CARES Act Helps Coronavirus-affected Employers, Employees Alike

The $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act stimulus law to help American workers and businesses weather the outbreak has a number of provisions that employers and their workers need to know about and can take advantage of during this crisis.

The CARES Act includes provision for:

  • Extended unemployment benefits.
  • Requiring health plans to cover COVID-19-related costs.
  • Small Business Administration (SBA) disaster loans.
  • Loans for large corporations.

Parts of the CARES Act will likely benefit your organization and employees in some way. Here’s what you need to know:

Extended unemployment

The CARES Act extends unemployment insurance benefits to workers, as long as they lost their jobs due to the outbreak.

Unemployment benefits under the CARES Act also apply to furloughed employees.

Workers in California will be able to collect both state unemployment and federal unemployment through the new law.

Under existing state law, workers who have lost their jobs can already receive regular unemployment benefits of between $40 and $450 per week, depending on their highest-earning quarter in a 12-month period beginning and ending before they apply for benefits with the state Employment Development Department. These benefits can last for up to 26 weeks.

The Pandemic Emergency Compensation program funded by the CARES Act will provide an additional $600 per week on top of state unemployment benefits, through July 31.

The law extends state-level unemployment by an additional 13 weeks. For example, whereas most of California’s unemployment benefits last 26 weeks, the bill extends state benefits to 39 weeks. The extended benefits will last through Dec. 31.

Health plan changes

Under the CARES Act, employer-sponsored group health plans must provide for covered workers — without cost-sharing or out-of-pocket expenses — the cost of COVID-19 testing, treatment and vaccinations when and if they become available.

SBA loans

The CARES Act provides $10 billion for grants of up to $10,000 to provide emergency funds for small businesses to cover immediate operating costs. It also offers loans of up to $10 million to companies that employ fewer than 500 people to cover payroll and expenses between February 15 and June 30. Some of the main provisions are:

  • Small businesses may take out loans up to $10 million—limited to a formula tied to payroll costs—and can cover employees making up to $100,000 per year.
  • The loans can be forgiven as long as a business meets certain conditions, such as using most of the funds to pay salaries for the eight weeks following the loan closing.
  • Entities eligible for loans include small businesses, nonprofit organizations, sole proprietors, independent contractors, and other self-employed individuals.
  • Borrowers who have received an SBA Economic Injury Disaster Loan for the same purpose do not qualify for the Paycheck Protection program (PPP).

Mid-sized employers

Under the CARES Act, the Secretary of the Treasury is authorized to implement financial assistance programs which specifically target mid-size employers with between 500 and 10,000 employees.

Loans would not have an annualized interest rate higher than 2% and principal and interest will not be due and payable for at least six months after the loan is made. But unlike loans under the PPP, these are not forgivable.

Large employers

The CARES Act provides $500 billion to the Treasury Department’s Exchange Stabilization Fund for loans and other funding for large companies and corporations affected by the outbreak.

  • $454 billion is set aside for loans, loan guarantees.
  • Companies that receive funds are prohibited from using them for stock buybacks.
  • Loans include terms limiting employee compensation and severance pay.

Like loans for mid-sized employers, they are not forgivable.

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