5 Things Every Small Business Owner Should Know About The American Rescue Plan Act
May 12, 2021, 1:40 pm
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by Gene Marks

Black Chalkboard with Handwritten Business Concept – Small Business – on Black Office Desk and Other Office Supplies Around. Top View. 3d Rendering. Toned Image.

The $1.9 trillion American Rescue Plan Act of 2021 aims to help the American economy recover after a long and difficult year of shutdowns and hardships related to the COVID-19 pandemic. If you’re a small business owner, here are the five things you need to know about it:

1. More businesses are eligible for PPP loans Until May 31

Not only did the Paycheck Protection Program (PPP) receive an additional $7.25 billion as part of the legislation, but more small businesses are now eligible to apply.

The program was expanded to include internet-only news and periodical publishers with more than one location. Larger 501(c)(3) organizations and veteran organizations that employ not more than 500 employees per physical location can participate now as well. The broader eligibility standards also allow larger 501(c)(6) organizations, domestic marketing organizations, and additional covered not-for-profit entities that employ not more than 300 employees per physical location to apply for program benefits.

Via a directive from the Biden Administration prior to the passage of the bill, independent contractors and sole proprietors who apply for the loan can now use “gross income” (line 7 on their Schedule C tax form) instead of “net income” as a means to calculate their loan availability, a change that will greatly expand the size of the loans for many.

Most of the other conditions of the program still apply, including second-round loans that are targeted toward businesses that have experienced a decline in revenues and an expansion in the types of expenses that can be used for forgiveness.

On March 25, Congress extended the Paycheck Protection Program application deadline. The legislation will set a new application deadline of May 31, allowing the Small Business Administration (SBA) to continue processing applications for up to 30 days past the new date.

2. There’s a new, grant program for restaurant and bar owners.

It’s called the Restaurant Revitalization Fund, and it is designed for restaurants, bars, food stands, food trucks, food carts, caterers, saloons, inns, taverns, lounges, brewpubs, tasting rooms, taprooms and any licensed facility or premise of a beverage alcohol producer where the public may taste, sample, or purchase products, or other similar place of business in which the public or patrons assemble for the primary purpose of being served food or drink.

Those entities can receive up to $10 million as compensation for any reduction in revenues they experienced in 2020 compared to 2019. The money must be spent on certain things like payroll and operating costs.

The legislation allocated nearly $29 billion to this fund, with $5 billion set aside for eligible applicants that have 2019 gross receipts of $500,000 or less. The bill also charges the Small Business Administration (SBA) with awarding grants in “an equitable manner to eligible entities of different sizes based on annual gross receipts.” During the first 21 days of the grants, the SBA will prioritize applications from restaurants owned and operated or controlled by women, veterans, or socially and economically disadvantaged individuals.

Applications for the fund are not available as of this writing but will eventually be found on the Small Business Administration’s website.

3. More grants are targeted at businesses located in low-income communities.

A low-income community is generally defined as where the average income of its residents is 50-80 percent of the average income of its surrounding communities. If the SBA determines that your business is located in one of these areas, then you may be eligible for a special grant.

The bill designated $15 billion for grants for businesses located in low-income communities that have no more than 300 employees and that have suffered an economic loss of more than 30 percent, as determined by the amount that the entity’s gross receipts declined during an eight-week period between March 2, 2020, and Dec. 31, 2021, relative to a comparable eight-week period immediately preceding March 2, 2020.

In addition, and no later than 14 days after the American Rescue Plan Act is enacted, the SBA must initiate a two-week period of accepting applications from any applicants that previously applied for targeted Advances under the Economic Injury Disaster Loan program and, because of lack of funds, did not receive the amount to which they were entitled.

The SBA can also make grants of $5,000 to “severely impacted” small businesses, which are eligible entities that have suffered an economic loss of more than 50 percent and have no more than 10 employees. Following that, the SBA can make $5,000 grants to “substantially impacted” businesses, which are those with no more than 10 employees that can demonstrate a loss of between 30 percent and 50 percent.

If you’re in an affected area, you can apply for these grants directly on the Small Business Administration’s website.

4. A new tax credit will help pay for your employees’ health insurance.

Because it’s been around for so long, many employers and their workers recognize the Consolidated Omnibus Budget Reconciliation Act of 1985, better known as COBRA. The Act allows employees to continue their health care coverage with their employer for a set period of time even after parting ways by continuing to pay their health insurance premiums.

When companies were involuntarily forced to lay off workers as a result of the pandemic, many workers risked losing their health coverage because they couldn’t afford the premiums. The American Rescue Plan Act now provides businesses with a tax credit that will effectively reimburse them for the cost of covering these premiums. The credit expires on September 30 and comes with other limitations, so it’s best to speak to your tax or payroll advisor about your particulars.

5. Finally, two additional (and generous) tax credits have been extended.

The Employee Retention Tax Credit allows companies who were either partially or fully shut down in a quarter or experienced a revenue decline of more than 20 percent in any quarter of 2021 (or 50 percent in any quarter of 2020) compared to 2019 to receive a generous (up to $7,000 per employee per quarter in 2021) tax credit against the payroll taxes owed. The credit can be taken even if you’re participating in the Paycheck Protection Program (although you can’t use the same payroll amounts to both calculate forgiveness and for the credit) and is calculated on your quarterly federal 941 payroll tax return. What’s great about this credit is that it’s refundable – if the credit is larger than the taxes owed you can get cash for the difference.

The American Rescue Plan Act extends this credit through December 31.

