The Coronavirus Aid, Relief, and Economic Security (CARES) Act will provide relief to several groups impacted by the Coronavirus pandemic. The roughly $2 trillion bill is meant to keep businesses and individuals afloat during this unprecedented event.
What groups are affected?
The CARES Act will provide assistance to a variety of groups that have been hit hard by the economic freeze caused by the Coronavirus. Here are the groups and aid amounts:
- Individuals: $560 billion (estimated)
- Big corporations: $500 billion
- Small businesses: $377 billion
- State & local governments: $339.8 billion
- Public health: $153.5 billion
- Education/other: $43.7 billion (estimated)
- Safety net: $26 billion
President Trump also specifically named the following groups:
- $100 billion will go to healthcare providers, including hospitals on the frontlines
- $27 billion will go to bolster life-saving capabilities, such as vaccine development and the development, purchase, and distribution of critical supplies
- $45 billion will go to the FEMA Disaster Relief Fund, which will empower state and local governments to respond effectively to the virus in their areas
- $3.5 billion will allow child care providers to stay open, keep payroll, and prioritize the childcare of healthcare, emergency, and sanitation workers.
The legislation will provide the much discussed checks that will be disbursed no later than December 31, 2020. Treasury Secretary Mnuchin says that many checks will arrive in 3 weeks or less. Note that these numbers are based on your AGI from your 2019 tax filing. Here are the eligibility requirements:
- Couples earning up to $150,000 will receive $2,400, plus $500 for each child
- Individuals earning up to $75,000 will receive $1,200, plus $500 for each child.
- Payments will phase out for individuals earning more than $75,000 and couples earning more than $150,000, and head of household filers up to $112,500.
There are also some changes to unemployment:
- State governments can temporarily increase unemployment benefits.
- States are encouraged to waive the typical waiting period of one week and provide an additional 13 weeks of benefits.
- Tax credits may be available to those who are self-employed
Paid sick and family leave will become available for more workers. It is required for more employees by the Families First Coronavirus Response Act. This applies to businesses of 500 employees or less. Businesses with 50 employees or less may be exempt from these policies. Eligible employees must be allowed up to 2 weeks, or 80 hours, of paid sick time:
- At their regular rate of pay if the employee is unable to work due to quarantine or if they are experiencing COVID-19 symptoms
- These payments are capped at $200 per day, or an aggregate payment of $2,000
- At two-thirds their regular rate pay if they have to care for someone who is ill or take care of a child who’s school was closed due to COVID-19
- These payments are capped at $511 per day, or an aggregate payment of $5,110
Family leave was also expanded. Affected employees are entitled to 10 additional weeks of leave with job protection to recover from illness at two-thirds their regular rate of pay, to care for sick family members or to care for children who’s school has closed. These payments are capped at $200 per day and $10,000 in aggregate. Read more about sick and family leave here: https://www.dol.gov/newsroom/releases/whd/whd20200324.
Finally, this legislation will enable payment forbearance for federally backed mortgages. Foreclosures and evictions have been suspended for those types of mortgages. Evictions have also been suspended for renters in federally supported housing. Penalties are being suspended for withdrawing up to $100,000 from retirement accounts. High deductible health plans with a health savings account will be able to cover telehealth services before a patient reaches their deductibles (read more about expanded telehealth services here: https://activewealth.com/2020/03/medicare-updates-you-need-to-know-about/).
You can read about what the Small Business Association (SBA) is doing to help small business owners here: https://activewealth.com/2020/03/664/. However, the CARES Act specifically provides for small business owners in the following ways. Small businesses and non-profits with 500 or fewer employees will have access to almost $350 billion in partially forgivable loans and the maximum loan amount for 7(a) loans has been temporarily increased. $17 billion will also be provided to forgive 6 months of payments on any existing SBA non-disaster loan.
The CARES Act will provide payroll relief to small businesses and expand the emergency disaster loan program. Businesses who have been adversely affected by the Coronavirus pandemic can receive tax credits for wages paid to each employee, up to $5,000.
Some rules for your retirement accounts have been relaxed. These changes will be in effect through 2020.
- Required minimum distributions (RMDs) for 2020 have been suspended for certain contribution plans and IRAs to help accounts recover from stock market losses. This includes the first RMD, which individuals may have delayed from 2019 until April 1, 2020.
- Eligible participants can withdraw up to $100,000 from their retirement accounts without incurring the usual 10% early withdrawal penalty.
- To be eligible, one must have been diagnosed with COVID-19 or experiencing adverse financial consequences.
- Income taxes on these distributions may be spread evenly over 3 years or the distribution may be repaid to an eligible retirement plan within a 3-year period.
- Loan repayments for affected workers in their retirement plans may be delayed for one year.
For Students and their Parents:
On March 13, President Trump announced that interest would be waived on federal student loans. The CARES Act also suspends payments on federal student loans for 6 months.
- These missed payments will be recorded as if the borrower had made a payment for the a loan forgiveness program
- Emergency financial aid will be available to some students, as much as a Federal Pell Grant would give for one year.
- Federal work-study payments can be made to students who were unable to complete their program due to COVID-19
- Students who were forced to withdraw from school due to COVID-19 may have a portion of their loan covering that semester cancelled
- Requirements for students to return portions of grants or loan assistance will be waived for these students, as well.
- A provision in this act provides an income tax exclusion for individuals who get student loan repayment assistance from their employer
- At the K-12 area, states may waive certain federal education requirements for the school year.
We want to make sure you have all the information you need in this uncertain time. We linked several articles throughout this piece, but we have a few more resources we would like to share with you below.
- COVID-19 Tax Information: https://sites.google.com/owenarnoff.com/covid-19-tax-info/home#h.8pgfswvdhcu9
- Small Business Association: https://www.sba.gov
- FAFSA: https://studentaid.gov
Should you have any questions regarding how you should be handling your finances and what the best way is to protect your wealth during market volatility, we are here to help. Don’t lay awake at night wondering if you’re making the right decision. Schedule a consultation today and ease your fears about your portfolio.
Active Wealth Management is a private wealth management firm located in Atlanta, GA. Our team is passionate about educating clients in order to empower them to invest and retire successfully and we believe in managing our client’s assets actively. Active Wealth Management works with three primary groups of people; pre-retirees, retirees, and business owners.
Active Wealth Management is led by our Founder and President, Ford Stokes, and by our Senior Vice President, Brandy Seats. They aim to help clients understand their current financial situation, analyze their current portfolio, and develop a customized financial plan to accomplish their goals. If you would like more information about the firm, please visit our website, https://activewealth.com, or call our office at (770) 685-1777.