UPDATED on July 13, 2020: Congress extended the deadline to apply to the Paycheck Protection Program (PPP) from June 30, 2020 to August 8, 2020.

UPDATED on June 8, 2020 with information on the Paycheck Protection Program (PPP) Flexibility Act, which loosens restrictions on the use of PPP loans and the standards for loan forgiveness. 

UPDATED on May 7, 2020 with information on the Main Street Lending Program.

UPDATED on April 27, 2020 with information on the Paycheck Protection Program and Health Care Enhancement Act, which was signed into law on April 24, 2020. The new law provides $484 billion in funding for various programs, including an additional $310 billion for the CARES Act Paycheck Protection Program and an additional $60 billion for Emergency Economic Injury Disaster Loans. 

On March 27, 2020, Congress passed a stimulus package that aims to aid workers and businesses impacted by the economic hardship caused by the coronavirus (COVID-19) pandemic. The bill, entitled the “Coronavirus Aid, Relief, and Economic Security Act” or the “CARES” Act, allocates approximately $2 trillion to a variety of loans, grants, and aid programs and makes changes to existing laws. Below, we highlight some of the assistance the Act provides to workers and businesses and changes made to healthcare plans:

Assistance to Businesses:

    • Employers with less than 500 employees can receive up to $10 million in loans from the Small Business Administration (SBA). Amounts spent on payroll, rent, utilities, and mortgage interest payments do not need to be repaid if certain requirements are met.
    • Employers who apply for an Emergency Injury Disaster Loan (EDIL) from the SBA can receive an emergency grant of up to $10,000 within 3 days of the SBA receiving their loan application.
    • Employers who do not receive loan forgiveness from SBA can defer 50% of Social Security taxes that are incurred from March 27, 2020 until December 31, 2020, with the first half due in 2021 and the other half due in 2022.
    • Employers who continue to pay employees while they are fully or partially shut down due to a local/state/federal order, or while they experience a 50% loss in business, can receive a tax credit of 50% of the wages paid during that time (up to $5,000 per employee).
    • The Act sets a limit on the amount employers are required to pay in emergency sick or family leave under the new Families First Coronavirus Response Act (FFCRA).
    • The U.S. Federal Reserve set up the Main Street Lending Program, which encourages banks to lend to small and medium sized  businesses (those with less than 15,000 employees or less than $5 billion in revenue in 2019) that were in good financial standing prior to the COVID-19 outbreak. 

Assistance for Workers:

    • Direct cash payments of $1,200 (plus $500 per qualifying child) for individuals who make $75,000 or less and $2,400 (plus $500 per qualifying child) to married couples filing jointly who make $198,000 or less.
    • The Act extends all state unemployment benefits to 39 weeks and provides an additional $600 per week until July 31, 2020 to individuals who are unemployed, partially employed or unable to work due to COVID-19.
    • Individuals can withdraw up to $100,000 in coronavirus-related distributions from their retirement funds.
    • Individuals can now exclude up to $5,250 in employer-provided student loan repayment benefits from their income. 
    • Student loan repayments and interest on federal direct loans taken out within the last 10 years will be suspended from March 13, 2020 until September 30, 2020.

Changes to health care plans:

    • The CARES Act expands the definition of the COVID-19 tests that group health plans must provide without cost-sharing.
    • Individuals with high deductible health care plans (HDHPs) can receive telehealth services without cost-sharing and before their deductible is met, until December 31, 2021.
    • Individuals can now use their HSA, FSA, HRA or Archer MSA to reimburse expenses for over-the-counter drugs or medicine bought after December 31, 2019.
    • Group health plans must provide preventative COVID-19 treatment to plan participants without cost-sharing, once available.

Assistance to Businesses:

Forgivable Loan Program: Paycheck Protection Program

Updated on June 8, 2020: Congress passed the PPP Flexibility Act, which extends certain deadlines and loosens the restrictions on loan forgiveness. The changes made by the PPP Flexibility Act are effective retroactively, which means the changes made applies to all PPP loans made under the CARES Act. 

Updated April 27, 2020: Congress added an additional $310 billion in funding to the Paycheck Protection Program.  

Employers with fewer than 500 employees (including sole proprietorships and independent contractors) can receive up to $10 million in loans from the Small Business Administration or “SBA” under the CARES Act “Paycheck Protection Program (PPP).” The amount of the loan spent on payroll, rent, utilities, or interest on mortgages can be forgiven if certain requirements are met.

