We wanted to pass along some highlights of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Thanks to the American Society of Employers for providing much of the language below. Please note this is not a complete list of stimulus measures.
Payments to Individuals
The law provides a one-time direct payment of $1,200 to adults and $500 per child to American households, structured as tax refunds to allow the Internal Revenue Service to distribute the funds quickly. These payments will phase out starting with $75,000 of individual income, head of household at $112,000, and $150,000 for families. These amounts are determined by the Adjusted Gross Income in either the 2018 or 2019 tax return (depending on if they filed a 2019 return at the time of payment). To determine the amount of a payout, click here.
Unemployment will be extended from 26 weeks to 39 weeks. There would be a one-time boost to benefits received of $600 on top of what they would otherwise receive for four months until July 31, 2020. For example, if the person would receive $300 per week, they would get $900 per week. These benefits would be extended to contract workers, freelancers, and other nontraditional workers, who lack benefits in some states. The $600 benefit will be taxable (like regular unemployment benefits), but it will be disregarded in determining Medicaid or CHIP eligibility.
Because the workload may be overwhelming, the law provides states the ability to waive personnel standards through December 31, 2020, to expedite the hiring of new staff to process unemployment claims, including allowing the hiring of independent contractors to process claims.
The law temporarily loosens the rules on hardship distributions from retirement accounts, giving people affected by the crisis access to up to $100,000 of their retirement savings without a 10% penalty. The law doubles the amount 401(k) participants can take in loans from an account for the next six months to the lower of $100,000 or 100% of the account balance. (IRAs don’t permit loans.)
The law allows a high deductible health plan to provide telehealth and remote care services without a deductible for 2020 and 2021. It permits tax-free reimbursement of feminine hygiene products from health savings accounts (HSAs), health reimbursement arrangements (HRAs), health flexible spending accounts (health FSAs), and Archer medical savings accounts (Archer MSAs).
The law allows most Americans with federal student loans to suspend their monthly payments through Sept. 30, 2020, without any interest accruing. It would also enable employers to make tax-exempt contributions toward their workers’ student-loan payments. Employees can exclude up to $5,250 from gross income for payments made by their employers to pay off their student loans.
The law authorizes hundreds of billions of dollars in loans if needed in the auto industry.
Businesses and nonprofits with up to 500 workers in a single location would be able to apply through qualifying banks for loans backed by the Small Business Administration. The loans would convert into grants that don’t have to be repaid for amounts spent on items such as payroll, rent, or utilities, with the grants reduced when workers are laid off.
The law allows for a special Section 13(3) Federal Reserve facility that provides financing to banks and other lenders that make direct loans to nonprofits and mid-sized businesses (between 500 – 10,000 employees). The loans will be subject to annualized interest rates of 2% per annum or less. There will be no loan forgiveness under this program.
Employee Retention Credit for Employers Subject to Closure or Experiencing Economic Hardship
The law would provide a refundable payroll tax credit for 50% of wages paid by eligible employers to certain employees during the COVID-19 crisis. The credit is available to employers, including non-profits, whose operations have been fully or partially suspended as a result of a government order limiting commerce, travel, or group meetings. The credit is also provided to employers who have experienced a greater than 50% reduction in quarterly receipts, measured on a year-over-year basis.
Wages of employees who are furloughed or face reduced hours as a result of their employers’ closure or economic hardship are eligible for the credit. For employers with 100 or fewer full-time employees, all employee wages are eligible, regardless of whether an employee is furloughed. The credit is provided for wages and compensation, including health benefits, and is provided for the first $10,000 in wages and compensation paid by the employer to an eligible employee.
Delay of Payment of Employer Payroll Taxes
The law allows employers and self-employed to defer paying the employer portion of Social Security tax (6.2%) through the end of 2020, with all 2020 deferred amounts due in two equal installments, one at the end of 2021, the other at the end of 2022. Deferral is not provided to employers that avail themselves of SBA 7(a) loans designated for payroll. It includes the employer portion of FICA.