American Rescue Plan
On March 11, 2021, President Joe Biden signed the American Rescue Plan Act of 2021 (American Rescue Plan) into law. The $1.9 trillion relief bill yields a multitude of benefits, including extended unemployment benefits, direct checks to individuals and more.
As with many other pieces of federal legislation, understanding what the American Rescue Plan may mean for your business and your clients can be difficult. Fortunately, we’re here to help.
Common Questions about the American Rescue Plan:
The American Rescue Plan is the latest COVID-19 relief bill passed by the U.S. government. It provides small business assistance; direct payments to individuals (stimulus checks); unemployment aid; housing assistance; emergency paid leave; aid to schools and child care; tax credits; aid to states, local governments, tribes and territories; and subsidies for Consolidated Omnibus Budget Reconciliation Act (COBRA) premiums.
The final American Rescue Plan did not include provisions for a minimum wage hike to $15 per hour, an extension on the federal eviction moratorium or an expansion of mandated paid sick and family and medical leave. While these provisions were included in the House bill, they were not included in the final version of the bill signed into law.
The American Rescue Plan covers various areas of assistance. The most relevant provisions included within the bill are explained below.
Just like the two other COVID-19 relief bills passed during the pandemic, this version also features direct payments to Americans. This time around, eligible recipients can expect $1,400 per person ($2,800 for couples), including adult dependents—a family of four could receive up to $5,600.
However, payment parameters are stricter this time around than with the previous direct payment. The total amount will go to individuals earning under $75,000 (or $150,000 for couples), with payments cut off entirely for individuals earning over $80,000 (or $160,000 for couples). Individuals earning an amount between those figures will receive a reduced sum.
You can check the Get My Payment tool on IRS.gov to see the payment status of these payments.
The bill invests billions toward small business assistance. Here is the current funding breakdown:
Economic Injury Disaster Loan program: $15 billion
New grant program for bars and restaurants, specifically: $28 billion
The bill extends two previously established pandemic unemployment assistance efforts: the Pandemic Unemployment Assistance Program and the Pandemic Emergency Unemployment Compensation program. Unemployed gig workers, freelancers, contractors and others who previously qualified for aid will continue to be eligible under these programs. The financial assistance provided by these two programs is currently set to expire in mid-March, which pressured legislators to act quickly.
The bill also provides enhanced unemployment assistance payments of $300 per week. Under the bill, these programs and their financial aid are extended through Sept. 6, 2021.
The relief bill provides an overhaul of the child tax credit for the 2021 tax year. The bill increases the credit amount to $3,000 for each child under the age of 18 and $3,600 for children under age 6. The credit will also become fully refundable, meaning low-income individuals would receive the benefit.
The bill also expands the earned income tax credit for individuals without children. The maximum credit will nearly triple, and eligibility will be broadened as well.
The Families First Coronavirus Response Act (FFCRA), signed into law on March 18, 2020, required certain employers to provide employees with paid sick leave or extended family and medical leave for specified reasons related to COVID-19. That requirement expired Dec. 31, 2020.
The American Rescue Plan maintains the status quo in that it does not require employers to offer leave under the FFCRA framework. However, the bill does give tax credits for employers that voluntarily provide leave under the FFCRA framework through the end of September 2021.
The bill subsidizes private health insurance premiums for unemployed workers through COBRA. The provision allows individuals eligible for COBRA insurance coverage to maintain their employer-sponsored coverage after losing employment without having to pay any portion of the premiums through the end of September 2021.
Additionally, the bill invests nearly $35 billion in premium subsidy increases for those who buy coverage on the ACA Marketplace. The bill increases the subsidies provided to currently eligible individuals and removes the 400% federal poverty level cap (equal to approximately $51,000 for an individual) on subsidy eligibility.