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CARES Act: Taking a Closer Look

by: Kimberly Houston, CFP®, CRPC®

On Friday, March 27th, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law by President Trump to combat the economic impact of COVID-19 while also providing relief for individuals, business owners, and healthcare providers. This $2 trillion emergency fiscal stimulus is the largest we’ve seen in American history. The provisions are outlined in a 900-page government document that can be found here. If you’re bored enough to read through it during quarantine – go you! If not, we’ve outlined some of the key points and how it may have an impact on you.

  • A check – According to estimates by the Tax Foundation, over 90% of taxpayers should receive some amount of Recovery Rebate. Individuals who had up to $75,000 in adjusted gross income in 2019 (or 2018 if you haven’t yet filed your 2019 tax return) will receive a one-time payment of $1,2000, while married couples with AGI up to $150,000 will receive $2,400. If you are within these income limits you should expect to receive $500 for each child under 17. According to Treasury Secretary Steve Mnuchin, you can expect payments through direct deposit around April 16, 2020. If the IRS does not have your bank information, payments will come by mail.
  • Elimination of 10% early withdrawal penalty – Distributions made from IRAs, employer-sponsored retirement plans, or a combination of both, which are made in 2020 due to hardship from the Coronavirus will be exempt from the normal 10% withdrawal penalty. In other words, if you are under the age of 59 ½ and have been impacted by the Coronavirus you may access your retirement funds without the normal penalty. You will have 3 years to roll all or any back into your retirement account.
  • Waived Required Minimum Distributions (RMDs) – For those over 72, Required Minimum Distributions for IRAs and employer-sponsored retirement plans do not have to be taken in 2020.
  • Support for small businesses – More than $350 billion will be given to small businesses. This includes forgivable loans up to $10 million to help keep businesses operating, a paycheck protection plan and grants.
  • Expanded unemployment benefits – Workers laid off due to COVID-19 can expect to receive an additional $600 per week of unemployment benefits for up to four months. This includes relief for those who would otherwise not normally qualify such as self-employed individuals and independent contractors.
  • Fortified healthcare – $150 billion will be allocated to hospitals and community health centers to provide more aid for equipment, supplies, and treatment.
  • Enhanced education – $30 billion will be allocated to improve state education and school funding. In addition, all federal student loan payments will be deferred until September 30th, 2020.
  • State and local government funding – Greater than $150 billion will be allocated to “state stabilization funds” to support reduced state and local tax receipts.
  • Other provisions – A $500 billion buffer will be induced to impacted and distressed industries, including the airlines, mass transit, and the postal service.

Will this be enough? There are already talks that a second or third stimulus package may be drawn-up in the future. Only time will tell. In the meantime, we hope that you stay safe, happy, and healthy. Please reach out to us if you have any questions regarding the current environment and how it may impact your financial situation. We are here for you at any time.