Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) on March 27, 2020, to assist employers coping with the COVID-19 pandemic. It is chock-full of provisions that impact employers, including the rollout of robust unemployment compensation benefits, payroll tax credits and deferral, and various forms of economic assistance to incentivize employers to bring back furloughed or laid-off employees and to refrain from further layoffs and terminations.
Expanded Unemployment Benefits for Individuals
The CARES Act expands rights to unemployment compensation for individuals who are unemployed because of the pandemic. The Act incentivizes states to provide for payment of an additional $600 per week in unemployment compensation benefits above what an individual is otherwise entitled to under state law for up to 4 months.
Furthermore, the CARES Act extends an individual’s ability to receive unemployment benefits by an additional 13 weeks through December 31, 2020. Note, though, that individuals cannot receive unemployment compensation at the same time they are receiving paid sick leave from an employer. In addition, the federal government will fund the expanded unemployment benefits and not charge an employer’s account.
The federal government previously incentivized the states to waive any waiting period (generally, 1 week) and to waive requirements to sign up for a job search.
Favorable Tax Provisions for Employers
The CARES Act includes some favorable tax provisions for employers.
Employers may be eligible for a refundable payroll tax credit if they were fully or partially closed because of an order from a government authority or they faced a significant decline in receipts related to COVID-19.
Where applicable, the tax credits are equal to 50% of qualifying wages paid to each employee in a particular quarter, up to $10,000 per employee. These tax credits may not be allowed where an employer takes advantage of certain governmental loans.
Employers also generally may defer the employer share of Social Security taxes owed as payroll taxes. Deferred payroll taxes are required to be repaid over the next 2 calendar years, with half due by December 31, 2021, and the remainder by December 31, 2022.
The CARES Act makes certain employer payments of an employee’s student loans are excludable from the employee’s gross income for qualifying student loans up to $5,250 per employee per calendar year. This provision does not provide an additional exclusion to previously existing education assistance payments and applies only to payments made after March 27, 2020.
Small Business Loans
The CARES Act creates the Paycheck Protection Program (PPP) within the Small Business Administration, which provides emergency loans (PPP loans) through June 30, 2020, to most employers with fewer than 500 employees. Certain employers, including those in the lodging and restaurant industries with over 500 employees, also may access these loans.
The maximum amount of the PPP loans is the lesser of:
- 2.5 times the average monthly payments the employer made for “payroll costs” during the year before the loan disbursement, plus certain outstanding loan amounts; or
PPP loans may be used to cover substantially the same payroll costs incurred between February 15, 2020, and June 30, 2020, as well as rent, mortgage, and utility payments related to an employer’s business. The loans may not be used to fund qualifying paid sick leave or paid family leave under the Families First Coronavirus Response Act.
In addition to meeting the maximum employee threshold referenced above, borrowers must certify that uncertain economic conditions make the loan request necessary to support continued operations and that the funds will be used to retain workers and maintain payroll.
Importantly, these loans are eligible for loan forgiveness of up to 100% of the principal for qualifying uses. However, the amount eligible for forgiveness will be reduced: Read more here…
Source: HR Daily Advisor