UPDATED April 30, 2020 to reflect further detail on mortgage and student loan forbearance.

UPDATED April 6, 2020 to reflect updated guidance on Payroll Protection Program loans. Please see the Small Business Administration Interim Final Rules for specifics on the program. The SBA will provide further guidance on portfolio companies of venture capital and private equity funds.

Over the recent weeks, the Coronavirus Aid, Relief, and Economic Security (CARES) and the Families First Coronavirus Response Act (FFCRA) were signed into law, providing support for businesses and individuals financially impacted by the coronavirus.

We wanted to provide a simple summary of the aid available, as well as how to apply for benefits.

Federal Aid for Businesses

Small Business Administration Disaster Loan

Businesses with 500 or fewer employees are eligible for a loan that is forgivable under certain parameters.

The business does not need to be shut down completely or partially to qualify. Any business that applies is presumed to need the loan and will get it.
The maximum loan amount is 2.5 times the average monthly “payroll costs” during the 1-year period before the loan is taken. Payroll costs include: group health and retirement benefits, state employment taxes and net earnings from self-employment. Compensation in excess of $100,000 for any individual should be excluded from the calculation. In order to qualify for the loan, the company must have been in business on February 15, 2020 and had employees for whom it paid salaries and payroll taxes.
About loan forgiveness: You will owe money when your loan is due if you use the loan amount for anything other than payroll costs, mortgage interest, rent, and utilities payments over the 8 weeks after getting the loan. Not more than 25% of the forgiven amount may be for non-payroll costs. Payroll costs include:
- Salary, wages, commissions, or tips (capped at $100,000 on an annualized basis for each employee);
- Employee benefits including costs for vacation, parental, family, medical, or sick leave; allowance for separation or dismissal; payments required for the provisions of group health care benefits including insurance premiums; and payment of any retirement benefit;
- State and local taxes assessed on compensation; and
- For a sole proprietor or independent contractor: wages, commissions, income, or net earnings from self-employment, capped at $100,000 on an annualized basis for each employee.
Loans can be for up to two months of your average monthly payroll costs from the last year plus an additional 25% of that amount. That amount is subject to a $10 million cap. If you are a seasonal or new business, you will use different applicable time periods for your calculation. Payroll costs will be capped at $100,000 annualized for each employee.
Your loan forgiveness will be reduced if you decrease your full-time employee headcount, and if you decrease salaries and wages by more than 25% for any employee that made less than $100,000 annualized in 2019. Employers have until June 30, 2020 to restore your full-time employment and salary levels for any changes made between February 15, 2020 and April 26, 2020.
The borrower has to show documentation to the bank that it actually spent money on the things that are eligible for loan forgiveness. The cancelled debt will be excluded from income.
The remaining balance will continue to be guaranteed by the SBA, have a maximum maturity of 10 years and bear interest at the rate of 4% or less.

Who is Eligible:

small businesses and nonprofits with fewer than 500 employees;
hospitality businesses with fewer than 500 employees at each location;
sole-proprietors, independent contractors, and self-employed individuals.
Pre-existing SBA regulations specifically allow most foreign-owned businesses to apply for emergency loans, as long as the borrower is located in the U.S.
Ineligible businesses include, but are not limited to: businesses engaged in lending, passive businesses owned by developers and landlords, businesses deriving more than one-third of revenue from gambling activities, certain religious businesses, businesses primarily engaged in political or lobbying activities, and certain speculative businesses.

How to Apply:

If you think you might be interested in a loan, assemble the documentation needed and apply now. You are not obligated to accept the loan, but starting the process now will secure your spot “in line.”

Learn more about SBA Disaster Loans

Apply for an SBA Disaster Loan

Payroll tax deferral and employee retention credit

Businesses can also defer Social Security tax and self-employment tax within a certain window. For businesses that have been shut down by coronavirus and have had to consider laying off employees, there is an employee retention tax credit of up to $5000 per employee.

Learn more about these tax relief programs

State Aid for Businesses

Each state is responding to the economic impact of Coronavirus with different programs.

Find Coronavirus aid programs in your state

Privacy Concerns: At this time, there has not been published guidance on what information will be publicly available about the recipients of these loans. After the 2009 economic downturn, loan information about the companies that received aid from the TARP program is in the public domain. The current aid programs are available to a much broader range of companies.

Sick leave requirements for employers

Every dollar of required paid leave (plus the cost of the employer’s health insurance premiums during leave) will be 100% covered by a dollar-for-dollar refundable tax credit available to the employer through the Families First Coronavirus Response Act.

Employers are required to provide two weeks of paid sick leave at regular pay rate for employees who are: experiencing Covid-19 symptoms and/or quarantined by government or medical order
Employers are required to provide two weeks of paid sick leave at two-thirds regular pay rate for employees who are taking care of a child or individual subject to quarantine.

