CARES Act and What it means for Businesses

The Coronavirus Aid, Relief, and Economic Security (CARES) Act (HR 748) has been a long time coming. After several failed attempts at cloture earlier this month, it has finally passed both the House and the Senate and it headed to the President's desk for final signature. In what seems to be a daily changing landscape for HR professionals, we can add this to the long list of things we have to quickly familiarize ourselves with and implement.

Although it was originally introduced in January 2019 for a completely different issue, it was used as a quick response to the ongoing COVID-19 pandemic. Essentially, the CARES Act will:

  • Send $1,200 to each American making $75,000 a year or less.

  • Add $600/week to unemployment benefits for four months.

  • Give $100 billion to hospitals and health providers and increases Medicare reimbursements for treating coronavirus.

  • Give $750 million to food banks, to Puerto Rico and the other territories for food assistance, and to programs for food distribution on American Indian reservations.

  • Make $500 billion of loans or investments to businesses, states and municipalities, and $32 billion in grants to the airline industry.

  • Relief for those with federally-backed mortgages.

  • Delay student loan payments

Some folks with student loan payments have already received help with deferred payments from their loan providers, offering much needed economic relief to folks who may or may not be impacted by reductions in force in the near future (if they haven't been impacted already).

Other bills that are a top priority for Americans right now include:

  • HR 904 - A second coronavirus relief act

  • HR 748 - Middle Class Health Benefits Tax Repeal Act of 2019

For now, I'll be addressing just the CARES Act since that's the most pressing and will likely be signed into action later today.

The full text of the CARES Act can be found here:

Be warned. It is LONG. 880 pages to be exact. Few folks have time to read through that many pages, so I have a breakdown for you below that hits the highlights of what will impact you and your company most immediately once this bill gets the final signature needed.

Unemployment Insurance

  • The CARES Act creates a new Pandemic Unemployment Assistance program (through December 31, 2020) to help folks who are not typically eligible for Unemployment Insurance (UI), including self-employed individuals (freelancers), independent contractors (1099 employees), folks with limited work history, and folks who are unable to work as a result of the coronavirus public health emergency. This includes folks who are in the high risk category who are not able to work due to their high probability to contract the coronavirus. The CARES Act pays 50% of the unemployment insurance costs incurred by state, local and tribal governments, and non-profit organizations (501-c3) , not part of the UI system.

  • An additional $600/week payment to each UI or Pandemic Unemployment Assistance recipient will be provided through the end of July 2020. If you're already getting UI, this won't kick in until April 1, 2020 - don't panic if your first payment is much lower than you expected!

  • Funding for the 1st week of unemployment for states to waive the traditional “waiting week” before benefits begin will be provided. If you have been waiting for unemployment to kick in, this will be a huge economic relief.

  • An additional 13 weeks of unemployment will be provided to help those who remain unemployed after weeks of state unemployment are no longer available. A great provision for folks who expect longer periods of unemployment due to the impact of COVID-19 in their workplace.

  • States will be provided with temporary, limited flexibility to hire temporary staff or re-hire former staff to quickly process unemployment claims. For HR recruiters working with staffing agencies, you may want to reach out to state agencies responsible for completing unemployment claims. They need all the bodies they can get right now.

  • Funding will also be provided to states to help them maintain short-time compensation programs to prevent layoffs, as well as expand these work sharing programs in the future. This will have a massive impact for the future of work past the COVID-19 affects we're seeing in workplaces now.


  • Waives the 10% tax on early withdrawals up to $100,000 from a retirement plan or IRA (made on or after January 1, 2020) for an individual who is diagnosed with COVID-19; whose spouse or dependent is diagnosed with COVID-19; who experiences adverse financial consequences as a result of being quarantined, furloughed, laid off, having work hours reduced, being unable to work due to lack of child care due to COVID-19, closing or reducing hours of a business owned or operated by the individual due to COVID-19; or other factors as determined by the Treasury Secretary. This will likely be a continually evolving list, so keep an eye out to see if you qualify for a waiver in the future if you don't qualify right now.

  • Permits individuals to pay tax on the income from the distribution over a three-year period and allows individuals to repay that amount tax-free back into the plan over the next three years. Those repayments would not be subject to the retirement plan contribution limits.

  • This also doubles the current retirement plan loan limits to the lesser of $100,000 or 100% of the participant’s vested account balance in the plan. Individuals with an outstanding loan from their plan with a repayment due from the date of enactment of the CARES Act through Dec. 31, 2020, can delay their loan repayment(s) for up to one year.

