THE CARES ACT OFFERS REAL EMPLOYEE AND EMPLOYER HELP DURING THE COVID-19 SHUTDOWN

The federal CARES ACT signed March 27, 2020 is a gigantic fiscal response to the Covid-19 hit on the economy. We’re talking trillions and the biggest fiscal bailout in history. The Act is designed to loosen up money for both employers and employees, and to create a source of liquidity in the economy as businesses fall short of capital, and employees lose their jobs.  But no government can safe every business or sustain the income of every citizen, not even for the short term.  The goal undoubtedly is to inspire confidence, keep open the flow of money within the economy, and to ride out the severe short term impact of major business disruption in the supply/demand chain.

THE CARES ACT IS A COMBINATION OF FISCAL STRATEGIES TO FREE UP MONEY FOR BOTH EMPLOYERS AND EMPLOYEES

CARES provides employers with fewer than 500 employees with forgivable SBA loans, Business Tax Relief, Employee Retention Benefits, Payroll Tax Deferral, a Bigger Business Interest Payments Deduction (from a maximum of 30% to 50% of net earned income).

Individuals without jobs due to Covid-19 may receive increased unemployment insurance benefits.  See my Blog: COVID-19 Unemployment Insurance Benefits and Paid Sick Leave. Students may have student loan deferral of payments, and employees may have penalty free or reduced access to their 401(k) accounts, individuals with adjusted gross incomes under $75,000 will get a tax rebate of $1,200.00.  Retirement fund withdrawals are free of the 10% penalty up to $100,000.00, and the federal income tax on the withdrawal can be spread for payment over 3 years.

Businesses willing to stipulate to certain restrictions on payment of highly compensated executives and willing to maintain their employee headcount at 90% during the crisis, plus other restrictions, such as no stock buybacks, will have access to guaranteed loans through the U.S. Treasury Department’s Exchange Stabilization Fund [“ESF”] loans at pre-Covid-19 prevailing interest rates, and the loan repayments must be made within five years.

For individuals needing credit card or consumer loan payment relief, there is a credit reporting feature that helps individuals keep their good credit rating — a credit reporting agency cannot enter a ding on your credit rating if offering a deferral or adjustment in payments because of a Covid-19 related loss of personal income.

For homeowners going into default on their mortgages because of Covid19 related job loss — big relief IF you have a Fannie Mae or Freddie Mac loan.  The lender cannot institute foreclosure for 180 days, during which time you are not to be charged interest or penalties on the loan.  You may even get an additional 180 days on request.

Student loans are suspended with no adverse credit rating allowed.  Student education grants can continue with relaxed requirements.

Employees, often self-employed individuals, with high deductible healthcare plans, may use telemedicine options in lieu of M.D. office visits and the charges will not be counted against the deductible, that is, coverage will be immediate.

ACT PROACTIVELY TO OBTAIN COVID-19 FINANCIAL HELP

This blog cannot spell out all the details.  For the magnitude of the relief package, see NPR’s Graphic Display. Each business and each individual employee strapped for funds because of Covid-19 will find something in the Act specific to their situation.  Do the research, and make the application for funds or other relief promptly.  Empower yourself with knowledge.  The Congress obviously realizes we’re in a major financial melt down unless this money gets into the system.  Help yourself, and help us all.  Americans will prevail.  It’s our spirit.