DOL Announces Final Rule Delaying Portions of 2020 Tip Rule
On April 28, 2021, the U.S. Department of Labor announced a final rule delaying portions of the 2020 Tip final rule until December 31, 2021. The remainder of the 2020 tip final rule will become effective April 30, 2021, including the rules addressing:
- A prohibition on employers, including supervisors and managers, keeping tips received by workers, regardless of whether the employer takes a credit for workers’ tips toward their obligation to pay those workers minimum wage.
- The recordkeeping requirements for an employer that does not take a tip credit to include non-tipped workers, such as cooks and dishwashers, in nontraditional tip-sharing arrangements.
- An employer that collects tips for tip pools must distribute tips fully no later than the regular payday for the workweek or pay period in which the establishment collected the tips.
The purposes of this delay is so the department can answer additional questions of law, policy, and fact and complete separate rulemaking related to the assessment of civil money penalties, and the application of the Fair Labor Standards Act’s tip credit provision to tipped employees who also perform non-tipped work.
Federal Contractors Minimum Wage Increase
On April 27, 2021, President Biden issued an Executive Order increasing the federal contractor hourly minimum wage to $15 effective January 1, 2022. This wage must be paid by federal contractors and subcontractors to workers who are working on, or in connection with, a federal government contract. The $15 minimum wage also applies to federal contract workers with disabilities. Additionally, covered workers who are tipped employees must be paid a cash wage that is at least $10.50 per hour beginning January 30, 2022, and then:
- Beginning January 1, 2023, 85 percent of the wage in effect, rounded to the nearest multiple of $0.05; and
- Beginning January 1, 2024, and for each subsequent year, 100 percent of the wage in effect.
Starting January 30, 2022, all federal agencies will incorporate a $15 minimum wage in their new contract solicitations. By March 30, 2022, all agencies will implement the minimum wage into their new contracts. Additionally, agencies will implement the higher wage into existing contracts when the parties exercise their option to extend them.
Beginning January 1, 2023, the federal contractor hourly minimum wage rate will annually increase as determined by the Secretary of Labor, based on the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers, and the increase will be published 90 days before its effective date.
Read more about the federal contractor hourly minimum wage on the Department of Labor’s website, which will eventually be updated because of the executive order.
2019 and 2020 EEO-1 Component 1 Reporting Opens
On April 26, 2021, the U.S. Equal Employment Opportunity Commission (EEOC) announced that the 2019 and 2020 EEO-1 Component 1 data collection is open after being delayed since May 8, 2020 due to COVID-19. The deadline for submitting both the 2019 and 2020 EEO-1 Component 1 data is July 19, 2021. The EEOC also extended the data collection period from 10 weeks to 12 weeks to provide employers additional time to file.
The EEO-1 Component 1 report is a mandatory annual data collection that requires all private sector employers with 100 or more employees, and federal contractors with 50 or more employees meeting certain criteria, to submit demographic workforce data, including data by race/ethnicity, sex and job categories.
There are two different ways to file the 2019 and 2020 EEO-1 Component 1 Report(s):
- As of April 26, 2021, filers may enter their data into a secure data entry form via the EEO-1 Component 1 Online Filing System; or
- As of May 26, 2021, filers may upload data files through the EEO-1 Component 1 Online Filing System. The format of the uploaded data file(s) must follow the file layout(s) set forth in the EEOC-approved specifications that will be available on May 26, 2021.
Employer Tax Credits, American Rescue Plan, and Paid Leave for Employees to Get Vaccinated
On April 21, 2021, the Internal Revenue Service (IRS) released a fact sheet about the American Rescue Plan Act of 2021 (ARP), the employers that are eligible for its tax credits (for the paid leave they provide employees for COVID-19 vaccinations), and how to claim them. The ARP allows small and midsize employers to claim refundable tax credits that reimburse them for the cost of providing paid sick and family leave to their employees due to COVID-19, including leave employees take to receive or recover from COVID-19 vaccinations. The ARP tax credits are available to eligible employers that pay sick and family leave for leave from April 1, 2021, through September 30, 2021.
Tax Credits and Paid Sick and Family Leave
Eligible employers are entitled to tax credits for wages paid for leave taken by employees who are not able to work or telework due to reasons related to COVID-19, including leave taken to get COVID–19 vaccinations or to recover from any injury, disability, illness or condition related to the vaccinations. These tax credits are available for wages paid for leave from April 1, 2021, through September 30, 2021.
