What’s in the Senate’s “historic” stimulus?

Upper chamber pushes through one of the largest pieces of legislation in modern history 

Below is a high level summary of the relief package that passed the Senate late last night by a vote of 96-0. The House is expected to take up the $2.2 trillion deal on Friday, and President Trump has indicated he’ll sign it shortly thereafter.

Summary of the Coronavirus Aid, Relief, and Economic Security (CARES) Act

KEEPING WORKERS PAID / EMPLOYED

Would provide $377 billion to help prevent workers from losing their jobs and small businesses from going under due to economic losses caused by the COVID-19 pandemic. The Paycheck Protection Program would provide 8 weeks of cash-flow assistance through 100% federally guaranteed loans to small employers who maintain their payroll during this emergency. If the employer maintains its payroll, then the portion of the loan used for covered payroll costs, interest on mortgage obligations, rent and utilities would be forgiven. This provision is retroactive to February 15, 2020 to help bring workers who may have already been laid off back onto payrolls.

ASSISTANCE FOR WORKERS, FAMILIES, AND BUSINESSES

This relief package includes a dramatic expansion and reform of the unemployment insurance (UI) program. The extended UI program in this agreement increases the maximum unemployment benefit by $600 per week and ensures that laid-off workers, on average, will receive their full pay for four months. It ensures that all workers are protected whether they work for businesses small, medium or large, along with self-employed and workers in the gig economy.

Rebate Checks

  • $1,200 for individual taxpayers; married couples who file a joint return are eligible for up to $2,400.
  • Those amounts increase by $500 for every child.
  • These checks begin phasing out after a single taxpayer has $75,000 in AGI and $150,000 for joint filers. The rebate amount is reduced by $5 for each $100 a taxpayer’s income exceeds the phase-out threshold.  The amount is completely phased-out for single taxpayers with incomes exceeding $99,000 and $198,000 for joint filers.  The IRS will base these amounts on the taxpayer’s 2018 tax return.

Retirement Funds – Consistent with previous disaster-related relief, this provision waives the 10% early withdrawal penalty for distributions up to $100,000 from qualified retirement accounts for coronavirus-related purposes.  In addition, income attributable to such distributions would be subject to tax over three years, and the taxpayer may re-contribute the funds to an eligible retirement plan within three years without regard to that year’s cap on contributions.  Further, the provision provides flexibility for loans from certain retirement plans for coronavirus-related relief.

 Charitable Contributions

  • Partial above the line deduction – this provision encourages Americans to contribute to charitable organizations by permitting them to deduct up to $300 of cash contributions, whether they itemize their deductions or not.
  • Limitations – this provision increases the limitations on deductions for charitable contributions by individuals who itemize, as well as corporations.  For individuals, the 50% of AGI limitation is suspended for 2020. For corporations, the 10% limitation is increased to 25% of taxable income.  This provision also increases the limitation on deductions for contributions of food inventory from 15% to 25%.

Student Loans: Employer Payments – This provision will exclude up to $5,250 in qualifying student loan repayments paid by the employer on behalf of the employee from income for income tax purposes.

Business Taxes

  • Estimated tax payments (corporations) – this provision allows corporations to postpone estimated tax payments due after the date of enactment until October 15, 2020.  There is no cap on the amount of tax payments postponed.
  • Employer payroll taxes – this provision allows employers and self-employed individuals to defer payment of their share of the Social Security tax they would otherwise be responsible for paying to the federal government with respect to their employees. It requires that the deferred employment 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

COVID-19 Vaccine – Requires individual and group health plans to cover any preventative vaccine and any drugs to treat COVID-19 at zero cost-sharing within 15 days of receiving a rating by United States Preventive Services Task Force or a recommendation from the Advisory Committee on Immunization Practices.

EDUCATION

Student Loans – The Dept. of Education will allow federal student loan borrowers to suspend payments through September 30, 2020 without penalty as the country battles the coronavirus pandemic. Interest due on loans during the national emergency will not capitalize at any time during the emergency. The Secretary of Education will ensure that consumer reporting agencies treat loans during this period as if the borrowers were making on time, regularly scheduled payments.

ACCOUNT BASED PLANS

Telehealth – Provides that payments for “telehealth and other remote care services” below the deductible will be permitted in an HSA-compatible HDHP. This provision is effective immediately and will last until December 31, 2021. Note: The bill does not define “telehealth and other remote care services.”

Over-the-Counter Drugs and Menstrual Care Products – Provides that HSAs, FSAs and HRAs will again be able to pay for or reimburse for OTC drugs and medicines. In addition, expenses for menstrual care products will be treated as qualified medical expenses. This provision is effective for amounts paid and for reimbursements of expenses incurred after December 31, 2019. Note: Unlike the telehealth provision (above), this does not have an expiration date.

 

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