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Analyzing the Recently Passed CARES Act

April 13, 2020

On Friday, March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law. This $2 trillion emergency relief package is intended to assist individuals and businesses during the ongoing coronavirus pandemic and accompanying economic crisis. Major relief provisions are summarized here.

  1. Stimulus Payments

What? Most Americans will receive a stimulus payment of $1,200 plus an additional $500 for every child 16 or under.

Who? Individuals with an adjusted gross income (AGI) below $75,000 and married couples below $150,000 will receive a payment of $1,200 or $2,400, respectively. The stimulus payment is phased down to $0 when AGI is more than $99,000 for individuals and $198,000 for married couples. 

How? The IRS says it will use your 2019 tax return (or 2018 if you haven’t filed your 2019 yet) to determine eligibility. The IRS will send payment via direct deposit information from previous tax returns, for eligible payees. Social Security recipients can expect to receive their stimulus payment through the same method they receive Social Security payments. More information on the stimulus payments can be found on the IRS Economic Impact Payments page.

  1. Expanded and Extended Unemployment Benefits

What? The stimulus bill increases the duration of unemployment benefits, guarantees a $600 boost to weekly checks for the next four months, and extends jobless benefits to previously ineligible workers.

Who? Anyone laid off or furloughed, or anyone who quit their job as a direct result of COVID-19 is eligible. Unlike before, this legislation also extends to contractors, gig workers (like Uber and Lift drivers), freelancers and the self-employed.

How? File an unemployment claim as soon as possible in the state where you worked. More information on how to file for unemployment in your state can be found on the Career One Stop website.

  1. Some “Quick Hits”
  • Retirement Plan Flexibility:
    • Individuals affected by the coronavirus may take a penalty-free hardship withdrawal of up to $100,000 from a retirement account. Those who take this withdrawal would owe taxes, but repayment of both the taxes and the withdrawal may be spread over three years.
    • Employer-Sponsored Plan loan limits are increased to $100,000 from $50,000 where 100% of the vested account balance can be used (only 50% of the vested account balance could be used, previously). Additionally, for Employer-Sponsored Plan loans already in existence, payments due through 2020 can be delayed for one year.
  • Student Loan Payments on Federal Loans are deferred until 9/30/2020, where no interest accrues during deferment. Borrowers will have to take steps to stop payments or they will continue voluntarily as the bill does not stop payees from continuing payments on a volunteer basis during this period of deferment.
    • The months deferred do count towards loan forgiveness programs though, so individuals anticipating some loan forgiveness in the future should connect with our team for further guidance on how to proceed.
  • Required Minimum Distributions (RMDs) for account owners and beneficiaries are waived in 2020. If you have already satisfied all or part of your 2020 RMD, you can deposit the dollars back into your account within 60 days of original distribution—this provision does not apply to Inherited RMDs, unfortunately.
    • If all or part of your RMD was distributed more than 60 days ago, contact our team to learn more about your options.
    • Additionally, our team is currently analyzing case-by-case situations where waiver or repaying an RMD makes sense. We will be in touch if this applies to you.

While no one truly knows just how extensive the impact of this economic downturn will be or how long it may last, the CARES Act is essential in leading us toward a healthy path to recovery. As always, please reach out with any questions you may have. Let’s get through this together.

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