Labor & Employment Law Daily Bipartisan lawmakers press Mnuchin to change employee retention credit determination, saying it’s against CARES Act intent
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Thursday, May 7, 2020

Bipartisan lawmakers press Mnuchin to change employee retention credit determination, saying it’s against CARES Act intent

By Pamela Wolf, J.D.

Contrary to current Treasury Department guidance, qualified wages in the CARES Act employee retention credit “were explicitly expanded to incorporate certain qualified health benefits,” the lawmakers say.

Senate Finance Committee leaders Ron Wyden (D-Ore.) and Charles Grassley (R-Iowa), along with House Ways and Means Committee Chairman Richard E. Neal (D-Mass.), are pressing the Treasury Department to reverse its current guidance and make employers that are providing health insurance to furloughed workers—but not paying other qualified wages—eligible for the employee retention credit provided in the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

According to the bipartisan trio of lawmakers, the Treasury Department’s current guidance contradicts congressional intent and bars employers providing health insurance to furloughed workers, but not paying other qualified wages, from receiving the credit, making it more difficult to preserve coverage.

Retention credit. In a May 4 letter, the lawmakers schooled Treasury Secretary Steven Mnuchin, saying that “in drafting the provision, qualified wages were explicitly expanded to incorporate certain qualified health benefits, with the intent to provide an incentive for employers to continue providing health benefits to their employees, even if the employer was otherwise unable to continue paying regular wages because of the coronavirus pandemic.”

“The economic contraction caused by the pandemic has resulted in over 30 million unemployment claims, making incentives that retain the connection to employment and employee benefits critical,” the lawmakers continued. “After the passage of the CARES Act, we reiterated this intent in subsequent communications with Treasury.”

Wyden, Grassley, and Neal said they were disappointed with a “recent determination [see

https://www.irs.gov/newsroom/covid-19-related-employee-retention-credits-amount-of-allocable-qualified-health-plan-expenses-faqs Question 64, Example 2, and Question 65] that an employer that is no longer paying regular wages but continues to provide full health benefits would not be able to treat any portion of those health benefits as qualifying wages eligible for the retention credit. They encouraged Mnuchin reconsider, “in light of congressional intent and the importance of providing access to affordable health care during the ongoing health crisis.”

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