COVID-19 CARES Act Information for Employers
The CARES Act provides ENORMOUS relief to employers under 500 employees in the form of FORGIVABLE LOANS to cover PAYROLL, EMPLOYEE BENEFITS, rent, utilities, and other expenses.
The amount of the forgiveness is reduced if the business reduces wages or terminates employees. Please read about the Cares Act by following the page below:
The Coronavirus Aid, Relief, and Economic Security Act (CARES)
The Coronavirus Aid, Relief, and Economic Security Act (CARES) is expected to infuse approximately $2.2 trillion into the U.S. economy. The Act addresses a multitude of ways in which the federal government seeks to support businesses impacted by the pandemic and employees affected by COVID-19. Key areas of interest for employers relate to business loans, unemployment benefits, retirement plans, tax credits and executive compensation.
Read the entire U.S. Congress S. 3548 CARES Act
Updated PPP Loan guidance was provided LATE on Thursday April 2nd evening by the US Treasury.
The following public articles have been referenced and cited:
- JacksonLewis: Senate Passes Coronavirus Aid, Relief, and Economic Security Act (CARES)
- Fisher Phillips LLP: CARES Act Stimulus Will Permit Business Loans To Cover Payroll, Expand Unemployment
- US Chamber of Commerce: CORONAVIRUS EMERGENCY LOANS Small Business Guide and Checklist
- Winton & Strawn LLP: Senate Passes SBA Paycheck Protection Loan Program
Loan & Loan Forgiveness Provisions
Source: Jackson Lewis LLP
Notably, small businesses may take out loans up to $10 million—limited to a formula tied to payroll costs—and can cover employees making up to $100,000 per year ($33,333 for the “covered period” of March 1 – June 30). Loans may be forgiven if a firm uses the loan for payroll, interest payments on mortgages, rent, and utilities and would be reduced proportionally by any reduction in employees retained compared to the prior year and a 25 percent or greater reduction in employee compensation.
Recently added, a minimum of 75% of the loan must be used for “payroll costs.”
Paycheck Protection Program (Section 1102)
- Small businesses with less than 500 employees are eligible to receive loans up to a maximum loan amount equal to the lesser of
- The sum of
- 2.5 x the average total monthly payments by the applicant for payroll costs incurred during the one-year period prior to the date on which the loan is made plus
- Any outstanding amount of a loan made during the period beginning on January 31, 2020
- Or $10,000,000
- The sum of
- Loan proceeds must be used for allowable purposes including
- Payroll costs
- Costs related to the continuation of group health care benefits during period of paid sick, medical or family leave, and insurance premiums
- Employee salaries, commissions, or similar compensation
- Payments of interest on any mortgage obligation
- Rent
- Utilities
- Interest on any other debt obligations incurred before the covered period
- Eligibility considerations include whether the business
- Was in operation on February 15, 2020, and
- Had employees whom the borrower paid salaries and payroll taxes, or
- Paid independent contractors
- The eligible recipient is required to make a good faith certification that
- Due to the uncertainty of the current economic conditions it is necessary to obtain the loan to support ongoing operations of the business
- The funds will be used to retain workers and maintain payroll or make mortgage, lease or utility payments, and
- There isn’t a duplicative application for the same purposes submitted by the business
- The Small Business Administration (SBA) requires lenders to provide complete payment deferment relief (including payment of principal, interest, and fees) for impacted borrowers with covered loans for a period of at least six months, but not more for one year
Loan Forgiveness (Section 1106)
- Loan recipients are eligible for loan forgiveness equal to the lesser of
- The amount the eligible recipient expended on payroll costs, mortgage or rent obligations, and utility payments during the eight weeks following approval of the loan (the covered period) or
- The principal amount of loan
- This amount is then reduced by multiplying the sum of total costs by the quotient obtained by dividing
- The average number of full-time equivalent employees per month employed by the eligible recipient during the covered period, by
- at the election of the eligible recipient, either
- The average number of full-time equivalent employees per month employed by the eligible recipient during the period beginning on February 15, 2019 and ending on June 30, 2019
- Or, the average number of full-time equivalent employees per month employed by the eligible recipient during the period beginning on January 1, 2020 and ending on February 29, 2020
