On March 27, 2020, President Donald Trump signed into law the Coronavirus Aid, Relief and Economic Security Act (“CARES” or the “Act”) providing financial resources for individuals, families and small businesses affected by COVID-19, as well as making several key policy changes impacting health care providers. This alert highlights the main provisions of CARES, including the topics of cash assistance to individuals, expansion of unemployment benefits, funds available to businesses adversely affected by COVID-19, healthcare relief and grants and tax credits available under the Act.
Cash Assistance to Individuals
The Act provides funding for $1,200 tax rebates to individuals, with additional $500 payments per qualifying child. The rebate begins phasing out when incomes exceed $75,000 (or $150,000 for joint filers).
- Eligible individuals receive either a cash disbursement or a refundable tax credit in the amount of:
- $1,200 for individuals; or
- $2,400 for individuals filing jointly; plus
- $500 for each qualifying child.
- The cash disbursement or refundable tax credit is reduced by 5 percent of any income over:
- $75,000 for individuals (phases out at $99,000);
- $150,000 for individuals filing jointly (phases out at $198,000); and
- $112,500 for individuals filing as head of household (phases out at $136,500).
- Income is based off of 2019 tax returns.
- For individuals who have not yet filed a tax return for 2019, tax returns for 2018 will apply.
- For individuals who have not yet filed a tax return for 2018, information provided in a 2019 Social Security Benefit Statement or a 2019 Social Security Equivalent Benefit Statement may be used.
- Individuals who have not yet filed a tax return for 2019 or 2018, and do not have a 2019 Social Security Benefit Statement or 2019 Social Security Equivalent Benefit Statement, will receive a refundable tax credit against their 2020 income tax instead of a cash disbursement.
**Note: individuals should file 2019 taxes in order to qualify for a cash disbursement.
- To be eligible, individuals must be citizens or permanent residents, and cannot be classified as dependents.
- Cash disbursements will be made as soon as possible and no later than December 31, 2020.
- Payments may be disbursed electronically to any account the individual authorized for receipt of tax refunds on or after January 1, 2018.
- Notice of payment will be sent to the eligible taxpayer’s last known address no later than 15 days after payment.
- A valid social security number must be included on tax returns.
Unemployment Benefits Expansion
The unemployment insurance provisions of the Act known as the Relief for Workers Affected by Coronavirus Act, among other things, increases the weekly maximum benefit by $600 per week until July 31, 2020, and increases the duration of payments to 39 weeks. The Act also extends unemployment benefits to previously ineligible workers including self-employed workers, workers seeking part-time work, workers who cannot reach their workplace as a result of COVID-19, as well as those who do not have sufficient work history to otherwise qualify for unemployment benefits:
Federal Pandemic Unemployment Compensation
The Act provides for an emergency increase in unemployment compensation benefits for individuals in any State that enters into an agreement with the Secretary of Labor.
Amount of Benefit. Covered individuals will receive weekly:
- The amount of unemployment compensation determined by State law (NY caps at $504 per week); plus
- An additional amount of $600, referred to as the “Federal Pandemic Unemployment Compensation.”
- This additional benefit expires on or before July 31, 2020.
Federal Pandemic Emergency Unemployment Compensation
The Act also extends these benefits to individuals who are no longer eligible because they have exhausted their regular unemployment compensation and would not qualify for a particular week.
- Must have exhausted all rights to regular compensation under State law or Federal law in the benefit year.
- Must have no rights to regular compensation during a week under State unemployment compensation law or other Federal law.
- Must not be receiving compensation during a week under the unemployment compensation law of Canada.
- Must be able and available to work and is actively seeking work.
Amount of Benefit. Covered individuals will receive weekly:
- The amount of regular unemployment compensation payable to the individual during the benefit year under State law for a week of total unemployment; plus
- The amount of Federal Pandemic Unemployment Compensation (or $600 per week)
- Covered individuals under the Act include those who are not eligible for regular compensation or extended benefits under State law, Federal law or pandemic emergency UI under section 2107 (or has exhausted all such benefits), and provide self-certification that they otherwise able and are available for work, except that the individual is unemployed, partially unemployed, or unavailable to work because:
- The individual has been diagnosed with COVID-19, is experiencing symptoms and is seeking a medical diagnosis.
- A member of the individual’s household has been diagnosed with COVID-19.
- The individual is caring for a family member or a member of the household who has been diagnosed with COVID-19.
- The individual is the primary caregiver to a child or other person in the household who is unable to attend school or another facility that is closed as a direct result of COVID-19 concerns.
- The individual is unable to go to the workplace because of a quarantine imposed due to COVID-19 concerns.
- The individual is unable to go to the workplace on advice of a health care provider to self-quarantine due to COVID-19 concerns.
- The individual was scheduled to start employment but does not have a job or cannot get to the job because of COVID-19.
- The individual has become the breadwinner (or provides major support) because the head of household as died due to COVID-19.
- The individual had to quit his/her job because of COVID-19.
- The individual’s workplace is closed because of COVID-19.
- The individual meets additional criteria established by the Secretary for UI assistance.
