On March 27, 2020, President Donald J. Trump signed into law the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, a $2.2 trillion economic stimulus package to provide financial and emergency relief to the U.S. economy during the COVID-19 pandemic.
The Act includes several elements intended to keep Americans engaged in the economy. It provides cash payments directly to individuals, expands unemployment benefits and changes the rules for student loans. The Act also made changes to retirement and other benefit plans, a summary of which can be found on the Critchfield COVID-19 Task Force page here.
The relief granted to individuals includes:
Payments to Individuals. Many adults in the U.S. will receive a one-time, direct payment from the government of $1,200 ($2,400 for individuals filing jointly) and $500 per qualifying child. These payments (which are technically advances on a new tax credit that may be claimed on the 2020 return), begin to phase out for individuals earning $75,000 per year, for heads of household at $112,500, and for joint taxpayers at $150,000. It is expected that the Department of the Treasury will issue most of these payments within the next three weeks, but it will be able to move fastest for people who have filed 2019 tax returns with direct-deposit information, and it will be significantly slower for those who will need paper checks. The government will use 2019 tax returns to set the payment amounts and 2018 tax returns if 2019 is not available. Those who have not yet filed 2019 tax returns may still file to make sure the government has their updated income and bank account information, as well as 2019 information about recent births, deaths, marriages, divorces, and moves. Such changes that happened after 2019 will not be reflected in the payments.
The advance payments will be determined based on 2019 income—or 2018 income if that is all that is available to IRS—but the final amount of the benefit will be determined based on 2020 income and settled on the 2020 tax return. So, people who ultimately qualify for more money than they receive this year would get the rest through a larger tax refund or smaller tax payment in 2021. But people who ultimately qualify for less money than they got this year will not have to pay it back.
One disappointment expressed by many is that some college students and adult dependents are left out. Generally, a full-time college student under the age of 24 is considered a dependent if their parent(s) provide more than half of their support. Dependents on someone else’s tax return and that are not children under age 17 will not get a payment.
Expanded Unemployment Benefits Eligibility. The Act expands the scope of those eligible for unemployment benefits to include Federal funding for self-employed individuals, independent contractors, and gig economy workers affected by the COVID-19 pandemic, or employees who have exhausted their unemployment benefits under existing state and Federal schemes – provided they are able to self-certify that they are otherwise able to work and available to work, but are presently unemployed, partially unemployed, or unable or unavailable to work because of the following COVID-19 related circumstances:
- They have been diagnosed with COVID-19 or are experiencing symptoms of COVID-19 and are seeking a medical diagnosis.
- A member of their household has been diagnosed with COVID-19.
- They are providing care for a family member or member of their household who has been diagnosed with COVID-19.
- A member of their household for which they have primary caregiving responsibility is unable to attend school or another facility that has been closed as a direct result of the COVID-19 public health emergency and because of this closure, they are unable to work.
- They are unable to work because of a quarantine imposed as a direct result of the COVID-19 public health emergency.
- They are unable to work because they have been advised to self-quarantine by a health care provider.
- They were scheduled to start a job but are unable to do so as a direct result of the COVID-19 public health emergency.
- They have become a “major support for a household” because the breadwinner in the household has died as a direct result of COVID-19.
- They quit their job as a direct result of COVID-19.
- Their place of employment is closed as a direct result of COVID-19.
The individuals covered by this provision are eligible for the $600 a week federal supplement (discussed below). They will also receive a base benefit calculated according to state benefit formulas and using recent information about their wages, but no lower than half the state’s minimum regular unemployment compensation payment.
Individuals who can telework with pay or who have received paid sick leave or other paid leave benefits are ineligible to receive assistance under the Act.
Expanded Unemployment Benefit Assistance. All covered individuals may receive assistance under the Act for up to a maximum of 39 weeks (which includes unemployment benefits available under state law, if eligible), by providing an additional 13 weeks of unemployment compensation, for eligible periods of unemployment beginning after January 27 and ending before December 31, 2020, to all individuals who otherwise would be ineligible for such compensation because they have exhausted all rights to regular unemployment compensation under state or federal law.
The amount provided to a covered individual under the Act is equal to the amount of unemployment benefit the covered individual would otherwise be entitled to under state law plus an additional amount referred to as Federal Pandemic Unemployment Compensation in the amount of $600 per week, through July 31, 2020.
- The Federal Pandemic Unemployment Compensation will not count as income for purposes of determining eligibility for Medicaid and the State Children’s Health Insurance Program (CHIP).
- The Act removes any waiting periods established by state unemployment laws. The Federal Treasury will fully reimburse states who provide unemployment compensation to individuals for their first week of regular unemployment through December 31, 2020.
- The Federal Treasury will pay states to reimburse nonprofits, government agencies, and Indian tribes for half of the costs they incur to pay for all unemployment benefits through December 31, 2020.
Student Loan Changes. Students that have borrowed money for their education directly from the Federal government will have payments for those loans suspended until September 30, 2020. Individuals may still pay down principal during that time, but the Act provides that interest shall not accrue. This relief does not apply to private student aid loans. Students who drop out of school due to the coronavirus will not have that time away from school deducted from their lifetime limits on subsidized loan and Pell Grant eligibility. Those students will also not be asked to pay back any grants or other aid they already received for the semester or quarter in which they dropped out due to coronavirus.