Reporting Requirements for COVID Paid Leave

By Gina Lemons and MeLissa Crockett

-UPDATE January 12, 2021-

The Consolidated Appropriations Act (CAA) signed by President Trump end of 2020 allows participants to roll over all unused amounts in the health and dependent care FSAs from 2020 to 2021 and from 2021 to 2022. Participants are also allowed to elect changes during 2021 without requiring an election-change event such as the birth or adoption of a child, or a change in marital status.

Employers who wish to offer the FSA relief options must amend their Section 125 Cafeteria Plan to incorporate the changes. The amendment can be retroactive as long as it is adopted no later than the last day of the calendar year following the year in which the amendment is effective.

Plan Sponsors are permitted to implement the following voluntary changes for health and dependent care FSAs.

• Unlimited carry-overs
• Extended grace period (may be extended for plan year ending 2020 or 2021 from two-and-a-half months to 12 months)
• Election changes (plan year ending 2021, participants may prospectively modify their health or dependent FSA contributions for any reason–watch for overspending under the Health FSA)
• Post-termination reimbursements from Health FSAs (employees who stop participating in a health FSA during 2021 may continue to receive reimbursements from unused amounts through the end of the plan year, including any grace period)
• Carry forward for aged-out dependents in Dependent Care FSAs – Current rules limit reimbursement of qualifying dependent care expenses to children under age 13, the CAA provides an extra year for children who “aged out” during the pandemic. Unused dependent care FSA amounts can be used for children until they turn age 14, at least through the end of the 2021 plan year.

FFCRA mandate

The “Stimulus Bill” signed by President Trump on Dec. 27th does not extend the benefit into 2021. However, the bill does extend the federal tax credit for both forms of paid leave through March 31, 2021, for employers with less than 500 employees who voluntarily wish to keep providing paid leave.

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In March 2020, Congress passed the Families First Coronavirus Response Act (FFCRA) that requires employers with fewer than 500 employees to provide emergency paid leave and Emergency Family Medical Leave for specific reasons related to COVID-19.

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Let’s re-visit the requirements for Emergency Paid Leave and Emergency Family Medical Leave.

EMERGENCY PAID SICK LEAVE

An employee is eligible for Emergency Paid Sick Leave if he/she is unable to work at the employer’s place or business, or work from home, due to the following reasons:

1. Required by health official to self-quarantine due to COVID-19
2. Subject to federal, state, or local quarantine due to COVID-19
3. Experiencing COVID-19 symptoms and seeking medical diagnosis
4. Caring for an individual subject to self-quarantine per health official
5. Caring for his/her child whose school or place of care is closed due to COVID-19, or child care provider is unavailable due to COVID-19

Full-time employees who meet reason #1, #2, or #3 are eligible for up to 80 hours emergency paid leave, not to exceed $511 per day.

Full-time employees who meet reason #4 & #5 are eligible for up to 80 hours emergency paid leave at 2/3 regular rate of pay up to $200 per day.

Part-time employees are eligible for up to 80 hours paid leave at a pro-rated amount based on their average number of hours worked in a two-week period.

EMERGENCY FAMILY MEDICAL LEAVE

An employee is eligible for additional 10 weeks of paid Emergency Family Medical Leave at 2/3 regular rate of pay if the employee is unable to work at the employer’s place or business, or work from home, because the employee is caring for his/her child (under the age of 18) as defined in reason #5.

FILING REQUIREMENTS

As part of the FFCRA, the Internal Revenue Service requires employers to report Emergency Paid Leave and Emergency Family Medical Leave on employees’ 2020 W-2 form.

In addition to including qualified sick leave wages in the amounts reported in Boxes 1, 3, and 5 of Form W-2, employers must separately state the total amount of qualified sick leave wages paid between April 1, 2020 and December 31, 2020, in Box 14 or on a separate statement.

Each qualified sick leave wage type must be identified in Box 14, using the following, or similar language:

1. “Sick Leave Wages subject to $511 per day limit” because of care employee required
2. “Sick Leave Wages subject to $200 per day limit” because the employee cared for another individual
3. “Emergency family leave wages subject to $200 per day limit”

The Internal Revenue Service may modify Form W-2 to expand Box 14 and allow for these descriptions. In the meantime, please let our Managed Accounting staff know if you have any questions or need assistance preparing for the upcoming filing season.

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