- Covered individuals also include those not eligible for regular compensation or extended benefits under State, Federal or pandemic emergency UI, and:
- Is self-employed.
- Is seeking part-time employment.
- Does not have sufficient work history.
- Otherwise would not qualify for regular UI or extended benefits under State or Federal law or pandemic emergency UI under section 2107.
- Individuals Not Covered:
- Individuals who can telework, with pay; or
- Individuals receiving paid sick leave or other paid leave benefits, regardless of whether they are otherwise eligible.
- Actively Seeking Work Defined
To be eligible for benefits, individuals must be actively seeking work, which includes the following:
- registered for employment services
- has engaged in an active search for employment
- has maintained a record of such work search
- when requested, has provided work search records to the State agency.However, the Act provides that States must give individuals flexibility in meeting the requirements due to inability to search for work because of illness, quarantine or other movement restrictions.
Extends Duration of Benefits
- Covered individuals may receive unemployment benefit assistance while unemployed, partially employed, or unable to work for the weeks of such unemployment, and while not entitled to any other unemployment compensation, as follows:
- Total number of weeks of assistance is increased to 39 weeks, which includes any weeks a covered individual received regular State benefits.
- Waiver of any State waiting period.
- Beginning on or after January 27, 2020, and ending on or before December 31, 2020.
Application to Other Compensation
- The additional $600 benefit received each week from the expanded coverage would count as income and may disqualify individuals for eligibility for other means-tested programs, except it is disregarded for Medicaid and the Children’s Health Insurance Program (CHIP).
Corporate Funding/SBA Loans
Another core piece of the Act is the provision of $349 billion for small businesses through federally backed loans under a modified and expanded Small Business Administration (SBA) 7(a) loan guaranty program called the Paycheck Protection Program. The program has been designed to make funds available to qualifying businesses quickly through approved banks and nonbank lenders, such as credit unions.
- Under the Act, qualifying businesses include:
- Businesses with up to 500 employees or which meet the applicable size standard for the industry as provided by SBA’s existing regulations.
- Businesses in the accommodation and food services industries with more than one physical location but no more than 500 employees at each location.
- Nonprofit organizations.
- Eligible independent contractors and sole proprietors with supporting 1099 or payroll tax filing information.
- Loans will be available through SBA and Treasury approved banks, credit unions, and some nonbank lenders.
- The time period for the “covered loan” is the period from February 15, 2020, ending June 30, 2020. The loan must be applied for prior to June 30, 2020.
- Borrowers can borrower 2.5 times their monthly payroll expenses, up to $10 million with an interest rate not to exceed 4%, deferred payments and a maximum maturity of 10 years.
- Applicable uses for the loan proceeds include: (1) qualified payroll costs; (2) rent; (3) utilities; and (4) interest on mortgage and other debt obligations. However, employees earning in excess of $100,000.00 are excluded.
- Loan forgiveness is available for funds used to pay 8 weeks of payroll and other qualified expenses. The amount of the forgiveness of the loan will be excluded from gross income to the employer.
- Loan forgiveness may be reduced by the number of full-time employees who are laid off during the “covered period,” as compared to the number of full-time employees employed from January 1, 2020 to February 29, 2020. The amount of forgiveness may also be reduced by the amount of reductions in total salary or wages of the employees during the covered period as compared to the most recent full quarter during which the employee was employed prior to the covered period.
- Businesses receiving loans must use the money within two months to obtain forgiveness. Notably, the employer cannot pay any employee more than $10,000 in those two months, or the portion of the forgiven amount may be reduced.
- An employer may also receive forgiveness for additional wages paid to tipped employees during the covered period.
- If a company laid off and shut down its operations due to the crisis, it may still be eligible for the SBA loans on the terms above, though not forgiveness of a loan since employees were not retained.
Employee Retention Credit
In addition to providing SBA loans, the Act also creates an employee retention credit equal to 50% of up to $10,000 in qualified wages (including properly allocable qualified health plan expenses) paid per employee during the COVID-19 crisis by eligible employers. Eligible employers are those employers whose: (1) operations were fully or partially suspended due to shut-down orders related to COVID-19, or (2) gross receipts declined by more than 50 percent when compared to the same quarter in the prior year.
- Qualified wages paid by eligible employers with greater than 100 full-time employees are wages paid to employees when they are not providing services for the period that the employer qualifies as an eligible employer, as defined above.
- Qualified wages paid by eligible employers with 100 or fewer full-time employees are the wages paid to all employees, whether the employee is providing services or not, for the period that the employer qualifies as an eligible employer, as defined above.
- Tax credits are not available for companies who obtain SBA loans under the Act.
Mid-Sized Business (500-10,000 Employees)
For business that have a wide scale impact on the economy, the Act also offers financial relief through loans with favorable interest rates for “eligible business” with 500-10,000 employees. The Act specifies certain industries such as the airline industry as well as certain financial institution as “eligible business,” it is unclear what other business may qualify for financial assistance. Applications will be available within ten (10) days of the Act. For employers, relevant conditions of the loans include:
- Either retaining at least 90% of its workforce at full compensation and benefits until September 30, 2020, or intends to restore 90% percent of its workforce as it existed as of February 1, 2020 by May 31, 2020;
- Barring employers from abrogating any existing any collective bargaining agreements during the term of the loan and 2 years after completing repayment; and
- Remaining neutral in any union organizing effort for the term of the loan.