- Eligible recipient with tipped employees may receive loan forgiveness for additional wages paid to those employees
- The amount of loan forgiveness is further reduced by the amount of any reduction in total salary or wages of certain employees during the covered period that is in excess of 25 percent of the total salary or wages of the employee during the most recent full quarter during which the employee was employed prior to the covered period
- Under certain circumstances, loan forgiveness will be determined without regard to a reduction in the number of full-time equivalent employees of an eligible recipient or a reduction in the salary of one or more employees of the eligible recipient during the period beginning on February 15, 2020 and ending on the date that is 30 days after the date of enactment of this statute
- For a reduction in employees, the eligible employer has eliminated the reduction in the number of full-time equivalent employees by June 30, 2020
- For a reduction in salary or wages, the eligible employer has eliminated the reduction in the salary or wages by June 30, 2020
- To substantiate an application for loan forgiveness, the loan recipient is required to
- Provide verifying documentation of the number of full-time equivalent employees on payroll and pay rates
- Certify that
- Documentation is true and accurate, and
- The amount for which forgiveness is requested was used to retain employees or to make mortgage, rent, or utility payments
Emergency EIDC Grants (Section 1110)
- The SBA will provide emergency grants in the amount of $10,000 to certain businesses with less than 500 employees that were in operation on January 1, 2020 who have applied for a SBA economic injury disaster loan. The loan should be provided to the business within three days of applying. The applicant must provide a self-certification that it is an eligible entity to apply. Even if applicants are later not approved for the economic injury disaster loan they are not required to repay this advance payment.
- The grant must be used for allowable purposes including
- Providing paid sick leave to employees unable to work for COVID-19
- Maintaining payroll to retain employment during business interruption
- Meeting increased costs to obtain materials unavailable due to interruption in supply chains
- Paying rent or mortgage
- Repaying obligations that cannot be met due to revenue loss
Subsidy for Certain Loan Payments (Section 1112)
- SBA will pay the principal, interest and fees owed on certain qualifying loan for six months
- Payments will begin within 30 days of the due date
- Payments will be applied in a manner so that the borrower is relieved of the obligation to pay
In January 2021, the SBA has released information regarding the 2nd draw opportunities for some businesses who’s business has declined more than 25% in any quarter.
Who is eligible?
- Must have not more than 300 employees
- Must have used, or will use, the full amount of the PPP1 loan on eligible expenses
- Must demonstrate at least a 25 percent reduction in “gross receipts” in a calendar quarter during 2020 relative to the same 2019 quarter
- or annual gross receipts in 2020 were at least 25 percent lower than annual gross receipts in 2019)
- Note: Special rules apply for businesses not in operation in 2019)
Second Draw Loans- The “Gross Receipts” Test
The Economic Aid Act did not define “gross receipts”
• January 6 regulations says that the term “gross receipts” is consistent with the definition of “receipts” at 13 CFR Section 121.104 (SBA regulations)
• See also SBA guidance, issued on January 19: “Second Draw Paycheck Protection Program (PPP) Loans: How to Calculate Revenue Reduction and Maximum Loan Amounts Including What Documentation to Provide”
For a for-profit business, “Gross Receipts” are:
- All revenue in whatever form received or accrued (in accordance with the entity’s accounting method, i.e., accrual or cash) from whatever source, including from the sales of products or services, interest, dividends, rents, royalties, fees, or commissions, reduced by returns and allowances but excluding net capital gains and losses
- Generally, gross receipts of affiliates are included (special rules apply for acquisitions or divestitures)
- Excluded from the definition are:
- Taxes collected for and remitted to a taxing authority if included in gross or total income (i.e., taxes collected from customers, not taxes levied on the business)
- Proceeds from transactions between a business and its domestic or foreign affiliates amounts collected for another by a travel agent, real estate agent, advertising agent, conference management service provider, freight forwarder or customs broker.
