By: Cassee Ger on April 9th, 2020
A Review of the CARES Act
As most organizations and individuals are facing unprecedented times and getting used to a new “normal,” a new piece of legislation was passed that will certainly make history because no stimulus package like this has ever been created before. The Coronavirus Aid, Relief, And Economic Security Act (CARES Act) was signed into law on March 27th, 2020. The CARES Act is an economic stimulus bill that provides $2 trillion in relief efforts to businesses and individuals, who have been impacted by COVID-19. Below are some of the key provisions of what is included in the CARES Act and what that may mean for your organization.
DISCLAIMER: Helios HR is not a financial lender, financial advisor or tax professional and many components of the CARES Act may require you to seek further guidance from financial and/or tax professionals.
Social Security Tax
- Organizations may elect to defer payment of the
6.2% employer Social Security tax through December 31, 2020.
- Deferred tax amounts would be paid in equal
amounts over two years, with payments due on December 31, 2021 and December 31,
- For more information, please visit section 2302
of the CARES Act.
Payroll Protection Program
- Organizations with less than 500 employees are
eligible for a new loan program through June 30, 2020, which will provide federally
guaranteed loans in amounts approximately equivalent to ten weeks of payroll
- For more information, please visit section 1102
of the CARES Act.
Employee Retention Credit for Closures Due to COVID-19
- All private sector employers, including
non-profit organizations, may claim a refundable tax credit against employer
Social Security tax equal to 50% of wages paid during the COVID-19 crisis, up
to $10,000 in wages per employee.
- For more information, please visit section 2301
of the CARES Act.
- All private insurance plans to cover COVID-19
treatments and vaccine and makes all coronavirus tests free of charge.
- Reauthorizes a critical telehealth program to
extend the reach of virtual doctor’s appointments.
- For more information, please visit section 3202
of the CARES Act.
- Organizations will be able to make up to $5,250 in tax-free contributions to their employees’ student debt April 1, 2020 – Dec 31, 2020.
- Temporary relief for federal student loan borrowers. Federal student loan borrowers are automatically being placed in an administrative forbearance, which allows them to temporarily stop making a monthly loan payment. This suspension of payments will last until Sept. 30, 2020. Loan borrowers can still make payments if they choose.
- For more information, please visit section 2206 of the CARES Act.
- “Qualified” employees may take up to a $100,000 withdrawal
- Plan loan limits are increased for qualified individuals (see “qualified individual” below) to the lesser of: $100,000; or 100% of their vested account balance
- Delayed contributions for defined benefit and money purchase pension plans
- Required Minimum Distributions from IRAs and 401(k) plans (at age 72) are suspended
- For additional 401K details, please visit this link or visit CARES Act section 2202.
- Under the Federal Pandemic Unemployment Compensation (FPUC) program, eligible individuals who are collecting certain UI benefits, including regular unemployment compensation, will receive an additional $600 in federal benefits per week for weeks of unemployment ending on or before July 31, 2020.
- Additionally, the PEUC program allows those who have exhausted benefits under regular unemployment compensation or other programs to receive up to 13 weeks of additional benefits. States must offer flexibility in meeting PEUC eligibility requirements related to “actively seeking work” if an applicant’s ability to do so is impacted by COVID-19.
- In summary, this will 1) add $600 per week from the federal government on top of base amount from the states and 2) allow Gig workers and freelancers to now be eligible for unemployment. For additional COVID-19 unemployment information, please visit the DOL.
The Small Business Administration
The SBA has released
guidelines and the application for small businesses to immediately access loans
for operating and payroll costs.
- The new loan program will be available retroactive from Feb. 15, 2020, so organizations can rehire their recently laid-off employees through June 30, 2020.
- The maximum loan amount is up to $10 million dollars.
- Loan forgiveness if proceeds are used for payroll costs and other designated business operating expenses in the 8 weeks following the date of loan origination (due to likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs).
- Additional SBA information can be found here.
The IRS has established frequently asked questions and answers as it relates to COVID-19 tax credits for required paid leave provided by small and mid-size businesses.
There is a very long list of other areas receiving help
including universities, health care organizations, and other institutions. You
are encouraged to view the CARES Act in it’s entirety by clicking here. Is the CARES Act enough to help businesses
and individuals survive? It’s certainly a good start, and it’s rumored that
they may be additional legislation to come in the near future. Helios continues to monitor upcoming and
pending legislation, and our team will continue to provide updates on these
issues as they are made available.
For more information on FFCRA and other COVID-19 related topics, please visit our COVID-19 Resource Page often for up-to-date information to help you stay informed of the ongoing issues and trends related to COVID-19.