The Act does not provide specifics on what constitutes “neutrality” or addresses other similar or overlapping topics such as card check, waiver of elections, and forms of assistance to unions such as providing names and contact information of employees. It is likely that deference will be afforded to the NLRB’s interpretations where “neutral” employer applies to waiver of employer free speech – not to procedural matters such card check, secret ballot elections, or other forms of union assistance. Notably, prior to the COVID-19 outbreak, the General Counsel of the NLRB challenged the parameters of neutrality agreements to prohibit forms of union assistance. For now, “neutrality,” at minimum, bars employers from campaigning against a union or favoring one union over another during an organizing campaign.
Delay of Payment of Employer Payroll Taxes
The Act also permits employers (and self-employed individuals) to defer payment of the employer’s share of the Federal Social Security tax (6.2%) on employee’s wages paid, as of the date of enactment through December 31, 2020. This provision requires that the deferred tax be paid over the following two years, with half of the amount required to be paid by December 31, 2021, and the other half by December 31, 2022.
Health Care Relief
The Act also increases funding for the Public Health and Social Services Emergency Fund, by attributing:
- $75 billion in grants and other mechanisms to reimburse eligible health care providers for health care-related expenses or lost revenues not otherwise reimbursed that are directly attributable to COVID-19. Eligible providers are defined as public entities, Medicare- or Medicaid-enrolled suppliers and providers, and other for-profit and non-profit entities as specified by the Health and Human Services (HHS) Secretary.
- $12.7 billion to fund activities such as developing vaccines, and purchasing vaccines, diagnostics and medical surge capacity. The Act would fund workforce modernization, telehealth access and other preparedness and response activities. At least $500 million of these funds must be made available to entities that are part of the Hospital Preparedness Program, with $200 million of these funds being made available within 30 days of enactment. In addition, at least $1.7 billion of these funds must be used to purchase products for the Strategic National Stockpile.
Other notable provisions of the Act applying to the healthcare industry include:
- Reauthorizing Health Resources and Service Administration grants related to telehealth, rural health, food assistance and increased access to health services.
- Providing “Good Samaritan” liability protections for volunteer health care professionals.
- Establishing a Ready Reserve Corps to help ensure the supply of doctors and nurses trained to respond to public health emergencies.
- Requires health insurance plans to provide coverage of a COVID-19 vaccine, when developed, at no cost to the patient.
The CARES Act also includes a number of Medicare and Medicaid provisions intended to increase support to hospitals and health care workers, as well as increase health care access for beneficiaries during the public health emergency. The Act:
- Increases payments to hospitals by temporarily lifting the 2% Medicare sequester.
- Increases Medicare payments for treating COVID-19 patients by 20%.
- Expands the number of Medicare providers who can provide telehealth services and waives numerous face-to-face requirements between providers and patients.
- Requires that Part D plans provide a 90-day supply of prescription medication when requested.
The Act reauthorizes and provides funding for a number of public health programs through November 30, 2020, including funding for:
- Community Health Centers.
- The National Health Services Corps.
- The Temporary Assistance for Needy Families Program.
- Programs that award grants to fund HIV/STD prevention, teen pregnancy prevention, and youth development.
The Act also extends Medicaid programs that help patients transition from nursing home settings to home settings. The Act also delays cuts to Medicaid Disproportionate Share Hospital (DSH) payments through November 30, 2020.
Finally, the Act makes significant changes to the regulation of over-the-counter (OTC) drugs, notably allowing the Federal Drug Administration to approve changes to OTC drugs administratively rather than through full notice and comment rulemaking, by creating an 18-month exclusivity period as an incentive for companies to bring innovative OTC products to market.
Amendments To The FFCRA
The Act also contains several technical amendments to the Families First Coronavirus Response Act (“FFCRA”):
- Limitations on Employer Paid Sick Leave Obligations: An employer’s requirement to provide paid leave with respect to any individual employee expires upon the earlier of: (i) the time when the employer has paid for sick leave for an equivalent of 80 hours of work; or (ii) upon that employee’s return to work after taking paid leave. (e. Emergency Paid Sick Leave must be used all at once, not intermittently).
- Paid Leave for Rehired Employees: Recently re-hired employees who were laid off not earlier than March 1, 2020 are now eligible for leave under the Emergency Family and Medical Leave Expansion Act (“EFMLEA”).
Secretary of Labor Exclusion for Small Businesses: The Secretary of Labor may exempt employers of fewer than 50 employees from providing emergency paid sick leave to employees caring for an individual who is quarantined or self-quarantined or a child whose school or daycare closed or other caregiver has become unavailable due to coronavirus, but does not extend this waiver authority to other uses of emergency paid sick leave.
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