With respect to premium pay, what documentation must be provided for reporting purposes?

The U.S. Department of the Treasury (“Treasury”) published the Final Rule implementing the American Rescue Plan Act’s (“ARP”) Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) on January 6, 2022. CSLFRF recipients may use the funding to provide premium pay to qualified workers. The Final Rule defines premium pay as follows:

Premium pay means an amount of up to $13 per hour that is paid to an eligible worker, in addition to wages or remuneration the eligible worker otherwise receives, for all work performed by the eligible worker during the COVID-19 public health emergency. Such amount may not exceed $25,000 with respect to any single eligible worker. Premium pay will be considered to be in addition to wages or remuneration the eligible worker otherwise receives if, as measured on an hourly rate, the premium pay is:

1. With regard to work that the eligible worker previously performed, pay and remuneration equal to the sum of all wages and remuneration previously received plus up to $13 per hour with no reduction, substitution, offset, or other diminishment of the eligible worker’s previous, current, or prospective wages or remuneration; or
2. With regard to work that the eligible worker continues to perform, pay of up to $13 that is in addition to the eligible worker’s regular rate of wages or remuneration, with no reduction, substitution, offset, or other diminishment of the workers’ current and prospective wages or remuneration.[1]

In addition to defining premium pay, the Final Rule describes the authority to provide premium pay:

(c) Providing premium pay to eligible workers. A recipient may use funds to provide premium pay to eligible workers of the recipient who perform essential work or to provide grants to eligible employers that have eligible workers who perform essential work, provided that any premium pay or grants provided under this paragraph (c) must respond to eligible workers performing essential work during the COVID-19 public health emergency. A recipient uses premium pay or grants provided under this paragraph (c) to respond to eligible workers performing essential work during the COVID-19 public health emergency if:

1. The eligible worker’s total wages and remuneration, including the premium pay, is less than or equal to 150 percent of the greater of such eligible worker’s residing State’s or county’s average annual wage for all occupations as defined by the Bureau of Labor Statistics’ Occupational Employment and Wage Statistics;
2. The eligible worker is not exempt from the Fair Labor Standards Act overtime provisions (29 U.S.C. 207); or
3. The recipient has submitted to the Secretary a written justification that explains how providing premium pay to the eligible worker is responsive to the eligible worker performing essential work during the COVID-19 public health emergency (such as a description of the eligible workers’ duties, health, or financial risks faced due to COVID-19, and why the recipient determined that the premium pay was responsive despite the worker’s higher income).[2]

This regulation indicates that recipients who provide premium pay should document that the additional payments go to “eligible workers” (both public and private sectors) who perform “essential work” while responding to the pandemic. In addition, the Final Rule requires recipients who provide premium pay in excess of 150% of the average pay for such an essential worker to provide a written justification to Treasury relating to the excess pay.

The Final Rule includes guidance on the determination of when premium pay “responds to” eligible workers performing essential work during the public health emergency. Under the Final Rule, premium pay is responsive if either the workers’ pay is below a wage threshold or, if the pay is above a wage threshold, the recipient submits written justification to the Treasury explaining how the premium pay is responsive. Additionally, the Final Rule adds a third means of demonstrating that premium pay is responsive.

The Supplementary Information to the Final Rule states:

a recipient may also show that premium pay is responsive by demonstrating that the eligible worker receiving premium pay is not exempt from the FLSA overtime provisions. This change will expand the number of workers eligible to receive premium pay and does not require recipients to provide written justification to Treasury regarding the workers who are not exempt from the FLSA overtime provisions, making the program easier to administer for recipients. Incorporating this change further simplifies application of the final rule for recipients because Treasury understands that most employers, public and private, are familiar with and are routinely required to apply the FLSA.[3]

Under the Treasury’s Compliance and Reporting Guidance for CSLFRF (“Reporting Guidance”), municipalities are required to submit their first Project and Expenditure Report on January 31, 2022, via the Treasury’s CSLFRF reporting portal.[4] The quarterly Project and Expenditure Reports should include financial data, information on contracts and sub-awards over $50,000, types of projects funded, and other information regarding a recipient’s utilization of the award funds.[5]

The Reporting Guidance requires the following information regarding premium pay to be included in the Project and Expenditure Reports:

Premium Pay (both Public Sector EC 4.1 and Private Sector EC 4.2) – Collection to begin in January 2022:

• List of sectors designated as critical to the health and well-being of residents by the chief executive of the jurisdiction, if beyond those included in the Rule (Note: a list of sectors will be provided in the forthcoming user guide);
• Number of workers to be served;
• Employer sector for all subawards to third-party employers (i.e., employers other than the State, local, or Tribal government); and
• For groups of workers (e.g., an operating unit, a classification of worker, etc.) or, to the extent applicable, individual workers, for whom premium pay would increase total pay above 150 percent of their residing State's average annual wage of their residing county's average annual wage, whichever is higher, on an annual basis
  • A brief written narrative justification of how the premium pay or grant is responsive to workers performing essential work during the public health emergency. This could include a description of the essential workers’ duties, health or financial risks faced due to COVID-19, and why the recipient government determined that the premium pay was responsive to workers performing essential work during the pandemic. This description should not include personally identifiable information; when addressing individual workers, recipients should be careful not to include this information. Recipients may consider describing the workers’ occupations and duties in a general manner as necessary to protect privacy.[6]

In addition to the Project and Expenditure Reports, municipalities will also be required to report on the use of funds relating to premium pay in future Recovery Plans. The next required Recovery Plan is due on July 31, 2022.[7] Treasury states in the Reporting Guidance that the requirements for reporting premium pay in the Recovery Plans should:

As relevant, describe the approach, goals, and sectors or occupations served in any premium pay program [and should]….Describe how [the recipient’s] approach prioritizes low-income workers.[8]

As stated in Treasury’s CSLFRF Frequently Asked Questions ("FAQ"), municipalities must also publicly disclose any grants to third-party employers intending to provide premium pay to their workers performing essential duties.[9]

As stated in the Final Rule, critical infrastructure sectors include—but are not limited to—healthcare, public health and safety, childcare, education, sanitation, transportation, and food production and services.[10] A municipality has the discretion to provide premium pay to “non-public” sectors if they meet the other premium pay requirements and if they are “deemed critical to protect the health and well-being of residents.”[11]

If a municipality decides to utilize CSLFRF for any provision of premium pay, it must adhere to the above-provided compliance and reporting guidance outlined by Treasury’s Reporting Guidance.[12] Furthermore, municipalities should review the Project and Expenditure Report User Guide[13] to assist in the preparation and submission of their first Project and Expenditure Report and all subsequent required reporting within the reporting deadlines via the Treasury’s CSLFRF reporting portal.

It is also noteworthy that Treasury explicitly states with respect to record keeping by recipients of CSLFRF assistance:

Financial records and supporting documents related to the award must be retained for a period of five years after all funds have been expended or returned to Treasury, whichever is later. This includes those which demonstrate the award funds were used for eligible purposes in accordance.[14]

Additional information may be provided when Treasury issues new Frequently Asked Questions specific to the Final Rule.[15]

Last Revised: February 3, 2022