Eligible Employers: Employers with less than 500 employees (please note this count includes individuals employed on a full-time, part-time, or other basis) will be eligible for the loan under the PPP. Employers in certain industries may have more than 500 employees if they meet certain size standards outlined by the SBA. For more, see the SBA website. Employers who apply must certify that the loan:

    • Is necessary to support ongoing operations, given the uncertainty of current economic conditions;
    • Funds will be used to retain workers, and maintain payroll or make mortgage, lease or utility payments; and
    • The employer does not have an application pending for a loan with the SBA for the same purposes and had not already received a loan from February 15, 2020 through December 31, 2020 under the loan program.

Loan Amount/Interest: The maximum amount in loans that an employer can receive is 2.5 times their their monthly payroll costs one year before the start date of the loan, up to $10 million. The loan will carry an interest of up to 4%.

Use of Funds: From February 15, 2020 to December 31, 2020, employers can use the loan amounts for the following:

    • Payroll costs and employee compensation;
      • Payroll costs include salary, wage, or similar compensation, payment for vacation, family, medical or sick leave, payment of cash tip, allowance for dismissal or separation, payment required for provisions of group health benefits (including insurance premiums), payment of retirement benefits, or payment of state or local taxes assessed on the compensation of employees.
      • Payroll costs cannot include compensation for employees with annual salaries above $100,000 (as prorated for the covered period), compensation for employees whose principal place of residence is outside the U.S., qualified sick leave wages for which a credit is allowed under FFCRA, or qualified family leave wages for which a credit is allowed under FFCRA.
    • Costs related to insurance premiums and the continuation of group health care benefits during periods of paid sick, medical or family leave;
    • Mortgage interest payments (not payments on mortgage principal), rent, and utilities; and
    • Interest on any debt obligations that were incurred prior to February 15, 2020.

Loan Deferment: Lenders must defer the loan (including payment of principal, interest and fees) for at least 6 months and they may defer up to 1 year.

Loan Forgiveness: Employers are eligible for loan forgiveness for the amounts incurred during the first 24 weeks of the loan or December 31, 2020 (whichever is earlier) related to:

    • Payroll costs;
    • Payments for rent, if the lease began prior to February 15, 2020;
    • Utilities for which service began prior to February 15, 2020; and
    • Interest on mortgages that the employer agreed to pay for before February 15, 2020.

Employers must submit relevant documentation to substantiate the loan forgiveness.

It is important to note that amount in loan forgiveness can be lowered if an employer reduces their employee count or decreases employee salary. Employers can avoid this reduction by:

  • rehiring any furloughed or terminated employees by December 31, 2020; or 
  • documenting that they are unable to (1) rehire individuals who were employees of the business on February 15, 2020 and they are unable to hired qualified employees for unfilled positions on or before December 31, 2020 or (2) return to the same level of business activity as they had before February 15, 2020 due to compliance with guidance related to sanitation, social distancing, or worker/customer safety.  

This means that an employer will only have to pay back the interest accrued on the loan if they use funds for qualifying expenditures and they maintain their employee population (or can document an exception to maintaining employee headcount) and salaries.

For more on the Paycheck Protection Program, see the SBA PPP Website and the U.S. Treasury Information Sheet. For more on the COVID-19 loan resources see the SBA website. For more on changes made to the PPP by Congress on June 5, 2020, see the PPP Flexibility Act.

Emergency EIDL Grant of up to $10,000

Updated April 27, 2020: Congress added an additional $60 billion in funding to the EDIL program. 

The CARES Act also expands the SBA’s Emergency Injury Disaster Loan (EIDL) program, which allows small employers (generally those with less than 500 employees) who have incurred a temporary loss in revenue due to the COVID-19 emergency declaration to apply for a loan of up to $2 million. The loan amount is based on the economic injury suffered by a business, which is determined by SBA.

From January 31, 2020 to December 31, 2020, employers who apply for a EIDL loan in response to COVID-19 can also request an emergency grant of up to $10,000 that they do not have to pay back, even if they are subsequently denied a loan.

The emergency grant can be used for any of the following reasons:

    • Providing sick leave to employees unable to work due to COVID-19;
    • Maintaining payroll to retain employees during business disruptions or substantial slow down;
    • Meeting increased costs to obtain materials that were interrupted by supply chain issues;
    • Making rent or mortgage payments; and
    • Repaying obligations that cannot be met due to revenue losses.