Although the requirements of the Families First Coronavirus Response Act became voluntary in 2021, if you’re still providing compensation to employees who miss work because of COVID-related illness to themselves or family members, you can still claim the tax credit associated with the Act to get reimbursement. Eligible reasons for missing work have been expanded to now include vaccinations and their side effects.

This credit is also taken on your quarterly federal 941 payroll tax return and has now been extended through September 30.

Click Here for the original article!

Employer’s Responsibility for New COBRA Subsidy Notifications
April 29, 2021, 9:30 am
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We know as employers you have a lot on your plate right now, and unfortunately we are going to add some parmesan, but know we are here to help in any way we can.  You may have been seeing in the news about this new COBRA subsidy that will allow for former employees who were involuntarily terminated or experienced a reduction in hours to get “free” COBRA for six months (April 1-Sept 30).  That isn’t just smoke and mirrors, it is true, but it will require some work on your end. 

Below is the game plan:

  1. Did you have any former employee that their coverage was lost due to involuntary job loss or a reduction in hours of work who is still covered by COBRA? (typically anyone terminated since November 2019)
  2. If the answer to #1 was yes, then you are going to have to send the attached notices to all of the former employees by May 31st, 2021 or be subject to a penalty that is yet to be determined.
  3. If the answer is currently no however layoffs will occur between April 1- September 30th, please refer to the attached documents for your updated COBRA notice that will need to be sent to the employee being laid off or reduced hours.

So what does this mean if you are on the hook to send these notices?

  1. That the COBRA qualified individual is not eligible for a subsidy if they can obtain coverage under another group plan or Medicare.
  2. The subsidy is only available for someone that that has been involuntarily terminated (not for gross misconduct) or had a reduction in hours.

Who pays?

  • For employers with 20+ employees, the premium assistance will be delivered through the employer paying COBRA premiums to the insurance carrier (or covering the cost of providing COBRA coverage under a self-insured plan) and then taking a payroll tax credit to recoup the cost of covering COBRA premiums or costs.  Employers will treat the subsidy as a credit against the employer’s share of Medicare tax under Internal Revenue Code Section 3111(b). 
  • If the credit exceeds the taxes owed for a quarter, the excess will be refundable.

*Please discuss with your CPA for more information regarding the tax credit/refundable amounts.

So what do I have to do again?

  1. Fill out the “Alternative Notice” that is attached (just the areas that are highlighted)
  2. Send that out via email or first class mail along with the Summary of Provisions Application & the COBRA application by May 31, 2021 – the former employee will have 60 days from the date received to send back the applications to you.  Flip them to us when you get them. 
  3. Also, send the “Summary of COBRA Premium Assistance Provision” that includes the form to request the premium assistance as an Assistance Eligible Individual.
  4. You’ll have to send one more notice out, the “Notice of Expiration of Period of Premium Assistance” notice that has to hit their inbox between August 15 – September 15 to remind them to drop the COBRA if they do not have any intentions of paying for it after the subsidy is over.

Know that this is ever evolving and that there will be a lot of questions coming down the pike.  We are in your corner as always to help.  Still have questions?  Click Here for common FAQs!

Looking for the packet of sample notices? Download the packet at the hyperlink below!

No Foolin’ – 8 Things to Know About the New COBRA Subsidy
April 1, 2021, 3:35 pm
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Curious about how the ARPA COBRA Subsidies work? Check out this article from Benefit Resource!

The American Rescue Plan Act of 2021 (ARPA) was passed through the House and Senate this week. The bill was signed into law on March 11, 2021. While the specifics are still developing, here are 8 things to know about the COBRA subsidy that is included in the bill.

1. It’s a 100% subsidy.

While there were several iterations of the bill and subsidies, the final version includes a 100% subsidy. This will allow eligible individuals to obtain COBRA continuation coverage for their health plan without paying COBRA premiums.

2. It’s specific.

The COBRA subsidy is only available for premiums due from April 1, 2021 through September 30, 2021, referred to as the subsidy period. In order to be eligible, individuals must be in their 18-month Federal COBRA Coverage period.

3. Coverage is not automatic.

While newly eligible individuals will not need to pay premiums, they will still need to elect COBRA coverage in order to take advantage of the subsidy.

4. Employers are responsible for paying premiums, but receive a tax credit.

Employers sponsoring a group health plan will be responsible for paying health insurance carriers for the premiums. They will be reimbursed for 100% of the COBRA premiums through tax credits against certain payroll taxes.

5. New and previous qualified beneficiaries may be eligible.

The COBRA subsidy is available for individuals who are or become qualified beneficiaries as a result of involuntary termination of employment or a reduction in hours. This may include individuals who:

  • become eligible for COBRA during the subsidy period
  • previously elected COBRA coverage and have paid premiums for prior months
  • have not elected COBRA coverage but are still eligible to elect COBRA

6. Eligible individuals will need to be notified.

Eligible individuals will need to receive an updated notification regarding their rights to COBRA and the COBRA subsidy. The Department of Labor and Department of Health and Human Services is expected to provide new model notices within 30-days of enactment of the law.

7. Subsidies apply to Group Health Plans, except FSAs.

The 100% COBRA subsidy applies to the underlying medical coverage, dental and vision plans. Participants may still be responsible for premiums if they elect coverage for an FSA (or other benefits being offered post-employment).

8. Individuals could elect to change coverage.

If an employer permits individuals to change coverage, the premium subsidy cannot exceed the cost of the coverage option the individual was in at the time of the qualifying event.

For example: Assume at the time of termination an employee was enrolled in Plan A and the premium was $500 per month. They have an opportunity to enroll in Plan B, but it costs $700 per month. The employee’s subsidy cannot exceed the original premium of $500 per month.