Tax Credit Amount and Calculation
The paid leave credits under the ARP are tax credits against the employer’s share of the Medicare tax. The tax credits are refundable, which means that the employer is entitled to payment of the full amount of the credits if it exceeds the employer’s share of the Medicare tax.
The tax credit for paid sick leave wages is equal to the sick leave wages paid for COVID-19-related reasons for up to two weeks (80 hours), limited to $511 per day and $5,110 in the aggregate, at 100 percent of the employee’s regular rate of pay. The tax credit for paid family leave wages is equal to the family leave wages paid for up to twelve weeks, limited to $200 per day and $12,000 in the aggregate, at 2/3rds of the employee’s regular rate of pay. The amount of these tax credits is increased by allocable health plan expenses and contributions for certain collectively bargained benefits, as well as the employer’s share of social security and Medicare taxes paid on the wages (up to the respective daily and total caps).
Claiming the Credit
Eligible employers may claim tax credits for sick and family leave paid to employees, including leave taken to receive or recover from COVID-19 vaccinations, for leave from April 1, 2021, through September 30, 2021.
Eligible employers report their total paid sick and family leave wages (plus the eligible health plan expenses and collectively bargained contributions and the eligible employer’s share of social security and Medicare taxes on the paid leave wages) for each quarter on their federal employment tax return, usually Form 941, Employer’s Quarterly Federal Tax Return Form 941 is used by most employers to report income tax and social security and Medicare taxes withheld from employee wages, as well as the employer’s own share of social security and Medicare taxes.
In anticipation of claiming the credits on the Form 941, eligible employers can keep the federal employment taxes that they otherwise would have deposited, including federal income tax withheld from employees, the employees’ share of social security and Medicare taxes and the eligible employer’s share of social security and Medicare taxes with respect to all employees up to the amount of credit for which they are eligible. The Form 941 instructions explain how to reflect the reduced liabilities for the quarter related to the deposit schedule.
If an eligible employer does not have enough federal employment taxes set aside for deposit to cover amounts provided as paid sick and family leave wages (plus the eligible health plan expenses and collectively bargained contributions and the eligible employer’s share of social security and Medicare taxes on the paid leave wages), the eligible employer may request an advance of the credits by filing Form 7200, Advance Payment of Employer Credits Due to COVID-19. The eligible employer will account for the amounts received as an advance when it files its Form 941, Employer’s Quarterly Federal Tax Return, for the relevant quarter.
EBISA Releases Cybersecurity Guidance
On April 14, 2021, the U.S. Department of Labor (DOL) announced the following new guidance for plan sponsors, plan fiduciaries, recordkeepers and plan participants on best practices for maintaining cybersecurity:
This is the first time the DOL’s Employee Benefits Security Administration has issued cybersecurity guidance and it is designed for use by plan sponsors and fiduciaries regulated by the Employee Retirement Income Security Act, plan participants, and beneficiaries.
COBRA Premium Assistance FAQs and the American Rescue Plan Act of 2021
On April 7, 2021, the U.S. Department of Labor’s (DOL), Employee Benefits Security Administration (EBSA) released frequently asked questions (FAQs) addressing how certain provisions of the American Rescue Plan Act of 2021 (ARP) apply to the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). The FAQs provide answers to general questions, inquiries about premiums, notices, and more.
More information is provided on the COBRA Premium Subsidy website and EBSA also released the following model notices:
- General Notice and Election Notice
- Notice in Connection with Extended Election Period
- Alternative Notice
- Notice of Expiration of Premium Assistance
- Summary of the COBRA Premium Assistance Provisions
COBRA continuation coverage provides certain group health plan continuation coverage rights for participants and beneficiaries covered by a group health plan. In general, under COBRA, an individual who was covered by a group health plan on the day before the occurrence of a qualifying event (such as getting fired or a reduction in hours that causes loss of coverage under the plan) may be able to elect COBRA continuation coverage when that qualifying event occurs. These individuals are referred to as qualified beneficiaries. Under COBRA, group health plans must provide covered employees and their families with certain notices explaining their COBRA rights.
Section 9501 of the ARP provides for COBRA premium assistance to help assistance eligible individuals continue their health benefits. The premium assistance is also available for continuation coverage under certain state laws. Assistance eligible individuals are not required to pay their COBRA continuation coverage premiums. The premium assistance applies to periods of health coverage on or after April 1, 2021 through September 30, 2021. An employer or plan to whom COBRA premiums are payable is entitled to a tax credit for the amount of the premium assistance.
The DOL also provides more information about the COBRA Premium Subsidy on its website.