Employers can apply for an EIDL loan through the SBA here. For additional information, see the SBA website on the EIDL grants. 

Delay of Payment of Certain Payroll Taxes

Employers can defer 50% of the amounts due for the employer-portion of Social Security payroll taxes (6.2% of wages) incurred from March 27, 2020 to December 31, 2021. The first half of the deferred amount will be due by the end of 2021 and the second half will be due by the end of 2022.

Updated on June 8, 2020: Congress passed the PPP Flexibility Act, which permits employers who receive loan forgiveness under the PPP to also delay employment taxes under this section. Prior to the passage of the PPP Flexibility Act, employers who received loan forgiveness could not take advantage of this tax deferral. 

Employee Retention Credit

Eligible employers can receive a tax credit (of 50% of wages, up to $5,000 per employee) for qualifying wages paid to employees during a COVID-19-related disruption in business.

Eligible Employers: All employers (of any size) who, during any quarter in 2020:

(1) fully or partially suspended business due to governmental orders limiting commerce, travel, or group meetings due to COVID-19; or

(2) experienced a loss of 50% in gross receipts, as compared to the same quarter the prior year (once the employer’s gross receipts go above 80% of the comparable quarter in 2019, the employer no longer qualifies for the credit).

Important Note: Employers who receive a loan through the CARES Act Paycheck Protection Program are not eligible for an Employee Retention Credit. 

Amount of the Tax Credit: The tax credit is equal to 50% of employees’ “qualified” wages from March 12, 2020 to January 1, 2021, which cannot exceed $10,000 per employee per year (for a maximum of $5,000 tax credit per employee).

Qualified Wages: The amount in “qualified wages” (which the tax credit is based on) is dependent on the employer’s average employee count in 2019:

Employers with less than 100 employees: Qualified wages are those paid to employees during (1) or (2) above (regardless if they worked or not). If the employer paid employees during partial/full suspension in business, or during a loss in 50% of business, the employer will receive 50% in tax credit of the wages paid to employees during that time.

Employers with more than 100 employees: Qualified wages are those paid to employees who did not work due to circumstances listed in (1) or (2) above. In other words, if the employer paid employees who were not providing services due to a partial/full suspension in business, or due to a loss in 50% of business, the employer will receive 50% of the wages paid to employees during that time in the form of a tax credit (up to $5,000 per employee, per year).

Important Note: “Qualified wages” in the above circumstances also include the amounts the employer incurred to provide and maintain a group health plan.

How to Receive Tax Credit: Eligible employers can receive their tax credit by:

  • Reducing their payroll taxes by the amount of the credit. If the amount of the credit exceeds the amount of payroll taxes due, the employer may receive an advance of the credit by submitting a Form 7200, Advance Payment of Employer Credits Due to COVID-19 to the IRS. Employers must report the amount of “qualified wages” and related health insurance costs for each quarter on their quarterly employment tax returns; or 
  • Requesting an advance of the credit by submitting a Form 7200

For more, see the IRS FAQs on the Employee Retention Credit and the IRS webpage on the Employee Retention Credit

Changes to the FFRCA

The CARES Act also sets limitations on the amount that employers must pay for emergency paid sick leave and family leave that was recently passed under the Families First Coronavirus Response Act (FFRCA). For more on FFCRA, see our blog.

Emergency Paid Sick Leave: Employers will not be required to pay more than either (1) $511 per day ($5,110 in total) to employees who are advised by a health care provider to self-quarantine, who are subject to federal, state or local quarantine orders, or who are experiencing COVID-19 symptoms and seeking medical diagnosis OR (2) $200 per day ($2,000 in total) for each employee caring for an individual who must quarantine (or for a child whose place of care is closed).

Emergency Federal Medical Leave Act (EFMLA): Employers will not be required to pay more than $200 per day, and $10,000 in total, for each employee taking emergency paid leave.

For additional information on the FFCRA, see our blog and the DOL FFCRA FAQs.

Main Street Lending Program

The CARES Act allocated $500 billion to the U.S. Treasury’s Exchange Stabilization Fund to support lending to businesses, states, and municipalities affected by COVID-19. A portion of these funds were allocated to The U.S. Federal Reserve Bank (“the Fed”), which established the Main Street Loan Program (“Program”) on March 23, 2020. The Program aims to facilitate lending to small and medium sized businesses that were in good financial standing prior to the COVID-19 outbreak but who are now experiencing financial strain. Under the Program, the Fed incentivizes banks to provide loans to eligible businesses by purchasing 85-95% of the total loan amounts lent, up to $600 billion. Loans are made through eligible banks to eligible businesses, which generally include businesses that:

  1. Were established prior to March 13, 2020;
  2. Are a U.S. business with significant operations in and a majority of their employees based in the U.S.; and
  3. Have 15,000 employees or fewer or had less than $5 billion in revenue in 2019 (for guidance on how to determine employee count or how to determine 2019 revenue, see the FAQs).

