On March 27, 2020, the President signed Coronavirus Aid, Relief, and Economic Security Act (CARES Act) into law. The CARES Act is an extensive piece of legislation that provides emergency assistance and health care response for individuals, families, and businesses affected by the COVID-19 pandemic. While CARES has multiple components, this alert focuses on the overarching employment aspects of the bill.
Individual Cash Payments
The CARES Act provides a one-time cash rebate of $1,200 per eligible individual ($2,400 for joint filers and $500 per child) for income less than $75,000 ($150,000 in the case of a joint return). The income is based on either the individual’s 2018 or 2019 tax filings. The cash rebates start to phase down as income increases and individuals making more than $99,000 ($198,000 for couples) will not receive the cash rebate.
Unemployment Insurance Expansion
The CARES Act also provides federal unemployment insurance assistance for unemployment, partial unemployment, or inability to work due to COVID-19. Specifically, the federal government will provide qualifying individuals with unemployment insurance payments of $600 per week (up to 4 months until July 31st), which is in addition to that individual’s unemployment insurance payments administered by the state. Moreover, CARES allows individuals to receive unemployment insurance payment benefits for an additional 13 weeks.
The unemployment insurance assistance also extends to self-employment individuals, gig workers, independent contractors and freelancers, all of whom historically would not qualify for such benefits.
Emergency Paid Family and Medical Leave Amendments
Rehires: Employees who worked for at least 30 days and were laid off on or after March 1, 2020, do not need to wait an additional 30 days to apply for Emergency Family Medical Leave.
No EPSL Intermittent Leave: The Act specifies that an employer’s requirement to provide EPSL to an employee ceases with whichever comes earlier: the time when the employer has paid that employee for paid leave under this section for an equivalent of 80 hours of work OR upon the employee's return to work after taking paid leave under this section.
While this is outside of our expertise at Cascade, it is worth noting that the CARES Act also provides small businesses with 500 or fewer employees with emergency grants and a forgivable loan program. Additionally, the Act sets aside loans and other money for large corporations. For further information on the small business protection assistance, reference Title I of Division A of the CARES Act.
Cascade is actively monitoring this bill and will continue to provide additional alerts when information becomes available. Please do not hesitate to reach out if you have any questions.
Additionally, our friends at Matisse Capital discuss the CARES Act and its impact on Retirement Plans in the following article:
Which retirement account rules would be suspended?
For the calendar year 2020, no one would have to take a required minimum distribution from any individual retirement accounts or workplace retirement savings plans, like a 401(k). That way, you aren’t forced to sell investments that may have fallen in value, which would lock in losses. If you don’t need the money now, you can let the investments sit and hope that they recover.
This change would not affect old-fashioned pensions.
What if I have to take money out of my IRA or workplace retirement plan early?
You could withdraw up to $100,000 this year without the usual 10 percent penalty, as long as it’s because of the outbreak.
You would also be able to spread out any income taxes that you owe over three years from the date you took the distribution. And if you want, you could put the money back into the account before those three years are up, even though the rules may normally keep you from making a contribution that large.
This exception applies only to coronavirus-related withdrawals. You qualify if you tested positive, a spouse or dependent did or you experienced a variety of other negative economic consequences related to the pandemic. Employers could allow workers to self-certify that they are qualified to pull money from a workplace retirement account.
Can I still borrow from my 401(k) or other workplace retirement plan?
Yes, and you could take out twice the usual amount. For 180 days after the bill passes, with certification that you’ve been affected by the pandemic, you’d be able to take out a loan of up to $100,000. Usually you can’t take out more than half your balance, but that rule would be suspended.
If you already have a loan and were supposed to finish repaying it before Dec. 31, you’d get an extra year.