On March 25, 2020, the Senate passed an updated version of the Coronavirus Aid, Relief and Economic Security (CARES) Act. The bill builds upon earlier versions of the CARES Act and is intended to be a third round of federal government support in the wake of the coronavirus public health crisis and associated economic fallout, along with the Families First Coronavirus Response Act (FFCRA).
The CARES Act builds upon previous legislation by providing support to both individuals and businesses. The bill includes:
- Stimulus Funds for Individuals. Americans will receive a one-time direct deposit of up to $1,200, and married couples will get $2,400, plus an additional $500 per child. The payments will be available for incomes up to $75,000 for individuals and $150,000 for married couples. This is true even for those who have no income as well as those whose income comes entirely from non-taxable, means-tested benefit programs, such as Social Security.
- Expanded Unemployment Insurance (UI). The bill includes a $600 per week increase in benefits for up to four months and federal funding of UI benefits provided to those not usually eligible for UI, such as the self-employed, independent contractors and “gig” economy workers. Additionally, the federal government will fund an additional 13 weeks of unemployment benefits through Dec. 31, 2020, after workers have run out of state unemployment benefits.
- $350 Billion Allocated for Small Businesses. Small businesses (fewer than 500 employees) who are impacted by the pandemic and economic downturn and cannot make payroll and cover other expenses from Feb. 15, 2020 to June 30, 2020 will be eligible for loans. Notably, small businesses may take out loans up to $10 million and can cover employees making up to $100,000 per year. Loans may be forgiven if a company uses the loan for payroll, interest payments on mortgages, rent and utilities.
- Retirement Distributions. The bill waives the 10 percent early withdrawal penalty on retirement account distributions for taxpayers facing virus-related challenges. Withdrawn amounts are taxable over three years, but taxpayers can recontribute the withdrawn funds to their retirement accounts for three years without affecting retirement account caps. Eligible retirement accounts include individual retirement accounts (IRAs), 401(k) plans and other qualified plans.
- Payroll Taxes. The bill allows employers to delay the payment of their 2020 payroll taxes until 2021 and 2022.
- Student Loan Repayments. Employers may repay student loans on behalf of employees and can be excluded from taxable income. Employers may contribute up to $5,250 annually toward student loans.
- Emergency Lending to Large Businesses, States and Cities. The bill includes $25 billion in lending for airlines, $4 billion in lending for air cargo firms and $17 billion in lending for firms deemed critical to U.S. national security. Emergency lending will be overseen by a Congressional Oversight Commission and a Special Inspector General.
- Funding for a Coronavirus Relief Fund and Other Health Provisions. The bill provides for provisions addressing supply shortages, coverage of diagnostic testing for the virus, support for health care providers, improving telehealth service access and flexibility, encouragement for the creation of drugs to treat the virus as well as for state and city government expenditures incurred due to dealing with the coronavirus public health emergency.
This is only a brief summary of the bill as it was sent to the House. The House has stated it will expedite the passage of the bill, but there may still be some changes made. We will update our blog as we receive information. Additionally, please see our video that can be shared with employees to give a brief summary of the bill.