Federal CARES Act Key Provisions
On March 27, Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The bill is a whopping 335 pages in its official print version and provides $2 trillion in stimulus benefits with many provisions aimed at supporting small business, encouraging employee retention, providing direct relief to individuals and expanded unemployment benefits, and a multitude of potential forgivable direct loans to employers and tax credits.
Although regulations interpreting the stimulus package have yet to be issued, the following are key highlights of interest to employers:
Paycheck Protection Program
The Paycheck Protection Program provides that small businesses, tribal businesses, and 501(c)(3) charitable organizations with under 500 employees, sole proprietors, independent contractors, and self-employed persons may be eligible for forgivable loans to cover qualifying expenses for up to 2.5 times the employer’s average monthly payroll costs, which may include:
- Salary, wages, or commissions
- Payment for vacation, parental, family, medical, or sick leave
- “Allowance” for dismissal or separation, which suggests inclusion of severance payments
- Group health benefits, including insurance premiums
- Payment of retirement benefits
In addition, qualified expenses include mortgage payments, rent, utilities, and interest. The loans are administered through the Small Business Administration, with deferred payments from 6 months to up to a year. The maximum loan is up to $10 million.
The loans are forgivable for loan proceeds used to cover up to 8 weeks of covered costs as listed above. Forgiveness amounts would be reduced for employers who lay-off workers or reduce compensation except where employers rehire workers or restore wages in a timely manner as set by the Act. The U.S. Chamber of Commerce has produced a helpful graphical explanation of loans under the Paycheck Protection Program, available at Small Business ELA Loan Guide.
Pandemic Unemployment Assistance
The CARES Act also provides much needed Pandemic Unemployment Assistance through December 31, 2020, including expanding benefits to those not traditionally eligible for unemployment benefits, such as business owners, self-employed individuals, independent contractors, gig workers, and those with a limited work history who are unemployed, partially unemployed, or unable to work as a direct result of COVID-19.
In addition to state unemployment benefits available, the CARES Act adds an additional $600 per week for up four months’ of benefits through July 31, 2020. The total benefit amount (state + federal $600 addition) may exceed the individual’s salary.
Employee Retention Payroll Tax Credit
Any employer carrying on a trade or business in calendar year 2020 may be eligible for a payroll tax credit if subject to a full or partial shut-down or a decline in gross receipts of more than 50% when compared to the same quarter in the prior year. The CARES Act provides a refundable payroll tax credit for 50% of qualified wages up to a maximum of $10,000 per employee (i.e., a maximum credit of $5,000 per employee) paid from March 13 through December 31, 2020.
2020 Recovery Rebates for Individuals
The Act provides U.S. residents with rebates of up to $1,200 for individual filers and up to $2,400 for joint filers, with an additional $500 per child. The rebates phase out beginning with individual filers with an adjusted gross income of $75,000 and joint filers with an adjusted gross income of $150,000. The rebates are completely phased out for individuals at the $99,000 income level and joint filers at the $198,000 income level.
Additional Provisions
The CARES Act includes important additional provisions for business and individuals, including Emergency Economic Injury Disaster Loan grants, relaxation of rules for withdrawal penalties and minimum distributions rules for retirement plans, and provides for delays in required payment dates for employment taxes.
The entire text of the Act may be found at CARES Act.
North Dakota COVID-19 Resources Website
The State of North Dakota launched a COVID-19 Resources website containing information of relevance to North Dakotans, including employers and employees. The website contains compiled information from various agencies, including information regarding:
- Unemployment Insurance – The website features frequently asked questions from both employees and employers on eligibility for benefits related to unemployment due to COVID-19, the amount and duration of benefits, and the Governor’s Executive Order regarding the non-charging of benefits to employer’s base period accounts temporarily.
- CARES Act – The website provides a brief, helpful overview of frequent questions related to the SBA loan program, qualifying expenses, and forgiveness requirements for loans and other benefits under the Act.
- Families First Coronavirus Response Act – The website includes numerous FAQs regarding benefits available under the expanded sick leave and FMLA provisions of the FFCRA, including information on the duration of leave, paid leave requirements, and coordination of leaves.
The newly launched North Dakota COVID-19 Response website can be found at North Dakota COVID-19 Resources
In addition, the North Dakota Department of Labor and Human Rights previously issued its own FAQs addressing wage payment, PTO, and other issues in job reductions, along with COVID-related issues, such as reasonable accommodation of employee medical conditions during the pandemic. The FAQ may be found at North Dakota Department of Labor and Human Rights FAQs.
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