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Unpacking ARPA: Consumer Edition

Updated: Apr 26


Wow. Just wow. The American Rescue Plan Act (HR1319) is here. Signed into law on 3/11/2021 it is so much more than the $1,400 stimulus checks Congress has been promising (we'll get to those). After several days we've read the full law top to bottom and here are several of the highlights identified from taking our own pass at ARPA. We've tried to keep it brief and remove the legalese so that it's digestible. Feel free to use any "Sec. XXXX" References to search the document and get more information.


The full ARPA Text can be found here: https://www.congress.gov/bill/117th-congress/house-bill/1319/text


Stimulus

Sec. 9601 outlines that households will be paid $1,400 for each member listed on the household return. So for a household of four, this would mean $5,600 could be deposited into your bank account as soon as next week.


Eligibility: For a single person full benefits are available assuming your income is under $75,000. There is a reduced benefit for those between $75,000 and $80,000 and no benefit for single households over $80,000. For head of household filers, those numbers are $112,500 and 120,000. For married couples, they are $150,000 and 160,000.


Unemployment


Extension

Sec. 9011 States pandemic unemployment benefits will now run through 9/6/2021. They also extended eligibility from 50 weeks to 79 weeks to account for individuals running out of time.


Extra amounts

Sec. 9013 References a continuation of the $300 per week federal benefit through 9/6/2021 as well.


Tax Reduction

Sec. 9042 States for tax year 2020 (which is what we are filing now) the first $10,200 of your unemployment compensation will be excluded from your income for tax purposes.


Health Insurance

Sec. 2305 This is special to plan year 2021, but a pretty big deal. This is also assuming you are responsible for getting your own health insurance for some months in 2021; i.e. not having employer coverage available all 12 months. If you receive unemployment compensation for even one week in 2021 then you are eligible for ACA coverage with many $0 premium options. Here in Lancaster, PA this means 16 of our 31 plans are $0. This leg-up allows individuals to focus on recovery and not stress about cash flow.




Financial Safety Nets


LIHEAP

Sec. 2911 - $4.5 billion of ARPA has been allocated for home heating assistance through the remainder of 2021 and 2022 through the LIHEAP program.


Medicaid

In many of the states where we operate, behind the scene's regulators are stating "once someone is on Medicaid we aren't pulling them off." To consumers, they are calling it a COVID waiver. The premise is this: if you are eligible for Medicaid then you are enrolled. If for some reason you get employed, ordinarily you would then be deemed ineligible and removed. However, in today's world, just because you get a job doesn't mean you have stable employment. If we go into lockdown again and next month you need to apply again, that becomes a burden on the system to get you reenrolled. Our states are working with limited resources to help as many people as they can, so the COVID waiver allows Medicaid eligible constituents to have stable coverage until we ride this out. Sec. 9814 is a bit hard to understand, but it essentially provides additional funding to states who honor COVID waivers incentivizing this program to stay for the foreseeable future.


SNAP

Sec. 1101 Addresses SNAP food benefits. The 15% increase in monthly benefits will be extended through 9/30/2021.


FMLA

Sec. 3132 Addresses concerns regarding leaves of absence. What if you get sick? What if your kids get sick and you need to be out? What if you have to quarantine for a few weeks? First, talk to your HR team (or person, if a small employer). Second, $12,000 in funding has been earmarked for this. This section outlines everything from when to how much is available but here's the gist. Your employer can cover the lesser of $200 or 100% of your salary per day for up to 10 business days per quarter. In the event you or your children were advised that you have COVID or must quarantine, this funding is available to you under the "Emergency Paid Sick Leave Act" HR6201.Sec.5102.


Children


Summer Food Programs

Sec. 1108 States "Any school year in which there is a public health emergency" the following summer programs can be diverted to EBT cards. If your son or daughter is eligible for free lunches or breakfast programs, then this may pertain to you. It effectively gives you the ability to purchase food through an EBT Card, for PA this is commonly referred to as an ACCESS card, instead of having to go to the schools to collect food. By doing this it limits additional points of contact as it relates to pandemic spread.


Raised By Grandparents Or Relatives (Kin)

Sec. 2922 Took us a bit by surprise. Essentially, if you are a grandparent or other relative taking care of kids, the government is extending technology resources in response to remote learning burdens that have been put on families. This benefit is targeted to reach guardians age 55+.


