In addition to provisions directly affecting employee health, leave and other benefits, the CARES Act also provides short-term financial relief for affected employees, aid to affected small employers, tax relief for affected employers of any size, specific aid to hard-hit industries, and added funds to the health system to handle the additional utilization caused by COVID-19. Join our webinar on April 3rd at 2:00 PM ET for a briefing on the provisions.
At $2.2 trillion, the law is the largest relief package ever passed by Congress. It includes the following amounts allocated to these specific areas:
- Additional Funds for Health System: $150 Billion
- Expansion of Unemployment Benefits: $260 Billion
- Direct Payments to Taxpayers: $290 Billion
- Various Tax Incentives (e.g., Payroll Tax Relief): $300 Billion
- Small Business Aid: $380 Billion
- Aid to Specific, Hard Hit Industries: $500 Billion
The provisions in this third round of legislation offer additional relief from the economic fallout caused by COVID-19. HR and benefits teams dealing with temporary layoffs, reduction in hours or other financial hardships for employees and their households due to the health or economic impact of COVID-19 may find the provisions for easing the financial burden for workers useful. The economic relief offered to employers generally includes requirements for company staffing, payroll and executive compensation that HR, compensation and benefits professionals should be aware of if their company seeks relief. More specifics on each of these and other provisions providing temporary financial relief are discussed below:
Relief for Affected Employers
Employer Payroll Tax Relief (until 12/31/2020)
- Provides payroll tax credit for employers adversely impacted during the COVID-19 crisis of up to $10,000 per employee per quarter.
- Provides relief for employers whose operations were fully or partially suspended due to COVID-19-related shutdowns or who suffered a greater than 50% gross receipt decline compared to the same quarter in the prior year.
- Applies the credit for the employer portion of payroll amounts paid after 3/12/2020 through 12/31/2020.
- Permits employers to defer their portion of payroll taxes on applicable employees’ wages during the payroll tax deferral period, between March 27, 2020 – and a later date ending before January 1, 2021.
- Gives employers choosing to defer payment of 50% of the deferred taxes until 12/31/2021 to pay the bill, with the remainder due by 12/31/2022.
Small Business Aid (until 12/31/2020)
- Applies to employers with 500 or fewer employees, independent contractors, the self-employed, franchises in the hospitality and restaurant industry and certain other industries with 500 or fewer employees per location.
- Offers government guaranteed loans for payroll support, paid sick leave, insurance premiums, mortgage, rent and utilities.
- Forgives loans (not including compensation greater than $100,000 annually) over an 8-week period if the employer maintains employees and continues paying their wages. Amount forgiven will be reduced for reductions in staff or pay.
- Permits loan forgiveness for employers who laid off employees due to COVID-19 if they rehire them.
Aid to Specific Hard-Hit Industries (until 12/31/2020)
- Offers $454 billion for loans, loan guarantees and investments to employers to any industry under certain conditions, including the unavailability of alternative financing, AND the employer must maintain its employment levels as of 3/24/2020 until 9/30/2020 to the extent practical but must maintain no less than 90% of its workforce.
- Reserves $25 billion for the passenger airline industry, $4 billion for the cargo air industry and $17 billion for businesses important to national security under the same conditions as above.
- Also includes limits on stock buybacks, compensation increases and severance packages for high-paid executives for any loans or other assistance provided.
Additional Funds to Health Industry and Front-Line Responders for Surge Capacity and Emergency Response
- Includes $100 billion for hospitals and health care providers for COVID-19-related expenses and lost revenue.
- Provides $16 billion to procure personal protective equipment (PPEs), ventilators and other medical supplies for federal and state response efforts via the Strategic National Stockpile.
- Adds $11 billion for vaccines, therapeutics, diagnostics and other preparedness needs, with at least $3.5 billion of that to advance the development of vaccines and therapeutics, added to the first emergency supplemental for COVID-19.
- Boosts CDC funding by $4.3 billion.
- Gives over $19 billion to the Department of Veterans Affairs to support increased demand for health care services at VA facilities.
Temporary Expansion of Unemployment Benefits (until December 31, 2020)
- Creates Pandemic Unemployment Assistance for those not eligible for unemployment benefits (contractors, self-employed, the newly employed and others with limited work history) who are unable to work as a result of the public health emergency.
- Adds $600 per week of unemployment benefits for up to 4 months for all unemployment insurance recipients and those who qualify for Pandemic Unemployment Assistance.
- Provides full federal funding for the first week of unemployment for states that begin paying recipients as soon as they become unemployed rather than waiting 1 week before eligibility.
- Adds an additional 13 weeks of unemployment benefits for those remaining unemployed after state benefits end.
- Subsidizes states that have or establish programs to pay prorated benefits for employees facing reduced hours due to the public health emergency.
Direct Payments to Low- and Moderate-Income Taxpayers (Immediate)
- Pays individuals $1,200 and joint filers $2,400 for those with adjusted gross incomes (AGI) up to $75,000/$150,000 who are not claimed as dependents on someone else’s return.
- Includes an additional $500 for each child.
- Provides smaller payments for incomes above these amounts but not exceeding $99,000/$198,000.
- Rushes IRS payments as soon as possible and will base eligibility on 2019 return if filed; 2018 returns will be used otherwise.
Other Immediate Relief for Individuals (Retirement Accounts—until December 31, 2020)
- Waives the penalty for early withdrawals from 401(k) and similar retirement accounts for up to $100,000 made on or after 1/1/2020 for COVID-19-related purposes.
- Defines COVID-19 relief to include people diagnosed with COVID-19, diagnosis of a family member or dependent, those facing adverse financial consequences of quarantine; those unemployed or facing reduced hours due to COVID-19 or because of lack of child care due to COVID-19, and closing of a business or reduction in hours due to COVID-19.
- Gives individuals 3 years to pay taxes on income attributed to distributions and repayments do not count toward that year’s contribution caps.
- Provides temporary relief from the minimum distribution requirement for retirement accounts and IRAs.
Other Immediate Relief for Individuals (Student Loans—until 9/30/2020)
- In addition to the option for employers to provide student loan repayment and education benefits to employees described elsewhere, the law temporarily suspends student loan payments through 9/30/2020 for all federally owned loans.
- Suspends interest accrual during this period.
- Suspends collections for past due payments, halts negative credit reporting and suspends late fees.
What Happens Next?
Congress is likely to pass at least one if not two more bills, this time to stimulate the economy after it stabilizes. Provisions may include additional relief and benefits for workers and infrastructure spending. The Business Group will provide updates on any additional COVID-19 relief legislation.
The Department of Health and Human Services, Department of Labor, and Internal Revenue Service will issue implementation guidance and provide more details on the above provisions. The Business Group will provide updates as this guidance becomes available.