After days of negotiations and last-minute changes, the Senate and the White House have signed a historic $2 trillion stimulus plan to help mitigate the economic fallout of COVID-19. The Coronavirus Aid, Relief and Economic Security Act (CARES) will put cash directly into people’s pockets, provide funding for hospitals and help businesses remain afloat.
Here’s all you need to know about the CARES Act.
4/15/20 Update: The highly-anticipated, and (highly-trafficked) “Get My Payment” site, launched by the IRS for Americans to check on the status of their Economic Impact Payment, has launched. Visit it to track your payment (you’ll need to enter your Social Security number, date of birth and mailing address).
If you wish to get your money faster (and the payment hasn’t yet been scheduled for delivery), you can input your bank account information to receive the money electronically rather than by paper check. (For that, you’ll need your most recent tax return, the refund or amount owed that year, and the account and routing numbers of your bank account).
One of the most crucial elements of the bill is the plan to distribute stimulus checks to Americans in the middle class and lower income levels. Officials hoped to deposit the one-time payments as soon as early April, though Americans likely won’t see the funds until a few weeks later.
Aid amounts will be based on household income reported in 2018 taxes (or 2019 taxes if they’ve already been filed), and will average $1,200 for each adult earning up to $75K a year and married couples earning up to $150K a year. Check amounts will begin to phase out for individuals whose income exceeds the $75K threshold, and for couples who earn more than $150K. Individuals earning more than $99K, and couples with no dependents earning more than $198K, won’t receive stimulus checks. Each household will also receive an additional $500 for every child under the age of 17 living at home. You can look up your anticipated check amount on this calculator.
The feds are hoping the stimulus checks will bolster the economy and provide relief to Americans who have lost their jobs or experienced decreased hours due to COVID-19.
Increased unemployment benefits
Enhanced unemployment insurance includes four months of unemployment pay for laid-off workers; expanded coverage for employees who were furloughed; the inclusion of workers who generally do not qualify for unemployment, like gig workers and freelancers; and increased unemployment benefits for all eligible workers by $600 a week for four months in addition to each state’s predetermined unemployment compensation.
The act calls for waiving the 10% early withdrawal penalty for retirement accounts (like IRAs and 401(k)) distributions up to $100,000 for purposes relating to COVID-19, retroactive to Jan. 1. Withdrawals still will be taxed; however, taxes are spread over three years, or taxpayers have the three years to roll it back over.
The CARES act also suspended Required Minimum Distributions (RMDs) for 2020, should a retiree elect to suspend it. This allows seniors to pause withdrawals from their retirement accounts while the stock market is down, and not pay stiff penalty fees.
Federal student loan borrowers will be allowed to pause payments on their loans. Loans will be put into forbearance for at least 60 days starting March 13, 2020. No payments should be due until after Sept. 30, 2020.
Federal student loan interest rates will automatically be set to 0% until Sept. 30, 2020. If borrowers continue making payments, the full amount will be applied to the principal.
Borrowers do not need to take action to suspend loan payments. In addition, collection efforts, including the garnishment of wages and the seizure of tax refunds, will be suspended on federal student loans that are in default.
Some homeowners could be able to pause payments for at least six months with the possibility of an additional six months of forbearance, according to the Act. Homeowners become eligible if they have one of the following types of first mortgage loans:
- An FHA Loan
- A VA Loan
- A USDA Loan
- A 184/184A Mortgage
- Any mortgage backed by Fannie Mae
- Any mortgage backed by Freddie Mac
- Missed payments would be required to be paid back; however, homeowners can work with their lenders at the end of the forbearance period to come up with a manageable payment plan. A moratorium on foreclosures for borrowers with any of the above types of government-backed loans began March 18.
Small business bailouts
Small businesses are among the hardest hit by the pandemic and national shutdown to help “flatten the curve.” The stimulus plan will offer $350 billion worth of funds to these corporations to help them remain solvent.
Funding for the health care system
The stimulus plan will pump $150 billion in the country’s health care system to help it meet the demands of the pandemic. Of this funding, $130 billion will go directly to hospitals struggling to deal with a shortage of masks, ventilators, beds and protective gear; and $1 billion will go to the Indian Health Service. The rest of the money will be used to fund research and treatment and to help the Strategic National Stockpile raise supplies of ventilators, masks and other equipment for hospitals across the country.
Funding for state and local governments
State governments are especially active and vocal at this time, as they are the sole elected officials authorized to enact and enforce lockdowns on their jurisdictions. State treasuries are also straining to meet the surge in requests for funding from hospitals and individuals seeking unemployment benefits. Local governments are similarly mobilized during the pandemic, with law enforcement authorities in heavily infected areas putting in longer hours.
The CARES Act will distribute $150 billion directly to state and local governments to enable them to address their spending shortages and to fund their increased labor at this time.
Additional provisions and addenda
There are several other components of the CARES Act:
- Establishment of a Treasury Department special inspector general for pandemic recovery and a Pandemic Response Accountability Committee to oversee loans to businesses.
- Prohibition for all businesses controlled by the president, vice president, members of Congress and heads of executive departments from participating in the loan or investment programs. Their children, spouses and other relatives are also banned from receiving benefits.
- Provisions to ban stock buybacks during the period of government assistance. There is an additional ban of a year for all companies receiving a federal loan from the CARES Act.
- Establishment of worker protections for businesses receiving the federal loans.
- Prohibition for airlines from using the federal loans for CEO bonuses.