Child Tax Credit Going Up In Amount And For 17 Year Olds

Sec. 9611. For tax year 2021 (i.e., returns due by April 15th, 2022) parents are going to see a bump in this credit. Ordinarily, this benefit is $2,000 per dependent ages 16 and under as a dollar for dollar credit at the end of your return that is usually either used to pay what you owe or refunded to you. For 2021 they moved it to age 17 (giving certain parents one more year!) and up to $3,000 ($3,600 if your child is under 5 as of the end of this year.) By July, consumers will also have an online portal where they can opt into a monthly advance of this credit.


Childcare Tax Credit Boost

We're going to say this is one of our favorite hidden gems in ARPA. Not to be confused with the child tax credit, Sec. 9631 gives parents some support when it comes to childcare. This could be daycare, a nanny/maid, or a babysitter if you need to get out of the house for a few hours. This credit is again a dollar-for-dollar benefit at the end of your return. But there are BIG changes just for 2021.


A typical year: The normal setup is that you get between 20% and 35% of the cost of childcare as a credit on what you owe. If you make less than $15,000 per year, it's 35%. If you make more, it's a sliding scale until you get to $47,000 where it hits the floor of 20%. So assuming you make more than $47,000, you get a credit worth 20% against up to $3,000(.2*3000=600) of dependent care costs per dependent ($6k max if 2 or more) against your final number. At best you are getting $1,200 off. Oh, and this credit isn't refundable!


All of that sounds pretty restrictive... Most people make more than $15,000. Additionally, you are reimbursed up to 35% (realistically probably 20%), and then it's capped at a $600 credit. That would mean to get to the cap you'd have to pay $15,000 a year in child care expenses (definitely doable). to even get that much, but if your costs go higher, you get no additional help. This is also not refundable. So if you are largely receiving W2 income where taxes are taken out as you go, what you owe may not be far off from what you've paid, effectively losing out on even seeing this.


The new system? If you make less than $125,000 you get the full %. Oh, and that percent is bumped to 50% starting point with the 20% limit not happening until $187,000 of income. Those $3,000 caps are going to $8k (and $16k for two or more). Last but not least, it's refundable.


A real-world example: Say a household makes $100,000 and has two kids in daycare. Maybe they pay $24,000 per year ($2k per month). Under current rules, they'd get a $1,200 credit against any tax balance on their return. Under ARPA they will get a $8,000 refundable credit(16k max *50% credit) that will either pay off taxes owed or be refunded to them when they file.


Here's a copy of the spreadsheet we built to illustrate this better.

Dependent Care Tax Credit Calc
.xlsx
XLSX • 20KB

Change the number of dependents and what you currently pay in daycare costs yearly to get a handle on the potential of this one provision.


What does this mean? For a lot of people, the fed will be picking up 50% of the tab of childcare costs. Need to get back to work without screaming kids or constant questions? This will help with that. For our Principal, Joshua Brooker, it's "Dad can you print another ninja turtle for me to color" smack dab in the middle of a zoom call. This benefit is there, consider using it.


Mental Health


"I'm not stressed, are you stressed?" Who has heard this? Sec. 2701 and Sec. 2702 allocate $3 billion dollars toward mental health and substance abuse issues. With this pandemic, we are all a bit more on edge, and we think the government recognizes that. Where those grants will go remains to be seen, but we will be monitoring the use of funds to advocate for consumers in our charge.





Health Insurance


COBRA For Free, But With A Risk

Sec. 9501 states that through September 30th, all COBRA benefits should be assumed as paid in full. So if you become eligible for COBRA due to loss of employment or life event, you can keep what you know(current plan) until September 30th without any premium owed. Keep in mind, if you are losing employment and going to be eligible for unemployment, COBRA may not be the best solution.

  1. Under ARPA if you need COBRA beyond September 30th, say due to not being able to find employment by then, starting October 1st your COBRA Premium would revert to full cost. In some cases, this is $1,500+ per month. And, since you aren't technically losing coverage this alone does not open a window up for you to move back to pennie/marketplace coverage. If $1,500 per month isn't affordable now, you will be stuck between a rock and a hard place later where your choices are to pay the price or go uninsured.

