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Fund Planning & Allocation

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

The U.S. Department of Treasury published an Interim Final Rule (“the Rule”) to implement the American Rescue Plan Act’s (“ARP”) Coronavirus State and Local Fiscal Recovery Fund authorities on May 17, 2021. The 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 the definition of Premium Pay, the Rule describes the authority to provide Premium Pay as follows:

(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, 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 it prioritizes low- and moderate-income persons. The recipient must provide, whether for themselves or on behalf of a grantee, a written justification to the Secretary of how the premium pay or grant provided under this paragraph (c) responds to eligible workers performing essential work if the premium pay or grant would increase an eligible worker’s total wages and remuneration above 150 percent of such eligible worker’s residing State’s average annual wage for all occupations or their residing county’s average annual wage, whichever is higher.[2]

On January 31, 2022, municipalities are required to submit their first Project and Expenditure Report via the United       States Department of the Treasury’s (“Treasury”) Coronavirus State and Local Fiscal Recovery Fund (“CSLFRF”) reporting portal.[3] 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.[4]

To provide additional guidance and instructions on the reporting requirements, Treasury has published the Compliance and Reporting Guidance (the “Reporting Guidance”) relating to CSLFRF reports, with the current Version 2.0 published on November 5, 2021. Treasury’s 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:

In addition to the Project and Expenditure Reports, municipalities will also be required to report use of funds relating to Premium Pay in its future Recovery Plans. The next required Recovery Plan is due July 31, 2022.[6] Treasury states in the Reporting Guidance that the requirements for reporting Premium Pay in the Recovery Plan are:

As relevant, describe the approach, goals, and sectors or occupations served in any premium pay program. Describe how your approach prioritizes low-income workers.[7]

It is advisable to refer to the Reporting Guidance for further details concerning future Recovery Plans and related reporting requirements.

Municipalities must document the criteria and process used to identify workers receiving premium pay and demonstrate that efforts were made to prioritize lower-income workers.[8] Municipalities must also publicly disclose any grants to third-party employers intending to provide premium pay to their workers performing essential duties.[9]

In addition, recipients may use Fiscal Recovery Funds (“FRF”) payments to provide premium pay to eligible workers performing essential work during the COVID-19 public health emergency or grants to third-party employers with eligible workers performing essential work.[10] These are workers who have been and continue to be relied upon to maintain continuity of operations of essential critical infrastructure sectors, including those critical to protecting their communities’ health and well-being.[11]

As stated in the Rule, critical infrastructure sectors include - but are not limited to - healthcare, public health and safety, childcare, education, sanitation, transportation, and food production and services.[12] A municipality has the discretion to provide premium pay to sectors not mentioned in the Rule if they are “deemed critical to protect the health and well-being of residents.”[13]

If a municipality decides to utilize CSLFRF for any provision of premium pay, it must adhere to the above-provided compliance outlined by Treasury’s Reporting Guidance.[14] Furthermore, municipalities should review the Portal for Recipient Reporting: State and Local Fiscal Recovery Funds[15] to assist in the preparation of their first Project and Expenditure Report and submitting their reports within Treasury’s respective submission portal, which is due January 31, 2022. A separate guide will be issued for the Project and Expenditure Report.

In addition, municipalities should document all guidance utilized in determining their decision and ongoing facilitation of CSLFRF at the given time. Treasury guidance in the future may change to supersede the current guidance, and a municipality may be required to demonstrate its rationale and reliance on the specific guidance it utilized when it used CSLFRF monies.

In support of this, Treasury explicitly states that:

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.[16]

Last Revised: November 12, 2021

[1] Treas. Reg. 31 CFR 35 at 134, available at: https://home.treasury.gov/system/files/136/FRF-Interim-Final-Rule.pdf.

[2] Id., at 143.

[4] Treas. Reg. 31 CFR 35 at 111, available at: https://home.treasury.gov/system/files/136/FRF-Interim-Final-Rule.pdf.

[5] Department of Treasury, Coronavirus State and Local Fiscal Recovery Funds—Compliance and Reporting Guidance (Revised November 5, 2021, Version 2.0), at 20, available at: https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf.

[6] Id., at 23.

[7] Id., at 24.

[8] Coronavirus State and Local Fiscal Recovery Funds, Frequently Asked Questions (as of July 19, 2021) – FAQ #5.1, at 26-27, available at: https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf.

[10] Id., at 45.

[11] Id.

[12] Id., at 48.

[13] Id.

[14] Department of Treasury, Coronavirus State and Local Fiscal Recovery Funds—Compliance and Reporting Guidance (Revised November 5, 2021, Version 2.0), at 20, available at: https://home.treasury.gov/system/files/136/SLFRF-Compliance-and-Reporting-Guidance.pdf.

[15] Department of Treasury, Treasury’s Portal for Recipient Reporting: State and Local Fiscal Recovery Funds (as of August 9, 2021), available at: SLFRF_Treasury-Portal-Recipient-Reporting-User-Guide.pdf.