5-minute read
The American Rescue Plan is designed to help working Americans have more money and get the help they need for things like insurance and medical care. But it's important to note that staffing and recruiting companies also need to understand the changes.
If you operate or work for one of these companies, being aware of the HR duties and responsibilities you'll have to adjust to is important. Here's what you'll want to consider.
COVID-19 Changed the HR World
Anyone who works in HR of any kind is probably well aware of how much COVID-19 changed things. When the world essentially went on lockdown, a lot of people who were normally working in offices ended up working from home.
Many of them lost their jobs, too, and because of that, they needed protection like COBRA to keep their insurance coverage. They also needed help with dependent care, and the FSA limits were changed by the American Rescue Plan to help accommodate that as well.
While these adjustments have been very helpful for workers, they've created important changes that HR professionals have had to adapt to and pay close attention to. If the changes aren't processed properly, it could leave people without the assistance they were expecting to help them get through the pandemic.
FSA Limits Have Been Adjusted
Flexibility for dependant care is very important, and that's even more significant with the pandemic. But the American Rescue Plan offers a higher dependent care tax credit. It also adjusts the requirements for a qualifying child, so more people can claim the credit and get additional tax relief.
For the 2021 tax year exclusively, the maximum contribution to an FSA for dependent care is $10,500. With the rising cost of childcare, many families are struggling. This will provide them with more options, and make it easier for them to pay for the care they need for their children and other dependents.
Flexibility is key, and the changes based on the American Rescue Plan provide that level of flexibility in ways that work for most people who want to contribute to dependent care spending accounts. The current dependent care FSA limit is $5,000, which is not a lot when daycare in some locations can be $2,000 per month or higher.
The COBRA Subsidy Is a New Benefit
When people lose a job and want to keep their insurance coverage, they can do that for a period of time through COBRA. But it's often cost-prohibitive, leading people to lose coverage --- often through no fault of their own. The new subsidy will help change all of that.
For people who have lost their jobs involuntarily, and for people who have had a reduction in hours, the subsidy is designed to provide them with 100% of the cost of their COBRA plan. Essentially, that makes insurance free and helps protect workers and their families.
If you've lost your coverage due to job loss or related issues, or if you work in an HR capacity where you help people transition to COBRA coverage, understanding the subsidy and what it can offer is an important part of moving forward and providing the right information to the people who need it most.
You'll Need to Make Knowledge a Priority
The biggest thing you can do as a professional with a staffing or recruiting company understands the new changes for the dependent care FSA contributions and COBRA subsidies. Workers need to be made aware of how much they can contribute to their FSA for the 2021 tax year.
These same workers may be used to only contributing $5,000 but may wish to put more away for times that they could need it. Being able to do so is important, but they probably won't do it unless they're told that they can. Educating them on the changes so they can get what they need for more financial security is vital.
The same is true for the COBRA subsidy, which wasn't offered before but could make a significant difference for people who need to continue their insurance coverage. They'll no longer be priced out of protecting themselves and their families, thanks to the American Rescue Plan.
You can help workers get the guidance and support they need by making sure you know about and understand these changes. That way, you can convey the information to those who need it, and get them the opportunity to make informed choices for themselves and their future.