  • Waives the required minimum distribution rules for account holders who are age 70-1/2 or older that are subject to mandatory minimum distributions for certain defined contribution plans and IRAs for calendar year 2020. This provision provides relief to individuals who would otherwise be required to withdraw funds from such retirement accounts during the economic slowdown due to COVID-19.

  • Retirement plans can make amendments and adopt these rules immediately, even if the plan does not currently allow for hardship distributions or loans, provided the plan is amended on or before the last day of the first plan year beginning on or after Jan. 1, 2020, or later if prescribed by the Treasury Secretary. For a lot of us, this is a huge relief since we won't have to worry about our individual retirement plan terms related to hardship qualifications.

*A lot of this is very legal jargon heavy - talk to your retirement plan specialist/company to see what applies to you. The big take-away here is don't panic.*

Business Provisions

  • Allows employers and self-employed individuals to defer payment of the employer share of the Social Security tax they otherwise are responsible for paying to the federal government with respect to their employees. All employers are responsible for paying a 6.2% Social Security tax on employee wages. The provision 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. The Social Security Trust Funds will be held harmless under this provision.

  • This also provides a refundable payroll tax credit for 50% of wages paid by employers to employees during the COVID-19 crisis. The credit is available to employers whose (1) operations were fully or partially suspended due to a COVID-19-related shut-down order, or (2) gross receipts declined by more than 50% when compared to the same quarter in the prior year.

  1. For employers with more than 100 full-time employees, qualified wages are wages paid to employees when they are not providing services due to the COVID-19 related circumstances.

  2. For employers with 100 or fewer full-time employees, all employee wages qualify for the credit, whether the employer is open for business or subject to a shut-down order.

  3. The credit is provided for the first $10,000 of compensation, including health benefits, paid to an eligible employee and is provided for wages paid or incurred from March 13, 2020 through December 31, 2020.

  • All employers may be eligible to apply for relief loans due to COVID-19. One of the requirements for loan recipients is to maintain employment levels as of March 24, 2020 through September 30, 2020, to the extent practicable, and in any case shall not reduce their employment levels by more than 10% from the levels on such date the loan is acquired.

  • Employers with 500 or fewer employees are eligible to receive a loan to cover costs incurred by the employer between February 15 and June 30, 2020. For the purposes of counting the number of employees that are employed, the term “employee” includes full-time employees, part-time employees, and individuals employed on “other basis,” like seasonal or temporary staff.

  1. Loan to support, among other things, wages, cash tip equivalents, the cost of health benefits, the cost of retirement benefits, the cost of leave (e.g., vacation, family, and sick leave), or the payment of State or local taxes assessed on employee compensation. The loan can also be used to pay mortgage interest, rent, utility bills, and premiums for COBRA.

  2. Defines eligibility for loans as a small business, 501(c)(3) nonprofit, a 501(c)(19) veteran’s organization, or Tribal business concern described in section 31(b)(2)(C) of the Small Business Act with not more than 500 employees, or the applicable size standard for the industry as provided by SBA, if higher. Self-employed individuals are also eligible to receive a loan.

  3. Small businesses may take out loans through December 31, 2020 and cover employees making up to $100,000 per year; loans taken for this purpose may be forgiven if the business maintains an average monthly number of employees during the covered period (between February 15 and June 30) that is no less than the number it had before the crisis began, among other requirements. Firms that have laid off employees may qualify for forgiveness if employees are rehired by April 1, 2020.

  4. The cost of participation in the program would be reduced for both borrowers and lenders by providing fee waivers, an automatic deferment of payments for one year, and no prepayment penalties.

  • Midsize to large employers (500 to 10,000 employees) including nonprofit organizations may qualify for loans related to losses incurred as a result of COVID-19. Loan borrowers will not be required to pay principal or interest towards the loan for the first six months or longer at the discretion of the Treasury Secretary. Loan recipients must retain at least 90% of the workforce, at full compensation and benefits, until September 30, 2020, among other requirements.

  • Guidance for businesses on deferring tax payments can be found here:

  • The Treasury has also issued a scam warning regarding loans and grants. Be mindful of scammers asking for your information or payments in order to receive benefits related to COVID-19. Scams should be reported here:

Education Assistance

  • Allows employers to provide a student loan repayment benefit to employees on a tax-free basis. Under the provision, an employer may contribute up to $5,250 annually toward an employee’s student loans, and such payment would be excluded from the employee’s income. The $5,250 cap applies to both the new student loan repayment benefit as well as other educational assistance (e.g., tuition, fees, books) provided by the employer under current law. The provision applies to any student loan payments made by an employer on behalf of an employee after date of enactment and before January 1, 2021.

