On March 27, 2020, President Trump signed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) (H.R. 748) into law. This is the third federal relief package related to COVID-19, with $2.2 trillion directed to individuals, business, governments, and the public sector. Below are brief summaries of the provisions of particular interest to most businesses.
Small business loans and forgiveness
For companies with 500 or fewer employees, the CARES Act provides emergency grants and forgivable loans to cover operating expenses and payroll through the Small Business Administration (SBA). If you already have a loan through the SBA, you may also be eligible for temporary relief. For additional information on the small business loans funded by the CARES Act—including the Paycheck Protection Program, Economic Injury Disaster Loans, and Business Debt Relief—consult the SBA’s Coronavirus (COVID-19): Small Business Guidance & Loan Resources.
Unemployment insurance expansion
The CARES Act expands who can receive unemployment benefits by allowing those who aren’t typically eligible for state benefits (e.g., self-employed, independent contractors, and short-term employees), to apply for Pandemic Unemployment Assistance (PUA). It also expands eligibility for benefits to include a long list of situations related to COVID-19. PUA is immediately available for a maximum of 39 weeks and expires on December 31, 2020. The CARES Act also adds 13 weeks of benefits and $600 to the weekly state benefit check for all unemployment benefit recipients (including PUA recipients). The $600 weekly bump lasts until July 31, 2020. The law also provides funding for states that choose to eliminate the usual one-week waiting period to receive benefits. Importantly, each state is given authority to determine the total amount of benefits prior to the added $600, so be sure to review your state’s details at the relevant website listed below:
Arizona Department of Economic Security
California Employment Development Department
Idaho Department of Labor
Montana Department of Labor and Industry
Oregon Employment Department
Washington State Employment Security Department
Flexible spending accounts (FSAs)
Effective January 1, 2020, health care flexible spending accounts can now reimburse employees for over-the-counter drugs and medicines without a prescription. In addition, menstrual care products (such as tampons, pads, cups, liners, etc.) are now included as qualifying expenses.
Retirement plan withdrawal flexibility
Recognizing that individuals may need to have early access or take loans against their retirement plans, the CARES Act provides excise tax relief and more flexibility for eligible retirement plans, including IRAs, tax-qualified retirement plans, tax-deferred annuities, and section 457 deferred compensation plans. If your employees express a need to access funds in this way, direct them to your plan administrator.
Tax credits and filing extensions
If your business operations are suspended by a government order relating to COVID-19 or your gross receipts are less than half of what they were in the year prior, the CARES Act provides a tax credit against the employer portion of Social Security taxes. The CARES Act also allows all employers to delay Social Security taxes, with 50 percent payable by December 31, 2021, and the remaining 50 percent payable by December 31, 2022. If your business isn’t struggling, but your employees are, consider another tax incentive: you can pay up to $5,250 in principal and/or interest on an employee’s qualified education loan tax-free. The IRS has established a Coronavirus Tax Relief website with detailed resources to help taxpayers, businesses, and others affected by COVID-19, and is updating the website regularly. We recommend contacting your tax adviser with additional questions.
Tips For Employers: The CARES Act is a massive bill, and we’ve only covered a few of the highlights that we felt would be of greatest interest to a majority of businesses. Your tax adviser and benefits adviser are your best resources on the items related to taxes and benefits. For small business loans, the SBA will have the information you need. In the meantime, if you have questions about employment-related issues, your Vigilant Law Group employment attorney is just a phone call away.