On March 27, the president signed into law a $2.2 trillion relief package—the largest in U.S. history—to provide aid to businesses, workers, and those unemployed as a result of the COVID-19 pandemic.
Among the key provisions of the new Coronavirus Aid, Relief, and Economic Security Act (CARES Act) are:
G&A’s legal partner firm, Littler Mendelson P.C., provided the following insight regarding the new law:
Agencies like the Small Business Administration and the Department of the Treasury will establish the mechanisms for participation in the CARES Act’s small business loans programs. Key provisions of these loan programs include:
Key features of loan forgiveness in the CARES Act:
Other changes include amendments to Chapter 11 of the Bankruptcy Code to address coronavirus-related issues such as excluding from income coronavirus-related payments from the federal government to the debtor.
The CARES Act offers both opportunities and potential pitfalls for employers. Among the pitfalls are the broadly applied unemployment benefits.
It remains to be seen how state unemployment agencies will process new claims under the expanded benefit provisions. Individuals are not eligible for benefits if they have the ability to telework with pay or are receiving paid sick leave or other paid leave benefits.
According to Littler, the temporary Pandemic Unemployment Assistance program provided by the CARES Act will cover individuals for the period beginning January 27, 2020 through December 31, 2020. Those applying for assistance must self-certify “that they are able and available to work” but are unemployed or partially unemployed due to the following:
Individuals are not eligible for benefits if they have the ability to telework with pay or are receiving paid sick leave or other paid leave benefits, Littler says. For those who are eligible, additional benefits may be available once these benefits are exhausted.
The CARES Act provides a refundable payroll tax credit for 50% of wages paid by employers to employees during the COVID-19 crisis. The credit is available to employers whose:
Littler says the credit is based on qualified wages paid to the employee. For employers with greater than 100 full-time employees, qualified wages are wages paid to employees when they are not providing services due to the COVID-19-related circumstances described above.
For eligible employers with 100 or fewer full-time employees, all employee wages qualify for the credit, whether the employer is open for business or subject to a shut-down order. The credit is provided for the first $10,000 of compensation, including health benefits, paid to an eligible employee. The credit is provided for wages paid or incurred from March 13, 2020, through December 31, 2020.
Employers and self-employed individuals may also defer payment of the employer share of the Social Security tax on employee wages. Deferred employment tax must be paid over the following two years, with half of the amount required to be paid by December 31, 2021, and the other half by December 31, 2022.
All U.S. residents with adjusted gross income up to $75,000 ($150,000 married), who are not a dependent of another taxpayer and have a work-eligible social security number, are eligible for the full $1,200 ($2,400 married) rebate. In addition, they are eligible for an additional $500 per child. 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 SSI benefits.
For the vast majority of Americans, no action on their part will be required in order to receive a rebate check as the IRS will use a taxpayer’s 2019 tax return if filed, or in the alternative, their 2018 return. This includes many low-income individuals who file a tax return in order to take advantage of the refundable Earned Income Tax Credit and Child Tax Credit. The rebate amount is reduced by $5 for each $100 that a taxpayer’s income exceeds the phase-out threshold. The amount is completely phased out for single filers with incomes exceeding $99,000, $146,500 for head-of-household filers with one child, and $198,000 for joint filers with no children.
Individuals may also be able to tap into retirement accounts. The provision waives the 10% early withdrawal penalty for distributions up to $100,000 from qualified retirement accounts for coronavirus-related purposes made on or after January 1, 2020. In addition, income attributable to such distributions would be subject to tax over three years, and the taxpayer may recontribute the funds to an eligible retirement plan within three years without regard to that year’s cap on contributions. Further, the provision provides flexibility for loans from certain retirement plans for coronavirus-related relief.
G&A is taking all necessary precautions and measures to ensure you continue to receive world-class services from our team of HR, payroll and benefits experts. Visit our COVID-19 site to access helpful resources.