- Any forgiven PPP loan or EIDL advance
- But guidance makes clear that the following are included:
- Subcontractor costs
- Reimbursements for purchase a contractor makes at a customer’s request
- Investment income
- Employee-based costs (e.g., payroll taxes)
How to meet the 25% reduction
General rule: Must demonstrate either:
- Gross receipts in any calendar quarter of 2020 were at least 25 percent lower than same quarter of 2019, OR
- Annual gross receipts in 2020 were at least 25 percent lower than annual gross receipts in 2019
Special Rules
- If not in business for Q1 and Q2 of 2019, gross receipts in any quarter of 2020 were at least 25% lower than either Q3 or Q4 of 2019
- If not in business for Q1, Q2, or Q3 of 2019, gross receipts in any quarter of 2020 were at least 25% lower than Q4 of 2019
- If not in business during 2019 but in operation on February 15, 2020, gross receipts in Q2, Q3, or Q4 of 2020 were at least 25% lower than Q1 of 2020
Loan Amounts and “Covered Period”
- Maximum loan is generally 2.5x average monthly payroll costs for a 12- month period, capped at $2 million
- But… if borrower operates with an NAICS Code 72 (restaurants, hotels, etc.) then loan is based on 3.5x average monthly payroll costs ($2 million cap still applies)
- Can use calendar year 2019 or 2020 as reference period for measuring payroll costs. Cannot use the 12 month period prior to the first draw loan
- Businesses that are part of the same corporate group (majority owned, directly or indirectly, by a common parent) cannot receive second draw loans in a total amount of more than $4 million
- Borrower can choose a “covered period” between 8 and 24 weeks
Second Draw Loans- Documentation
- January 19 guidance from SBA describes documentation requirements for different entities
- Corporations are directed to provide Form 941, state quarterly wage UI tax reports, filed business tax return, and documentation showing business was in operation on February 15, 2020
- A borrower can provide the following as substantiation:
- IRS Forms W-2 and Form W-3 or payroll processor reports, including quarterly and annual tax reports, in lieu of IRS Form 941
- Records from a retirement administrator to document employer retirement contributions
- Records from a health insurance company or TPA for a self-insured plan to document employer health coverage contributions
- If the borrower is using same lender and same payroll timeframe as it used for PPP1 loan, and already submitted the required payroll documentation to the lender, then no additional payroll documentation needs to be submitted
Ineligible Businesses
The following business are NOT eligible:
- Businesses not operating on February 15, 2020
- Publicly-traded companies
- Entities that have permanently closed
- Entities receiving Shuttered Venue Operator Grants
- Lobbying organizations
- Entities if the President, VP, head of an Executive department, Member of Congress, or spouse owns at least 20% of company
New Allowable and Forgivable Expenses
The following are new categories of forgivable expenses:
- “Covered Operations Expenditures” – clearly includes software and cloud computing expenses related to human resources and accounting. Open question as to how broadly this can be interpreted
- “Covered Property Damage Costs”- Costs related to property damage due to public disturbances that occurred during 2020, if not covered by insurance
- “Covered Supplier Costs”- Payments to a supplier pursuant to a contract/purchase order in effect prior to taking out the loan, if expenditures were essential to the recipient’s operations at the time the expenditure was made
- “Covered Worker Protection Expenditures”- Costs to pay for PPE or other investments that would help the borrower comply with governmental guidelines related to COVID-19 between March 1, 2020 and the end of the national emergency declaration
PPP Round 2, What’s New: Simplified Loan Forgiveness
Loans of less than $150,000 or less are eligible to use a new, super- simplified one page loan forgiveness application form (Form 3508S)
- Essentially just list loan amount, number of employees at time of loan application and forgiveness application, covered period, amount of loan spent on payroll costs, and requested forgiveness amount
- Must attest to complying with PPP requirements
- Must retain employment records for four years and all other relevant records for three years
- If borrower is eligible to use Form 3508S but already applied for loan forgiveness, it may resubmit using Form 3508S at any time until SBA notifies the lender of a final SBA loan review decision or remits to the lender the loan forgiveness payment
The following publication helps outline the program.