Resources for self-employed individuals & independent contractors

Pandemic Unemployment Assistance

Ordinarily, self-employed individuals and contractors are not covered by unemployment insurance, but “pandemic unemployment assistance” will be available if you are able and willing to work or telework for pay, but are unable to do so due to a broad range of reasons related to the COVID-19 pandemic.

Find the unemployment application for your state

Self-employed individuals are also eligible for the Small Business Administration disaster loan described above.

Learn more about SBA Disaster Loans

Apply for an SBA Disaster Loan

Resources for individuals

Unemployment insurance through your state

Unemployment insurance has been expanded to cover individuals affected by COVID-19 such as self-employed and independent contractors, and benefits have been increased an additional $600 per week per recipient for up to four months. The Act extends benefits to self-employed workers, independent contractors, and those with limited work history. The federal government has asked states to remove any waiting period on receiving benefits, and is funding the difference. In some cases, individuals who are required to be at home to care for children and cannot work will have their unemployment benefits extended up to an additional 13 weeks.

Find unemployment benefits for your state

Stimulus Recovery Check

Single filers will receive rebates of up to $1,200 and joint filers will receive up to $2,400 (plus an additional $500 per child under 18). These rebates are subject to phase-outs beginning at $75,000 / $150,000 adjusted gross income (AGI) for single filers / joint filers, and the rebate is completely phased-out at the following thresholds:

Single taxpayers with incomes exceeding $99,000
Head of household filers with one child at $146,500
Joint filers earning more than $198,000

All of this is based on 2019 adjusted gross income.

Required Minimum Distributions are suspended for 2020

This provides some tax relief for individuals who are required to take a distribution (RMD) from their 401k, 403b, IRA, SEP IRA, Simple IRA or Inherited IRA.

The relief applies to retirement account owners and beneficiaries of inherited retirement accounts. They are able to reduce their taxable income in 2020 by either not taking their RMD or only taking partial distribution from the account. For IRA account owners only (not beneficiaries of inherited accounts) who took their RMD early in the year, the amount can be rolled back to the account within a 60-day window. In addition, there is also the possibility to roll back any amount taken beyond the 60-day window in to the IRA if the account owner was impacted by the COVID-19 crisis.

Early retirement plan withdrawals will not be penalized

Individuals who make certain coronavirus-related withdrawals from qualified retirement plans between January 1, 2020 and December 31, 2020 will have the 10% early withdrawal penalty waived.

If you decide to roll over a 401(k) plan to an IRA during this time, there are also some easing of restrictions to allow access to cash. (NOTE: The following only applies if you send the rollover money from your retirement plan to your personal checking account rather than another investment account.) The usual 20% tax withholding is waived, and you have a 3-year window to put the money back into the account—again, allowing tax-free access to the money for 3 years with no penalty. Alternatively, if you don’t intend to return the money to the account, you could spread out taxes on the withdrawal over those 3 years.

We expect the Treasury Secretary to issue additional guidance on how to reconcile any re-contribution amounts for tax purposes on Form 1040.

The rules for taking a loan from a qualified retirement plan will be relaxed for those affected by coronavirus.

Unlike a withdrawal from a retirement plan, which will be taxable upon receipt, a qualified plan loan is not taxable so long as the required repayment terms are met by the participant without a subsequent default.

Under the CARES Act, if an individual takes a Coronavirus-related loan between March 27, 2020 and September 23, 2020, the maximum amount that a tax-qualified retirement plan can permit as a loan is: the lesser of (a) $100,000 or (b) the greater of $10,000 or 100 percent of the participant’s vested account balance.

The due date for repayment of existing loans from retirement plans will be delayed by 1 year.

Paid sick leave through the Families First Coronavirus Response Act

The Families First Coronavirus Response Act requires your employer to allow you to take 2 weeks of fully paid sick leave if you are experiencing Covid-19 symptoms or are quarantined, and an additional 2 weeks at 2/3 your regular rate if you are taking care of a child or quarantined individual.

Mortgage Forbearance

Under the CARES Act, Congress is requiring lenders to offer forbearance on mortgages to homeowners for up to a year. Forbearance allows homeowners to stop making mortgage payments, or to make partial payments, for up to a year. This covers the vast majority of outstanding home loans.

Contact your mortgage lender to find out about their forbearance program, as the specifics will vary between lenders.

Student Loan Forbearance

Under the CARES Act, federal student loan borrowers are automatically being placed in an administrative forbearance, which allows you to temporarily stop making your monthly loan payment. This suspension of payments will last until Sept. 30, 2020 (with 0% interest), but you can still make payments toward the principal if you choose.

Employer payments of employees’ student loans

If an employer makes payments up to $5,250 toward an employee’s student loan balance between March 23, 2020 and January 1, 2021, the amount will be excluded from the gross income of the employee. The employee would not be able to “double dip” by taking a deduction on this money for taxes.

Please reach out if you have any questions at all about coronavirus-related aid impacts your financial situation. Some of these programs have financial planning opportunities that can be optimized based on your individual situation.