Health Care

  • Clarifies that all testing for coronavirus is to be covered by private insurance plans (fully-insured and self-insured) without cost sharing. Coverage extends to any services or items provided during a medical visit—including an in-person or telehealth visit to a doctor’s office, an urgent care center, or an emergency room—that results in coronavirus testing or screening. This coverage requirement began on March 18 (when Families First Coronavirus Response Act was enacted) and remains in effect only while there is a declared public health emergency as defined under federal law.

  • For private health insurance plans, the bill broadens the testing that would be covered without cost-sharing beyond FDA-approved testing to include 1) tests provided by clinical labs on an emergency basis (including public health labs); and 2) state-developed labs. For folks worried about reimbursement for testing, there are provisions in place for that as well under the CARES Act that will continue to evolve.

  • Changes the use of health savings accounts (HSAs) paired with high-deductible health plans (HDHPs). Allows a high-deductible health plan (HDHP) with a HSA to cover telehealth services prior to a patient reaching the deductible. This means that telehealth and other remote care services could be covered pre-deductible without violating federal rules for HDHPs paired with an HSA. Check with your HSA providers to see if this applies to you. This provision is temporary and will sunset December 31, 2020 unless Congress takes future action to extend or make permanent.

  • Inclusion of certain over-the-counter medical products as qualified expenses. Allows patients to use funds in HSAs, Flexible Spending Accounts, Archer medical savings accounts and health reimbursement arrangements for the purchase of over-the-counter medical products, including those needed in quarantine and social distancing, without a prescription from a physician. This change would apply for amounts paid or expenses incurred after December 31, 2019.

  • Allows HSAs (and the similar arrangements noted above) to be used to pay for certain menstrual care products, such as tampons and pads. These products would be treated as qualified medical expenses for purposes of these arrangements. This change would apply for amounts paid or expenses incurred after December 31, 2019. There is the potential for this piece to remain in action indefinitely, so I'll be keeping my eyes out for how this develops going forward.


  • Allows an employee who was laid off by an employer March 1, 2020, or later to have access to paid family and medical leave in certain instances if they are rehired by the employer. The employee would have had to work for the employer at least 30 days prior to being laid off. There will likely be changes made to the FMLA requirements as a result of the COVID-19 impact to hours worked so keep an eye out for those changes later this year.

  • Allows employers to receive an advance tax credit from the Department of Treasury instead of having to be reimbursed on the back end. This also creates regulatory authority to implement tax credit advancements. Great news for small employers who were concerned about being able to pay 80 hours for each employee needing time off to care for a child diagnosed with the coronavirus.

  • This also amends Section 518 of ERISA to provide the Department of Labor the ability to postpone certain ERISA filing deadlines for a period of up to one year in the case of a public health emergency.

  • Provides single employer pension plan companies with more time to meet their funding obligations by delaying the due date for any contribution otherwise due during 2020 until January 1, 2021. At that time, contributions due earlier would be due with interest. The bill also provides that a plan’s status for benefit restrictions as of December 31, 2019, will apply throughout 2020.

  • Ensures that federal contractors who cannot perform work at their duty-station, or who cannot telework because of the nature of their jobs due to COVID-19, continue to get paid.

This has been pieced together using multiple resources (SHRM, IPMA, McLean Associates, GovTrack) as well as the full text of the CARES Act. Because things have been changing day-to-day, the information here is meant to be informational and is not intended to be legal advice. You should always consult your legal counsel and any other company decision makers before making major decisions.

If you haven't seen the Department of Labor's FAQ on paid leave rights under the Families First Coronavirus Response Act (FFCRA), you can find those guidelines here:

Other helpful resources to keep on your radar in the coming weeks are:

National Conference of State Legislators (NCSL)


Department of Labor (DOL)

Small Business Administration

National Alliance on Mental Illness

There are plenty of other resources available as well, so please feel free to comment with any resources that you think could benefit others! Hopefully you found this to be helpful and at least a little bit of a welcomed relief at the end of what has been a very long week.

Stay safe. Be well. Take care of one another!

As always, if you need assistance implementing strategies to help your company navigate these difficult times, feel free to reach out to see how we can help you get to your Better!

We're all in this together.