Paycheck-Protection-Program-Portal-Reopens-For-Second-Round-of-LoansUnemployment Insurance Provisions
Source: Jackson Lewis LLP
Enhancement of Benefits and Covered Individuals (Sections 2101-2116)
Expanded unemployment insurance (UI) for workers, including a $600 per week increase in benefits for up to four months and federal funding of UI benefits provided to those not usually eligible for UI, such as the self-employed, independent contractors, and those with limited work history. Additionally, the federal government will fund an additional 13 weeks of unemployment benefits through December 31, 2020 after workers have run out of state unemployment benefits who are unemployed or underemployed because of the COVID-19 pandemic.
- Extends unemployment insurance by 13 weeks and provides a four-month enhancement of benefits
- Makes unemployment compensation available for those not traditionally eligible for regular unemployment benefits, including those with limited work history or those who have exhausted their state unemployment compensation benefits
- A “covered individual” eligible for benefits includes anyone who provides self-certification that he or she is able and available to work, but is unemployed or partially unemployed due to any of the following:
- Has been diagnosed with COVID-19 or is experiencing symptoms and seeking a medical diagnosis
- A member of the individual’s household has been diagnosed with COVID-19
- The individual is providing care for a family member or household member who has been diagnosed with COVID-19
- The individual is the primary caregiver for a child or other person in the household who is unable to attend school or another facility as a direct result of COVID-19
- The individual is unable to reach the place of employment because of a quarantine imposed as a direct result of COVID-19
- The individual is unable to work because a health care provider has advised the individual to self-quarantine due to COVID-19 concerns
- The individual was scheduled to commence employment and does not have a job or is unable to reach the job as a direct result of COVID-19
- The individual has become the breadwinner or major support for a household because the head of household has died as a direct result of COVID-19
- The individual has to quit their job as a direct result of COVID-19
- The individual’s place of employment is closed as a direct result of COVID-19
Individuals are not eligible if they are able to work remotely
- Individuals are not eligible if they are receiving paid sick leave or paid family leave
- State unemployment insurance providers will determine eligibility. However, states may not restrict the coverage to a more limited group of individuals than provided under federal law (Supremacy Clause). Therefore, all states are required to expand eligibility to those affected by COVID-19 as defined by the Act
- Provides an additional $600 per week payment to each recipient of unemployment insurance for up to four months (expires on July 31, 2020)
- The total amount of benefits will be equal to the amount determined under state law, plus an additional amount of $600 per worker per week
- Provides an additional 13 weeks of unemployment benefits to those who remain unemployed after state unemployment benefits are exhausted (expires on December 31, 2020)
- All but eight states (Arkansas, Alabama, Florida, Idaho, Kansas, Missouri, North Carolina, and South Carolina) offer 26 weeks of unemployment insurance benefits
- Receipt of assistance under the unemployment provisions shall not exceed 39 weeks, unless otherwise extended
- Provides funding to pay the cost of the first week of unemployment benefits for states that choose to pay recipients as soon as they become employed instead of waiting one week before the individual is eligible to receive benefits (expires on December 31, 2020)
- Secretary of Labor has the ability to issue operating instructions or other guidance as necessary in order to implement these provisions
Employee retention credit for employers subject to closure due to COVID-19
Source: Jackson Lewis LLP
The provision provides a refundable payroll tax credit for up to 50 percent of the first $10,000 ($5,000 max per employee) of wages paid by employers to employees during the COVID-19 crisis.
The credit is available to employers
whose
- operations were fully or partially suspended, due to a COVID-19-related shutdown order, or
- gross receipts declined by more than 50 percent when compared to the
same quarter in the prior year.
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.
Changes to the Employee Retention Tax Credit (ERTC)
- Repeals the provision denying the ERTC to employers receiving a PPP loan. Instead, mechanisms would be created to prevent the same wages from being used for both PPP loan forgiveness and the ERTC.
- Extends the ERTC to apply to wages paid before July 1, 2021 (instead of January 1, 2021).
- Increases the credit percentage from 50 percent to 70 percent of applicable wages.
- Increases the per-employee limitation on applicable wages from $10,000 total to $10,000 per calendar quarter. In combination with the increased credit percentage, this would increase the maximum credit per employee from $5,000 to $7,000 per quarter (up to $14,000 for the first two quarters in 2021).
- The following language was added to the ERTC provisions that specifically addresses PEOs:
Any forms, instructions, regulations, or guidance described in paragraph (2) shall require the worksite client (not the PEO) to be responsible for the accounting of the credit and for any liability for improperly claimed credits and require the professional employer organization or other third-party payor to accurately report such tax credits based on the information provided by the customer. - Makes the ERTC available if the business experienced a decline of at least 20 percent in gross receipts (instead of a 50 percent decline) as compared to the same calendar quarter in the prior year.
- Modifies the small employer definition of qualified wages to apply to employers that have 500 or fewer employees (instead of 100 of fewer employees).
- The worksite employer must attest in writing that they qualify and state which quarters they qualify for. ERTC eligibility is determined on a quarterly basis
- Employers may not take the credit on wages that were covered by their PPP loan. Thus, the employers must certify to the PEO that they have done the analysis and they are not “double dipping”.
Social Security Tax Deferral Program
President Trump signed the Paycheck Protection Flexibility Act (“PPFA”), making certain changes to the Paycheck Protection Program enacted as part of the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act in March.
Section 4 of the PPFA amends Section 2302(a) of the CARES Act to delete section 2302(a)(3). Accordingly, employers who obtain forgiveness of a Paycheck Protection Program (“PPP”) loan may now defer all employer social security tax deposits that would otherwise be required to be deposited before January 1, 2020.
Under Section 2302 of the CARES Act, employers may significantly defer the deposit of the employer share of social security taxes (but not Medicare taxes).
Specifically, all employer social security taxes otherwise required to be deposited between the date of enactment and December 31, 2020, are not required to be deposited on the normal deposit schedule.
- 50% of such taxes would be required to be deposited by December 31, 2021.
- 50% would be required to be deposited by December 31, 2022.
However, Section 2302(a)(3) of the CARES Act precluded an employer who obtains forgiveness of a PPP loan from taking advantage of the employer social security tax deferral. The IRS issued FAQs that clarified that
- an employer that obtains a PPP loan may defer the deposit of employer social security tax up until such time as the employer is notified that some or all of the PPP loan will be forgiven.
After enactment of the PPFA, this prohibition will no longer apply and PPP loan recipients are able to take advantage of the deferral without regard to whether the employer has a PPP loan forgiven.
Retirement Plans
Source: Jackson Lewis LLP
Greater Access to Distributions (Section 2202(a))
- Section 72(t) of the Internal Revenue Code (Code) imposes a 10% excise tax on certain early distributions from retirement plans
- CARES provides that this tax does not apply to COVID-19 related distribution (CRD) up to $100,000 (determined on a control group basis)
- CRD’s are defined as
- Distribution(s) made from eligible retirement plan
- During 2020
- To an individual
- Diagnosed with COVID-19
- Spouse or dependent diagnosed with COVID-19
- Furloughed, laid off, or unable to work because of COVID-19
- Plan Administrators can rely on employee’s certification that he meets these criteria
- CRD’s treated as meeting a plan’s distribution requirements
- Eligible Retirement Plan includes
- IRA
- Tax-qualified retirement plans
- Tax-Deferred Annuities
- Section 457 deferred compensation plans
- Recipient can avoid any income tax by repaying amount of CRD as a rollover within three years of distribution
- To the extent not repaid, taxable ratably over three years
Greater Loan Flexibility (Section 2202(b))
- Section 72(p) of the Code limits non-taxable loans from qualified plans to the lesser of $50,000 or 50% of the employee’s vested benefit
- CARES eases these restrictions for loans made to a qualified individual during the 180 day period beginning on the date of enactment by increasing these limitations to $100,000 and 100 percent
- Loan repayments for qualified individuals with loans in effect on and after the date of enactment that would otherwise be due between the date of enactment and December 31, 2020 are suspended for one year
- Extended payments are adjusted for accrued interest
- The statutory repayment period (generally five years) begins to run after this suspension period
- “Qualified individual” is defined in the same manner as used in the distribution provisions in Act Section 2202(a) above
Relaxed Rule on Required Minimum Distributions (Section 2203)
- Section 401(a)(9) of the Code requires that distributions from qualified plans generally begin at age 72
- CARES relaxes this rule for certain defined contribution plans and IRA’s by creating a waiver of required minimum distributions that would otherwise be required for 2020
Special Business Provisions
Source: Jackson Lewis LLP
Social Security Tax Credit for Employers Subject to Full or Partial Suspension of Business Due to COVID-19 (Section 2301)
- Employer tax credit equal to 50 percent of “qualified wages” paid to employees from March 13, 2020 through December 31, 2020
- The tax credit applies against the employer portion of Social Security taxes payable on W-2 wages paid to all employees (after first applying the tax credits for payment of required sick leave and required FMLA leave)
- The tax credit is available to employers who meet either of the following conditions (“eligible employer”)
- The employer’s operations are either fully or partially suspended by a government order relating to COVID-19 OR
- The employer’s gross receipts during a calendar quarter are less than 50 percent of the gross receipts for the same calendar quarter during 2019
- The tax credit is based on the qualified wages paid by an eligible employer during the calendar quarter
- More than 100 average number of full-time employees during 2019 – qualified wages includes ONLY wages that continue to be paid to employees who are NOT providing services due to a COVID-19 suspension of business operations or the greater than 50 percent reduction in gross receipts
- 100 or less average number of full-time employees during 2019 – qualified wages include ALL wages paid to employees regardless of whether or not the employee is providing services
- In all cases, the total amount of qualified wages that can be counted for an individual employee during the entire COVID-19 period cannot exceed $10,000
- Wages refers to W-2 wages used to determine FICA (Social Security and Medicare) taxes BUT NOT counting FFCRA required sick leave payments and FFCRA required FMLA leave payments
Delayed Payment of Employer Social Security Taxes (Section 2302)
- ALL employers – whether or not affected by COVID-19 – are permitted to delay payment of 2020 employer Social Security taxes
- 50 percent of the deferred 2020 employer Social Security tax is payable by 12/31/2021
- Remaining 50 percent of the deferred tax is payable by 12/31/2022
DOL Authority to Relax Filing Deadlines (Section 3607)
- Section 518 of ERISA authorizes the DOL to extend certain filing deadlines under certain circumstances
- CARES extends this authority to include public health emergencies such as the COVID-19 pandemic
Single-Employer Funding Rules (Section 3608)
- Single-employer defined benefit plans must generally satisfy minimum funding rules by making certain minimum required contributions
- CARES relaxes this requirements by extending the due date for contributions that would otherwise be due in 2020 until January 1, 2021
- Any extended contributions are adjusted for accrued interest
- For purposes of applying the benefit restrictions imposed by Section 436 of the Code, a plan may use the adjusted funding target attainment percentage (AFTAP) for the last plan year ending before January 1, 2020
Tax-Free Employer Payment of Student Loans (Section 2206)
- Amends the special educational assistance rules of Section 127 of the Code to permit an employer pay the principal and/or interest on an employee’s qualified education loan tax-free up to $5,250 for a calendar year
- Applies to payments made after date of enactment and before 1/1/2021
- The $5,250 annual cap applies to TOTAL of student loan payments PLUS other educational assistance payments made during the calendar year
All of the Section 127 requirements for tax-free payments continue to apply.
Executive Compensation
Source: Jackson Lewis LLP
Executive Compensation Limitations (Section 4004)
- If a company accepts certain emergency direct lending relief under CARES, the company must agree to certain limitations on the compensation (including salary, bonuses, equity, and other financial benefits) paid to its officers and employees that remain in effect until one year after the loan or loan guarantee ceases
- These limitations are as follows:
- No officer or employee whose total compensation in 2019 exceeded $425,000 (excluding certain collectively bargained employees)
- May receive compensation during any 12-month period greater than the amount received in 2019 or
- May receive severance pay or benefits upon termination which exceed two times the maximum total compensation received in 2019
- No officer or employee whose total compensation in 2019 exceeded $425,000 (excluding certain collectively bargained employees)
- Additionally, no officer or employee whose total compensation in 2019 exceeded $3,000,000 may receive compensation during any 12-month period greater than $2,000,000 plus 50 percent of the amount greater than $3,000,000 received in 2019
Special Executive Compensation Limitations for Officers and Employees of Air Carriers or Contractors (Section 4016)
- If an air carrier or contractor receives financial assistance under CARES, the entity must agree to limit executive compensation during the period between March 24, 2020 and March 24, 2022 equivalent to the limitations described above under Section 4004
Direct Financial Assistance To Individuals
Source: Fisher Phillips LLP
Although not necessarily applicable to employers, the Act also provides financial assistance directly to certain U.S. residents.
The Act generally provides a tax credit of $1,200 for individual taxpayers or $2,400 for joint taxpayers, plus $500 for each child of the taxpayer. These rebates are not taxable income for the recipients because they are a credit against tax liability.
For most Americans, no action will be required to receive such a rebate. Tax returns from 2019 will generally be used to calculate these rebates, but tax returns from 2018 will be used to calculate these rebates if the individual has not filed a tax return for 2019. Those who may be eligible for a larger rebate based on their 2020 income would receive it in the 2020 tax reason.
These rebates are reduced based on the taxpayer’s adjusted gross income. Specifically, the rebates are reduced by 5% per dollar of qualified income when the adjusted gross income exceeds $150,000 for joint taxpayers, $112,500 for a head of household, and $75,000 for all other taxpayers. The rebates would be completely phased out when the adjusted gross income exceeds $198,000 for joint taxpayers with no children, $146,500 for head-of-household taxpayers with one child, and $99,000 for single taxpayers.
Benefits/Health Care Issues
Source: Fisher Phillips LLP
The CARES Act also makes some revisions to healthcare coverage for virus testing, preventive services, and benefits. The federal law will still require group health plans and health insurers to cover certain state-developed COVID-19 diagnostic testing (in addition to current federally approved diagnostic testing); diagnostic testing pursuant to developer requested emergency use authorizations; and any other test the Secretary determines appropriate in guidance. However, the new law deletes specific language about diagnostic testing performed in qualifying clinical labs.
Federal law will also provide specific guidance on pricing and reimbursement rates for providers of diagnostic testing services. It allows negotiated rates or any amount not exceeding cash price.
- Specifically, it requires COVID-19 diagnostic testing providers to publish their cash price for testing on a public internet site of the provider. The Secretary of HHS can impose a civil monetary penalty up to $300 per day for noncompliance with the posting requirement.
- It also requires the Secretaries of HHS, Labor, and Treasury to require group health plans and health insurers to cover any “qualifying coronavirus preventive service.” Items, services and immunizations qualifying as preventive or mitigating must be covered “rapidly,” essentially meaning for immunizations within 15 days of recommendation.
Finally, under the CARES Act, high deductible health plans will not be disqualified for failure to have a deductible for telehealth and other remote care services. There will be a safe harbor exemption for telehealth services provided in plan years beginning on or before December 31, 2021.
Changes to FFCRA
Source: Fisher Phillips LLP
The CARES Act also makes several changes to the recently enacted FFCRA. Most employers all already familiar with the provisions of that law, which establishes new paid leave requirements as part of new Emergency Paid Sick Leave and Emergency Paid Family and Medical Leave requirements. The DOL recently announced that those new leave requirements will go into effect on April 1, 2020. Most of the changes to the FFCRA are technical and clarifying in nature.
The CARES Act adds new language to the EFMLA to address leave entitlement under that provision for “rehired employees.” The new language states that for purposes of the EFMLA, the term “employed for at least 30 calendar days” includes an employee who was laid off on or after March 1, 2020, had worked for the employer for not less than 30 of the last 60 calendar days prior to their layoff, and was rehired. Essentially, this provides that rehired employees who meet those criteria will be eligible for EFMLA without having to “restart the clock” on the 30-day requirement.