CARES (Coronavirus Aid, Relief, and Economic Security) Act

Mar. 2020

The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law by President Trump on March 27, 2020.  This Act is designed to curb any potential recession caused by the outbreak of COVID-19.  The Act included a $367 billion loan and grant program for small businesses.  It also expanded unemployment benefits to include people laid off, gig workers, and freelancers who were impacted by the social distancing rules implemented to slow the spread of the virus.  Additionally, families making up to $150,000 jointly will receive $2,400 plus $500 per dependent under the age of 17.  Single filers making up to $75,000 will receive $1,200.

In addition to the direct payments to taxpayers, the Act provides $130 billion to health care providers and $500 billion fund for loans to corporations overseen by the inspector general and a congressional panel.  There are additional funds and grants earmarked for other industries, including airlines, air cargo, and state/local governments.  We are happy to discuss these in detail if you are interested, but for the purposes of this blog post, we have limited the discussion to the portions of the bills that impact Employers and Carriers.

For smaller employers (those with less than 500 employees), it is important to remember that eligibility for the loans provided by the Act is still decided by the Treasury or Small Business Administration.  That said, the Act also provides for paycheck protection to encourage employers to keep their workers paid and employed during the state of emergency.  Any business with under 500 employees is eligible to receive a loan from the $349 billion allocated by the Act to cover payroll and essential overhead with most or all of the loan forgivable.  However, this loan is capped at $10 million per business.  Additionally, the amount of forgiveness available can be impacted by the average number of employees kept on payroll after the loan origination date.  Simply put, if an employer wishes to maintain forgiveness potential for the entire loan, they should not make an unnecessary staffing changes after the loan origination date.

The Act also created a new Employee Retention Credit against employment taxes that encourages employers to retain and pay their employees.  This is not available to any business that receives a Small Business Interruption Loan described above.

In addition to helping businesses, the unemployment eligibility is extended to people who would not otherwise be eligible IF their work loss is related to the coronavirus pandemic.  It also extends the collection period from 26 weeks to as long as 39 weeks for included workers.  Those eligible now include contractors, the self-employed, those who had previously exhausted their existing benefits amounts, and part-time workers.  The Act also allows benefits for those with an insufficient work history and broadly includes “anyone else who would not otherwise qualify”.  Importantly, the only workers who cannot collect unemployment benefits under the Act are remote online workers and those who already receive other paid leave.

If you wish to discuss this or have any questions, please contact our office.