a bona fide need to care for an individual subject to quarantine (pursuant to Federal, State, or local government order or advice of a health care provider), or to care for a child (under 18 years of age) whose school or child care provider is closed or unavailable for reasons related to COVID-19, and/or the employee is experiencing a substantially similar condition as specified by the Secretary of Health and Human Services, in consultation with the Secretaries of the Treasury and Labor; and
  • Up to an additional 10 weeks of expanded family and medical leave at two-thirds the employee’s regular rate of pay up to a maximum of $200 per day where an employee, who has been employed for at least 30 calendar days, is unable to work due to a bona fide need for leave to care for a child whose school or child care provider is closed or unavailable for reasons related to COVID-19
  • Nonpayment is treated as failure to pay wages

Employer Benefits of FFCRA

As an employer, you will receive 100% reimbursement for paid leave pursuant to the Act, up to the max amounts per day. Please note:

  • Health insurance costs are also included in the credit
  • You will face no payroll tax liability
  • Self-employed individuals receive an equivalent credit

You will also experience quick and easy reimbursement since reimbursement is offset against payroll taxes. That being said, the IRS is expected to send the refund as quickly as possible. Nonpayment is treated as failure to pay wages. It’s important to note that these requirements are subject to a 30-day non-enforcement period for good faith compliance efforts.

How do FFCRA credits work?

  • Paid Sick Leave Credit
    • For items #1, #2, and #3 above, eligible employers may receive a refundable sick leave credit at the employee’s regular rate up to $511 per day (max of $5,110 per employee for 10 days/80 hours)
    • For items #4 and #5 above, eligible employers may claim a credit for 2/3 of the employee’s regular rate of pay up to $200 per day (max of $2,000 per employee for 10 days/80 hours)
    • Eligible employers are entitled to an additional tax credit determined based on costs to maintain health insurance coverage during the leave period
  • Child Care Leave Credit
    • In addition to the sick leave credit for item #5 above, eligible employers may receive a refundable credit equal to 2/3 of the employee’s regular pay, capped at $200 per day or $10,000 in aggregate for any employee who has been employed for at least 30 calendar days
    • Up to 10 weeks of qualifying leave can be counted toward the child care leave credit
    • Eligible employers are entitled to an additional tax credit determined based on costs to maintain health insurance coverage during the leave period
  • Payment (additional guidance coming out the week of March 22-Watch for updates! )
    • Eligible employers will be able to retain an amount of the payroll taxes equal to the amount of the qualifying sick and child care leave that they paid, rather than deposit them with the IRS.
      • This includes federal income taxes, the employee share of Social Security and Medicare taxes, and the employer share of Social Security and Medicare taxes
    • If there aren’t enough payroll taxes to cover the cost of the qualified sick and child care leave paid, employers will be able to file a request for an accelerated payment two weeks or less) from the IRS.
    • Additional guidance will be provided regarding how the employer will report this on their quarterly payroll reporting forms (Form 941 as an example)

I have someone who qualifies for FFCRA paid sick leave and/or extended family leave, now what?

  1. Make sure you have separate pay codes setup to track hours and wages paid
    • Recommend 3 hourly pay codes
      • Employee sick – 100% of wage up to $511/day
      • Employee caring for someone who is sick – 2/3 of wage up to $200/day
      • Employee with school or daycare closure – 2/3 of wage up to $200/day
  2. FFCRA wages subject to
    • Federal and state withholding
    • Social Security – Employee
    • Medicare – Employee and Employer
  3. Can continue employee deductions
  4. Calculate health insurance coverage costs, if applicable
    • Employer and employee (pre-tax) costs
    • Includes HRA and health FSA employer contributions
  5. Determine amount of credit
    • Wages paid
    • Health insurance costs
    • Employer portion of Medicare tax on FFCRA wages paid
  6. Reduce payroll tax payment for that payroll
    • Complete Form 7200 if credit outweighs payroll taxes due
  7. Keep great documentation
    • Copy of COVID-19 reason
    • Calculation of health insurance costs
    • Payroll information showing wages
    • Calculation of Medicare tax on FFCRA wages
    • Copy of every Form 7200 prepared

The CARES Act which was signed by the President on March 28th created opportunities for you as an employer to have access to new grants, loans and other forms of assistance and flexibility.

Self-Employed Individuals

  • Equivalent child care leave and sick leave credit amounts are available which will be claimed on their income tax return and will reduce estimated tax payments
  • Will need to maintain documentation that the IRS requires which will be in future guidance.

The US Department of Labor’s Wage and Hour Division (WHD) released guidance on 3/24/2020 explaining the Paid Sick Leave and Expanded Family and Medical Leave under the Families First Coronavirus Response Act that the President signed on March 18th. The guidance includes fact sheets for employees and employers along with a frequently asked questions document.

In addition, the WHD provided information on common issues employers and employees face when responding to COVID-19 and its effects on wages and hours worked under the Fair Labor Standards Act (FLSA) and job-protected leave under the Family and Medical Leave Act (FMLA).

You can view more information as it relates to COVID-19 on our COVID Update Page. Our team is here to help you determine the best option for your unique situation. If you have questions about FFCRA as it relates to your business, please contact our experts for assistance.

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