In an effort to bolster the struggling economy in the wake of the coronavirus pandemic, the federal government recently passed a $2.2 trillion relief package, which will send money directly to Americans and expand unemployment programs. But what does the coronavirus stimulus plan mean for employers?
Signed into law March 27, it’s the biggest relief bill in U.S. history. The funding supports both small and large employers, with portions carved out for specific industries and the healthcare field.
Though many portions of the bill — student loan relief, waiving penalties for early withdrawal from retirement plans, etc. — are aimed at supporting individuals, our focus here will be how the stimulus plan impacts employers.
Loans for Large Employers
The stimulus bill, which spans more than 800 pages, provides $500 billion in loans for large corporations. However, that total includes billions directly linked to the airline industry and those considered essential to national security.
The remaining funds (estimated at $425 billion) will be administered through a Federal Reserve emergency-lending system akin to the one used during the financial crisis of the previous administration.
There are additional regulations for big business, however, including a provision that companies that receive funds will not be able to buy back stock for the term of the loan plus a year. Also, workforce cuts of more than 10 percent are also not allowed for businesses that utilize the loan program.
Other conditions for loans for large businesses are also in place under the Coronavirus Aid, Relief and Economic Security (CARES) Act, and a congressional oversight panel and new inspector general will oversee the distribution of funds.
Another key provision of the CARES Act is that it will allow companies to pay 2020 payroll taxes through the end of 2022, though fifty percent must be paid by the end of next year.
The payroll tax deferral, which applies to the company portion of the payment, is aimed at helping employers with immediate cash-flow problems.
Stimulus for Small Businesses
For small businesses, $377 billion is available, with $350 coming in the form of support loans through a so-called Paycheck Protection Program. It provides eight weeks of cash-flow via loans to businesses to cover payroll.
Under the legislation, small businesses are defined as having 500 or fewer employees, similar to how the new federal paid sick leave and family and medical leave bill was crafted.
In some cases, the businesses that take advantage of the program won’t have to repay the loans, which would come through banks and are backed by the Small Business Administration (SBA). Banks that lend the money would be reimbursed by the Treasury Department, which will receive the $377 billion.
To receive loans, employers must apply with the SBA. However, there have been reports of issues with the process in the few short days since the stimulus package was made law. Also, businesses have eight weeks to use the money to avoid repayment.
The maximum amount of the loans is $10 million. For more information about loan resources, visit the SBA’s page on coronavirus relief.
Other Parts of the CARES Act
In addition to the funds set aside for the airline industry, the CARES Act also allocates more than $130 billion to the stressed healthcare industry.
Meanwhile, another $150 billion has been set aside for state and local governments, divided based on population.
Lastly, the eligibility and benefit amounts for unemployment benefits has also been expanded as part of the relief effort. Unemployment claims have seen a massive spike since the outbreak of the coronavirus.
The stock market has already responded to the stimulus bill, with the Dow up on Tuesday. And more stimulus legislation could be in the works as the federal government looks to revive the economy.
Still, as the impacts of the coronavirus change daily, including paid leave laws, stay-at-home regulations and more, employers would be wise to follow laws as they advance at the federal, state and local levels of government.
Find previous coronavirus-related blogs from Employment Law News: