On March 27, 2020, the President signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The $2 trillion relief aid package is meant to keep businesses and individuals afloat during an unprecedented time. The Act has many provisions including tax, financial, and loan implications. Therefore, we recommend employers take an individualized, holistic assessment of the business impact and consult with their CPA, financial advisor, and legal counsel who specialize in these areas.
Here’s a look at some of the key provisions included in the Act:
Unemployment Insurance (UI) benefits are increased and expanded, creating the following major changes to this program:
- Increases the maximum unemployment benefit amount by $600 per week above the current state unemployment benefit. For example, if an out-of-work person is receiving the national average of $340 per week, under the new federal program their weekly benefit will be $940. This continues through July 2020.
- Creates a new Pandemic Unemployment Assistance program for self-employed individuals, gig workers, freelancers, and independent contractors, as well as those with limited work history, who are unable to work as a result of the pandemic. Applicants who fall into this category are also eligible for the above referenced $600 weekly benefit.
- Funds the first week of UI for states that had a one-week waiting week so benefits can begin right away.
- Provides an additional 13 weeks of unemployment benefits to help those who remain unemployed after their respective state UI benefits are exhausted.
Small Business Rescue Plan
The main features for small businesses are emergency grants and a forgivable loan program for companies with less than 500 employees. Specifically, the Act allocates more than $375 billion in forgivable loans and grants to small businesses and nonprofits so they can keep employees on the payroll, pay other business expenses (i.e. rent, mortgage, or utilities) and stay open in the near-term. Self-employed individuals, independent contractors, and sole proprietors are also eligible for assistance.
Student Loan Repayment Program
Employers can contribute up to $5,250 annually toward an employee’s student loan. Payments are excluded from the employee’s income between March 27, 2020 and December 31, 2020.
Employers and self-employed individuals are allowed to defer the payment of their share of 2020 Social Security taxes on employee wages. The first half of the deferred amount must be paid by December 31, 2021 and the second half by December 31, 2022.
The 10 percent early withdrawal penalty is waived for distributions up to $100,000 for coronavirus-related purposes, retroactive to January 1, 2020. NOTE: Withdrawals are still taxed, but taxes are spread over three years. In addition, the 401(k) loan limit is now increased from $50,000 to $100,000.
Businesses of all sizes are eligible to receive a fully refundable tax credit to help if they are distressed or need to close. The goal is to get employees hired back or put on paid furlough. For employers with more than 100 full-time employees, the credit is for wages paid to employees when they are not providing services because of the coronavirus pandemic. Eligible employers with 100 or fewer full-time employees can use the deduction even if they aren't closed.
Funding for Hospitals
Hospitals and other medical facilities will receive significant funding so they can provide necessary care during the pandemic. The funding includes a massive new grant program for hospitals and health care providers, personal protective equipment for health care workers, testing supplies, increased workforce and training, new construction to house patients and emergency operation centers. Also included is dedicated funding to deliver Medicare payment increases to all hospitals and providers, plus new investments in the Strategic National Stockpile, surge capacity, and medical research into COVID-19.
Other Emergency Appropriations
Several additional emergency appropriations will provide funds that range from billions for hard-hit airports, expanded benefits to the Supplemental Nutrition Assistance Program (SNAP), increased community development block grants helping municipalities, funding for child care, nutrition for seniors, help to heat homes when income becomes a problem, and for the National Guard to give support to the hardest-hit states and territories.
To keep MRA members up-to-date on the latest with the Families First Coronavirus Response Act (FFCRA) and other COVID-related business impacts, MRA has a dedicated COVID-19 webpage and continued support through our HR Hotline at 866.474.6854 and email at email@example.com. We’re here to help you!