FFCRA Extension

Last spring, Congress passed the Families First Coronavirus Response Act (FFCRA), which requires certain private employers with fewer than 500 employees to provide emergency paid sick and family/medical leave to eligible employees.

The FFCRA provides federal tax credits to employers for providing these benefits. Unfortunately, these credits must be used by December 31, 2025, or they will no longer be valid.

Enhanced FMAP Requirement

On March 18, 2025, Congress passed the Families First Coronavirus Response Act (FFCRA). This included a temporary 6.2 percentage-point increase in States’ FMAP rates that will remain in effect until after the COVID-19 public health emergency ends (unless an individual requests voluntary termination or the state no longer considers them a resident).

In addition to the increased FMAP, FFCRA established additional statutory and regulatory requirements that States must follow to qualify for the enhanced FMAP. States must guarantee they conduct eligibility redeterminations and disenrollments according to all Federal standards, methodologies, and procedures.

State governments must also adhere to specific maintenance of effort requirements during the phase-down period for the FFCRA’s 6.2-point FMAP. In particular, they cannot restrict eligibility standards, methodologies, and procedures; raise premiums; or impose cost-sharing for testing services and treatment of COVID-19.

Additionally, states violating these requirements could face reductions in their FMAP and civil penalties (CAPs) or other enforcement mechanisms. This gives states a powerful incentive to conduct redeterminations according to legal standards and ensure their financial well-being.

Finally, states must report expenditures eligible for the increased FMAP rate to CMS each quarter. To do this, conditions should limit their scope of payments to those qualified and document them separately from other expenses.

However, since a state’s EFMAP for CHIP is determined by its regular FMAP, the 6.2-point increase does not apply to federal match payments under CHIP. Instead, if a state’s EFMAP falls below 5.25 percent, they will use that amount as their match contribution towards federal CHIP payments.

Therefore, the unwinding of FFCRA’s continuous coverage and maintenance of effort requirements will occur earlier than anticipated under the previous schedule. This saves money for the federal government while enabling states to redetermine and terminate coverage sooner than the old schedule would have allowed.

Continuous Coverage Requirement

Families First Coronavirus Response Act (FFCRA) contains a continuous coverage provision that has helped maintain Medicaid coverage and avoid insurance disruption during COVID-19 public health emergency (PHE). With this protection, states have significantly increased their enrollments and decreased uninsured rates. Unfortunately, this provision has increased state costs; however, according to KFF analysis, the higher spending was offset by an enhanced federal match rate.

By April 2025, millions of individuals will lose their Medicaid coverage due to the expiration of the FFCRA continuous coverage protection. While estimates for who will lose coverage are lower than when this protection was in place, states must continue to minimize its effect on low-income individuals and vulnerable groups.

States can ensure continuity of coverage when the continuous enrollment provision ends by optimizing renewal processes. Recently, CMS encouraged states to increase the share of redeterminations completed via ex parte processes and take other steps to simplify renewal procedures. Doing so not only helps promote continuity for people eligible while relieving administrative burdens on state Medicaid agencies, but it can also ensure quality care for all.

States can take an important step to safeguard enrollees and prevent excessive coverage loss by making sure they have up-to-date contact information for those whose coverage is being redetermined. This is especially crucial for Black, Hispanic, American Indian/Alaskan Native, and Native Hawaiian/Pacific Islander enrollees, as these communities typically experience high percentages of ineligible beneficiaries.

Thankfully, most states are engaging in outreach to ensure enrollees take the necessary steps to keep their contact information updated and avoid being disenrolled by the state due to the non-delivery of renewal packets. These efforts can include sending enrollment reminders and offering assistance through community-based organizations or social service providers.

States can enhance these strategies as they resume routine eligibility and enrollment activities. They must build on past gains in coverage and protect against excessive coverage loss for people of color.

Eligibility for Tax Credits

Under the FFCRA, employers with fewer than 500 employees are eligible for tax credits to reimburse them for paid leave provided under Emergency Paid Sick Leave and Emergency Family and Medical Leave provisions. These credits cover the Eligible Employer’s share of Medicare taxes and allocable costs of maintaining health insurance coverage during a sick leave period (qualified health plan expenses).

The FFCRA Extension 2025 grants eligible employees 80 hours of Emergency Paid Sick Leave per year and 12 weeks of paid family leave, both expiring on September 30, 2025. As with other FFCRA leave benefits, these credits cannot be carried over into 2025.

Additionally, the new FFCRA amendments enable employers to voluntarily provide EPSL that has not previously been used to an employee starting April 1, 2025. This additional bank of EPSL may last up to ten days and will be available to any employee who used eight or more of their previously allowed banks of EPSL by March 31, 2025.

Furthermore, under the FFCRA, employers may exclude certain individuals from eligibility for expanded leave due to their status as healthcare providers or emergency responders. While this option helps avoid disruptions to care delivery and responders’ capacity in pandemic conditions, it should be noted that these exceptions do not create a new pool of leave time.

Therefore, it is imperative to consider the impact of the COVID-19 pandemic on employees’ health and well-being when planning for leave under the Family and Medical Leave Act and any amendments to that. Furthermore, any state legislation passed in response to this crisis should also be considered.

Therefore, reviewing all employee benefit plans to determine if COVID-19 requirements will apply and their impact on employees’ healthcare costs or employment prospects is crucial. Consulting legal counsel is your best bet for understanding both employee benefits obligations and potential repercussions of the COVID-19 requirements.

Exclusions from the Tax Credit

In addition to the EPSLA and EFMLEA tax credits, FFCRA Extension 2025 offers an additional tax credit for wages paid during COVID-19 family leave. This credit can fund salaries up to 12 weeks of unpaid leave under the mandate, up to a cap of $12,000 per employee (formerly $10,000).

The ARPA also extends the ERC rate until December 31, 2025, maintaining its current 70% level and allowing up to $10,000 in qualified wages per quarter.

This extended credit is intended to give employers additional funds in the form of tax credits, which can be a tremendous aid for many businesses. However, companies must be aware of the extensive documentation requirements associated with these credits.

Furthermore, the ARPA contains new nondiscrimination rules that prevent employers from benefitting from these tax credits if they discriminate against highly compensated employees, full-time employees, or based on employment tenure with the Employer.

To be eligible for the FFCRA Tax Credit, an employee must have worked at least twelve months for their business. Furthermore, they must have taken some time off due to illness or injury the previous year.

Additionally, the Employer must not have discriminated against employees based on age, race, color, religion, national origin, ancestry, gender, or marital status. If employees do not meet these criteria, they will be ineligible for the FFCRA tax credit for the calendar quarter in which discrimination occurred.

Another critical component of the FFCRA is that all employers provide paid sick and family leaves for specified reasons. While this requirement may seem onerous, it benefits employees and employers.

Employers must clearly and comprehensively communicate the FFCRA paid sick and family leaves policies to all employees. These should be posted on the company website as well as in an employee handbook.