COVID-19 CLIENT ALERT – Summary of the Coronavirus Aid, Relief and Economic Security (CARES) Act
On March 27, President Trump signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act, a stimulus package of unprecedented proportions intended to provide economic relief and assistance to American individuals and businesses impacted by the COVID-19 pandemic.
The CARES Act is principally intended to address the significant disruptions in income being experienced by individuals and companies during the pandemic crisis, while also providing incentives for businesses to remain open and financial assistance for certain industries facing especially severe economic hardship.
- Direct payments to individuals: Most Americans will receive a one-time direct deposit of up to $1,200, and married couples will get $2,400, plus an additional $500 per dependent child. The payments will be available for incomes up to $75,000 for individuals and $150,000 for married couples.
- Waiver of early withdrawal penalties for retirement accounts: The bill waives the 10% early withdrawal penalty for distributions up to $100,000 for coronavirus-related purposes, retroactive to Jan. 1.
- Small businesses incentives: $350 billion is devoted to preventing layoffs and business closures while workers stay home during the COVID-19 pandemic. Businesses with 500 employees or fewer that maintain their payroll during the outbreak can receive up to 8 weeks of cash-flow assistance in the form of loans. If employers maintain payroll, the portion of the loans used for covered payroll costs (as well as interest on mortgages, rent, and utilities) will be forgiven.
- Enhanced unemployment benefits: $250 billion will be used to enhance unemployment insurance benefits by expanding eligibility and offering workers an additional $600 per week for four months, in addition to what state programs pay. Unemployment benefits will extend through December 31 for eligible workers. Self-employed, independent contractors, and “gig” economy workers like Uber drivers all benefit from these provisions.
- Funding for hospitals and health care: The Act provides over $140 billion to support the U.S. health system, $100 billion of which is for the benefit of hospitals. The balance will be dedicated to providing personal and protective equipment for health care workers, testing supplies, increased workforce and training, accelerated Medicare payments, and supporting the CDC, among other things.
- Coronavirus testing: All testing and potential vaccines for COVID-19 will be covered at no cost to patients.
- Loans and other financial benefits for large corporations: $500 billion will be used to provide loans, loan guarantees, and other investments for large corporations, overseen by a Treasury Department inspector general. These loans will not exceed five years and cannot be forgiven.
In a future Client Alert, we will be providing more details concerning specific features of the CARES Act. In the meantime, we welcome your questions concerning how this measure affects your business and how we might assist you in taking advantage of the financial benefits and incentives it provides.
We extend our best wishes to you and your families during this very challenging time. Please do not hesitate to call us with any questions you may have.