In April of 2020, we published this blog post regarding the newly enacted Families First Coronavirus Response Act (“FFCRA”) and what it meant for contractors. Among other things, the FFCRA required all private employers with fewer than 500 employees to offer employees two types of paid leave benefits: (1) up to 80 hours of Emergency Paid Sick Leave or “EPSL” and (2) up to 12 weeks of Public Health Emergency Leave or “E-FMLA” through December 31, 2020.
Contractors Who Provided FFCRA Leave from April 1, 2020 to December 31, 2020
As originally enacted, the FFCRA required contractors to continue to make contributions to health and welfare funds for employees who took leave. To offset the cost, the FFCRA made a tax credit available for “qualified health plan expenses,” so contractors would be reimbursed for the cost of health and welfare contributions.
Other fringes, however, were not eligible for tax credits. There was a question about whether contractors needed to make these contributions, and the answer likely depended on whether the relevant CBA required the contractor to make fringe contributions on “hours paid” (instead of “hours worked”).
Contractors Who Voluntarily Provided FFCRA Leave Between January 1, 2021 and September 31, 2021
While the requirement to provide paid FFCRA leave expired on December 31, 2020, Congress extended the FFCRA tax credits for employers who voluntarily offered the leave through March 31, 2021. Then, Congress passed the American Rescue Plan (“ARP”), which then extended the tax credits for employers who continued to offer paid leave through September 30, 2021 – see here.
Accordingly, a contractor may claim a tax credit for contributions made to health and welfare funds made while an employee is on emergency leave if voluntarily offered by the contractor from January 1, 2021 through September 30, 2021.
Further, the ARP included additional tax credits for “amounts paid under certain collectively bargained agreements,” including: (1) pension plan contributions and (2) apprenticeship fund contributions that are allocable to E-PSL and E-FMLA. The contributions are properly allocable to qualified leave wages if the contributions are required, pursuant to the applicable CBA to be paid for the hours for which the qualified leave wages were provided. As noted in the 2020 blog post linked above, an example of a CBA requiring contributions to pension/apprenticeship program funds would be where the CBA mentions “hours paid” rather than “hours worked”.
The ARP specifies that the amount of pension plan or apprenticeship program contributions allocated to E-PSL or E-FMLA for a calendar quarter shall be the product of (1) the pension or apprenticeship program contribution rate (expressed as an hourly rate), and (2) the number of hours for which qualified E-PSL or E-FMLA wages were provided to employees covered under the CBA during the calendar quarter.
Accordingly, contractors may also claim a tax credit for contributions to a pension plan or apprenticeship program allocable to E-PSL or E-FMLA between April 1, 2021 and September 30, 2021.
Contractors who voluntarily offered E-PSL and E-FMLA through September 30, 2021 should make sure they claim tax credits for wages and fringe benefits contributions. Specifically, contractors may claim a tax credit for wages and contributions to a health and welfare fund from January 1, 2021 through September 30, 2021.
Contractors may also claim a tax credit for certain contributions to a pension plan or apprenticeship program allocable to E-PSL or E-FMLA between April 1, 2021 and September 30, 2021.