The CARES Act: Stimulus, Relief, and Other New Provisions
The $2 trillion Coronavirus Aid, Relief and Economic Security Act which was signed on March 27th provides funds for health care, state and local governments. It also contains a number of provisions intended to assist individuals and small businesses who have suffered economic harm due to the pandemic.
Relief for Individuals
-Many individuals will qualify for a one-time payment of $1200 plus $500 for each qualifying child. Payments are phased out for those with incomes over $75,000 ($150,000 for couples).
-Unemployment insurance is increased by $600 per week for up to four months.
-Prohibition on foreclosures for federally backed mortgages (60 days, option to request 180 days) and evictions (120 days for some rental properties).
-Charitable giving will be deductible up to $300 for cash gifts, even if you do not itemize.
Flexibility for retirement savers
-Required minimum distributions (RMD) can be waived for this year/ Investors with RMD due in 2020 will not have to take a distribution, which should allow some time for investments to recover. This includes RMD’s due for inherited IRA’s.
-Employer plan loan limits increased from $50k or 50% of the vested balance to the lesser of $100k or 100% of invested balance. Repayment is delayed for loans taken in 2020. However, some plans require repayment within 60 days if employment ends. Make sure you understand the provisions of your particular plan.
-Early withdrawal penalties (10%) are waived for qualified retirement account distributions up to $100,000, and the tax due on such distributions can be spread over three years. Investors should be cautious about liquidating portfolios at depressed stock values and potentially derailing retirement plans.
Relief for small businesses
-The Paycheck Protection Program creates a Small Business Administration loan to help businesses keep their workforces employed during the COVID-19 crisis. Businesses with fewer than 500 employees can borrow up to 2.5x monthly payroll or $10M for payroll, rent or mortgage and utilities. Loans can be forgiven if employers maintain their workforce.
-Deferral of payroll tax, including the employer share of Social Security Tax.
There are many other provisions in this complex law, and there are more stimulus packages in the works. If you have questions about how this new legislation impacts your personal finances, please contact us. Stay safe.
