April 21, 2020
By Robbins, Salomon & Patt, Ltd.
RD has provided a list of ten takeaways for businesses to keep in mind regarding the Coronavirus Aid, Relief and Economic Security (CARES) Act.
- Unemployment Insurance Benefits Have Been Expanded
Unemployment benefits have not just been increased, they have been expanded, by 13 weeks, and gig workers, freelances and independent contractors are now eligible for it. So, people who performed work for employers in those capacities are now eligible for unemployment benefits. Do not be surprised or upset if such workers apply for and are awarded special unemployment benefits. They will be, this one time, under the Act.
- PPP Funds Are Available to Small Businesses
PPP or Payroll Protection Program loans are available for employers with less than 500 employees. The program is to be administered by the Small Business Administration (SBA). The purpose is to encourage businesses to bring their employees back to work and to keep them at work.
Applications started April 3, so the funds for this program are probably gone now but there is talk that additional money will be allocated to the program. HR departments will be expected to run reports that show FTE counts, payroll wages, levels of executive compensation (executive comp is excluded), and documents that provide assurance that employees brought back will be kept for a certain length of time.
- Retention Tax Credits
Employers with more than 100 full-time employees but less than 500, that suffered a shut-down or major loss of revenue (in terms of lost gross receipts) because of the coronavirus pandemic may qualify for a refundable payroll tax credit of 50% of qualified wages up to $10,000 per employee. Businesses with 100 or less full-time employees may qualify without having suffered a shut-down.
For employers with over 100 full-time employees, “Qualified wages” are only those wages paid to employees when not providing services. For employers with 100 or less full-time employees, all wages are qualified wages. The credit applies to the first $10,000 of compensation including benefits.
- Deferral of Social Security Payroll Taxes
Under the Act, employers are allowed to defer but still have to pay their share of Social Security taxes on employee wages. The deferred amount must be paid over the next two years with the first half due by December 2021. The second half is due December 31, 2022.
This benefit is not available to employers who receive SBA loan/grant benefits under the PPP program.
- Recalled Employees Eligible for CARES Act Leave Benefits
The CARES Act created a class of leave benefits just for purposes of the pandemic. These special leave benefits expire December 31, 2020. Are employees who were laid off prior to the effective date of the Act, eligible for leave benefits under the Families First Coronavirus Response Act (FFCRA) if they are recalled to work since the CARES Act and the FFCRA went into effect? The answer is yes.
So, if an employee was employed on January 1, 2020, and laid off March 1, 2020 (the Acts went into effect on April 1, 2020), and they are rehired at any point prior to October 1, 2020, they can still take the full 12-weeks for coronavirus related leave. If they are hired back on or after October 1, they are still eligible depending on when they are rehired because the right to such leave expires on December 31, 2020.
- No Penalty for Withdrawals from Retirement Plans
Before the Act, there was a 10% withdrawal penalty in the year a participant takes an in-service withdrawal from a retirement plan or 401(k) before they are age 59 ½. In-service loans against the value of the benefits, were limited to $50,000. Under the Act, there is no in-service withdrawal penalty for amounts withdrawn up to $100,000. For amounts over that level, the withdrawal is taxed but the taxes are spread over three years. The loan maximum was increased from $50,000 to $100,000 and participants are given an additional year to repay loans due in 2020.
- Student Loan Repayment Assistance from Employers Encouraged
The Act encourages employers to help repay their employees’ student loans. Employers are allowed to provide up to $5,250 in tax-free student loan assistance to employees.
- Expanded Definition of Qualified Expenses under HAS, FSA and HRA; Telehealth Services Covered Under High Deductible Plans
Certain over-the-counter drugs and feminine care products can be paid for out of health savings accounts or HSAs under the Act. In addition, telehealth conferences in lieu of in-person assessments are covered before individuals reach their out-of-pocket maximums for plan years beginning prior to 2022.
- Union Neutrality Requirement
To qualify for PPP loans, the employer is required to use good faith efforts to “remain neutral in any union organizing effort for the term of the loan.”
- Some Employees will Receive Economic Impact Payments
Some employees will be receiving economic impact payments from the federal government. The government is distributing the payments and will use either 2018 or 2019 tax information to determine eligibility.