Congress Passes $2 Trillion COVID-19 Economic Rescue Plan
Dear WANADA Members,
The
House of Representatives just gave final approval to the
CARES Act, a $2 trillion package that contains hundreds of billions of dollars in loans and grants to small and medium-sized businesses to stay afloat and meet payroll, while expanding unemployment benefits for laid-off workers, and providing funding to hospitals and governments that are battling both the health and economic burdens of the COVID-19 pandemic.
We will be following up with additional information after President Trump signs the bill, and federal agencies like the
Internal Revenue Service begin setting up the framework for businesses and workers to take advantage of this rescue package.
Small Business Grants and Worker Protections
The biggest provisions in the legislation include the $367 billion or so earmarked for small business loans, which will convert to grants if businesses meet certain thresholds for employee retention during 2020.
Eligible businesses with 500 or fewer employees will be eligible for up to $10 million in forgivable loans through the Small Business Administration's 7(a) Paycheck Protection Program.
We recommend that you contact your SBA 7(a) lender, if you have one, as soon as possible if you plan to participate in this program. In general, we believe the maximum loan amount will be 250 percent of an employer's average monthly payroll total, up to that $10 million amount.
Owing to the severity of this crisis, we believe that the bill was written to make these loans relatively easily to access, particularly compared to SBA programs of the recent past. T
he SBA loans can be used for a range of business expenses (including but not limited to payroll/wages, rent, debt interest, and benefits), and only require a that you demonstrate a "good faith" reason why the loan is necessary to combat economic hardship, and that you simply certify that you "retain workers and maintain payroll or make mortgage payments, lease payments and utility payments."
The loans, up to the $10 million mark, will be entirely forgiven if the money is spent on retaining employees who earn $100,000 or less annually at no less than 75 percent of their previous salary, and that you retain them until at least June 30, 2020. Rent, utilities, and mortgage interest are also forgivable provisions under the bill, and the loan can also be secured (and forgiven) if businesses re-hire employees who were laid off between February 1 and now, so long as they do so by June 30.
There is also an additional tax credit available to small businesses of 101 to 500 employees, up to $5,000 per employee, for those who have seen at least a 50 percent decline in revenue in Quarter 1 of 2020, due to a government-mandated shutdown. Businesses with 100 or fewer employees can qualify for similar credits, up to $10,000 per employee, if they have seen the same level of decline in revenue.
Liquidity for Businesses, Tax Deferrals, and Direct Payments to Americans
For businesses with 501 or more employees, they will be able to access the Treasury Department's Exchange Stabilization Fund, which will provide more than $400 billion in low- or zero-interest loans to large businesses, at the discretion of the department and a Congressional oversight committee that will be established once the bill is signed into law.
Laid-off workers will also be eligible for an additional $600 per week in unemployment benefits, up to four months, on top of the benefit that is normally available to them in the state in which they were last employed. B
usinesses will also be able to delay, interest-free, the 6.2 percent payroll tax on Social Security, for at least one year. And nearly all Americans who earned less than $75,000 (or $150,000 if filing as a couple) in 2019 will receive
a one-time payment of $1,200, plus $500 for each dependent child in the household. Workers who earned less than $99,000 in 2019 will get at least some payment from this IRS program, likely by May.
Summary
Given the fact that this bill is the largest economic rescue package in the history of the United States, this summary only begins to scratch the surface of what the CARES Act will mean for businesses and workers in the near future. And given the severity and apparent longevity of this crisis, it seems likely that even more stimulus spending will be on the way in the months to come.
We will keep you up to date as we have more information on the provisions included in this legislation, and the ways businesses of all sizes can access the programs created or expanded by it.
If you have any questions about the legislation, please feel free to contact me or Joe Koch (
[email protected]) at any time. If you have any questions about how this legislation will impact your benefits and/or insurance plans, please reach out to Ed Mullaney (
[email protected]) or Connie Ryan (
[email protected]).
As I mentioned, please expect to see many more communications from WANADA in both the coming days, and for many months to come, regarding the CARES Act and what it means for you. Thank you for your hard work, as always, during this uncertain time for all of us.