  2. Some plans on exchange for the unemployed would be $0 but potentially with better benefits and a guarantee through December 31st at $0 vs. COBRA running out September 30th.

We do see one benefit... If you turn 65 before October 1st and are only hanging on to employment for fear of health insurance premiums but equally afraid of getting sick, this may be a helpful. It would take this piece of the consideration off of your plate as you transition to retirement.


Society for Human Resources has more info here: https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/stimulus-bill-provides-cobra-subsidy-through-september.aspx


2020 Health Insurance Tax Repayments Cancelled

If you enrolled in health insurance on healthcare.gov and right now you have started or filed your taxes already, you may have talked to your accountant about health insurance tax credits. These credits would have lowered your premiums in 2020. Usually, if you understated your income or got a raise/bonus/high-income boost in the year, you may have to pay it back. But, Sec. 9662 says that the IRS will ignore any miscalculation of premium tax credits. So if you have a balance of tax credit repayments for the year 2020, take this to your accountant now.


Premiums Are Going Down

Another big change is the Affordable Care Act. For 36 states this is "Healthcare.gov." For the rest of them it's a state based system like Pennie, Get Covered NJ, Covered California, and the like. Regardless of how you enroll in coverage, the insurance companies and the plans themselves are the same. That is until now. If you are one of our clients you've probably heard the following:


"Health insurance under ACA was originally designed to bring health insurance into the affordable territory through tax credits. Essentially the roughly middle plan in your county(second-cheapest silver plan) needed to be under about 8% of your income. So a household making $50,000 would need that plan to be under $4,000 or $333 per month. If the plan premium is $500 for that benchmark plan than you would be eligible for $167 in tax credit to bring it down to $333. If the plan premium is $1,000 you'd receive $667. And if the plan premium was $2,000, you'd receive $1,667. Regardless of how many people are in your household, the premium would be brought down to "Affordable" based upon your total income. That $167/$667/$1,667 would then be used to shop around for a plan. If you picked a cheaper plan, that same $667, say, could potentially give you a $0 net premium if you found a bronze plan for $500 since $500-$667 is less than $0. Now, they won't pay you to buy a plan, but $0 for health insurance isn't the worst situation."


So what's changed? The "about 8%" I say about because for lower-income households it goes down to 2.07% and for higher-income households, it was up to 9.83% prior to today. Under Sec. 9661 we have moved the lower end to 0% and the higher end to 8.5%. In English?


If you're single and your income is under $19,320 then 16 plans in Lancaster are available to your $0. This includes $2,150 deductible, $0 deductible, and $800 deductible gold plans: not just the cheap stuff. For households of two the cap is $26,130, three the cap is $32,940, and four the cap is $39,750. Those incomes may seem low to some, but this law helps pretty much everyone.


No More Cliff For High-Income Earners

Another key issue with ACA is that it typically imposes a ceiling for incomes above 400% of the federal poverty limit. What does this mean? For 2021, this is a household of one at $51,520, two at $69,680, three at $87,840, and four at $106,000. Essentially if your income was above these limits you were deemed "ineligible for tax credits." This was a problem for two key reasons.


First, it became a cutoff where consumers were left out to fend for themselves at aggressively high rates. Kaiser Family Foundation, a non-profit, estimates that a single person making just $55,000 would have had to shell out 21% of their income to health insurance premiums because they didn't make the cut. That's ridiculous.


Second, there was an issue for consumers who estimated their income as $48,000 at the beginning of a year only to have a bump in income or some other situation cause them to go over $51,520. We call this the cliff, because even one dollar over and you have to pay all of the credits back that you received. Ask an accountant what they've seen for APTC repayment and you'll hear the horror stories. Additionally, for self-employed clients too close to "the cliff" they had to make a choice for heightened income tracking to stay under the limit, or act as if the support wasn't there from the get-go and not take the risk. Well, today there is some great news. For 2021 and 2022 the 400% cutoff is removed. Instead, Sec. 9661 specifically states everyone over 400% of FPL be capped at 8.5% of income. What this means is if you make $100,000 per year but that "middle plan" is $1,000 per month, then you'd get a tax credit to bring it down to $708.33. That's an extra $3,500 you get to keep in your pocket.

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