Key Features of the CARES Act Relevant to Employers
On Friday, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was enacted. It is a sprawling statute, with many features. Here is a quick run-down of some of its components that may be of interest to employers.
- Paycheck Protection Program. Generally, for employers with 500 or less employees. Administered by the SBA, businesses can borrow up to lesser of 2.5x monthly payroll costs or $10M and proceeds can be used for payroll, health care benefits, salaries, rent, utilities, and other expenses. Loans are potentially forgivable. No guarantees required. Unclear if SBA affiliation rules will apply outside of hospitality and restaurant industries, to which they have been waived.
- Payroll tax credit. If employer suffers a full or partial closure during 2020 or suffers a reduction in gross receipts of 50% or more compared to last year’s quarter due to COVID-19. Refundable payroll tax credit for some qualified wages.
- Payroll tax deferral. Taxes owed for rest of year can be deferred into 2021 and 2022.
- Retirement account penalties waived. Early withdrawal penalties waived for withdrawals up to $100,000 for COVID-19 related reasons.
- Exclusion of student loan payments from taxable income. Employers can pay tax-free to employees up to $5,250 towards student loan repayment or other current educational assistance.
- Coronavirus Economic Stabilization Act of 2020 (CESA). Among other things, low-interest loans will be made available to employers with 500-10,000 employees. Some significant restrictions on loans made under CESA exist, however, including salary caps on officers and employees making over $425,000 (no raises) and even income reductions for officers and employees making over $3M. For low-interest loans made to employers with between 500-10,000 employees, employer must intend to maintain at least 90% of jobs, cannot outsource or offshore jobs, cannot end current CBAs and must remain neutral regarding future union organizing activity.
Stay safe and keep the course. And please let us know if we can help.