The Program will operate through three “facilities” (or agreements), which set forth the eligibility for the loan and the conditions of the loan: (1)The Main Street New Loan Facility, (2) The Main Street Priority Loan Facility, and (3) The Main Street Expanded Loan Facility. All loans under the program have a 4-year maturity with principal and interest payments deferred for a year. The loan amounts range from a minimum of $500,000 up to the lesser of $25 million and 4x or 6x the borrower’s 2019 earnings before interest, taxes, depreciation and amortization (“EBITA”). It is important to note that loans under this program are not forgivable like those under the PPP.

The Fed will purchase loans until September 30, 2020 (or longer if the Program is extended). The launch date of the Program has not yet been announced. Businesses interested in the Program can find additional information regarding their eligibility and terms of the loan at the Program’s website and the published FAQs.


Assistance for Workers

Direct Cash Payments

The CARES Act provides direct cash payments to individuals based on their 2019 income (or their 2018 income if their 2019 taxes have not yet been filed):

Individuals earning less than $75,000 (or $112,500 for heads of household) will receive $1,200 and $500 for each child aged 17 or younger. Individuals making more than $99,000 (or $136,500 for heads of household) will not receive any cash payment. Individuals with incomes between $75,000 and $99,000 (or between $112,500 and $136,500 for heads of household) will receive less than $1,200 based on a sliding income-based scale.

Married couples filing jointly making less than $150,000 will receive $2,400 and $500 for each child aged 17 or younger. Married couples making $198,000 will not receive a cash payment. Again, married couples making between $150,000 and $198,000 will receive less than $2,400 based on a sliding income-based scale.

For additional information, see the IRS webpage

Pandemic Unemployment Assistance 

The CARES Act provides for expanded unemployment benefits for individuals who are unemployed, partially employed, or unable to work from January 27, 2020 through December 31, 2020 due to COVID-19. The Act extends state unemployment insurance benefits to 39 weeks and provides an additional $600 per week until July 31st. Most notably, the Act extends eligibility for benefits to individuals who are usually ineligible for state unemployment benefits, including self-employed individuals and part-time workers.

Each state may implement the CARES Act unemployment expansion differently. Individuals should check with their state’s unemployment benefits agency to determine the application process and benefits available.

Eligible Individuals: Individuals who are unemployed, partially unemployed, or unable to work for the following reasons:

    • The individual is diagnosed with COVID-19 or experiencing symptoms and seeking a diagnosis, a member of an individual’s household is diagnosed with COVID-19, or the individual is caring for a family member or member of their household diagnosed with COVID-19;
    • The individual is a primary caregiver to a child or other member of their household who is unable to attend school/another facility and such school or facility care is required for the individual to work;
    • The individual is unable to reach a place of employment because of a quarantine or the individual has been advised to self-quarantine by a medical provider;
    • The individual has become the breadwinner or major support for a household because the head of household has died from COVID-19;
    • The individual quit their job, or their place of employment closed due to COVID-19; or
    • The individual is self-employed or would otherwise not qualify for state unemployment and meets one of the above eligibility criteria.

Ineligible Individuals: The unemployment insurance would not apply to individuals who:

    • Have the ability to telework with pay; or
    • Are receiving paid sick leave or other paid leave benefits.

Benefit Amounts/Duration: The unemployment benefits will be the total of state provided unemployment benefits (for up to 39 weeks) and federal pandemic unemployment compensation (for up to 4 months until July 31, 2020).

  • State provided unemployment benefits, which vary by state, for up to 39 weeks (states generally provide for 26 weeks of benefits, so the bill extended this time period by 13 weeks).
    • States generally provide a percentage of an individual’s income (during a specified period of time), up to a maximum amount. For example, in California, benefits can be between $40 and $450 per week.
    • For individuals who would not otherwise qualify for state unemployment benefits, the weekly benefit will be calculated in accordance with the Disaster Unemployment Assistance (DUA) program.
  • Federal pandemic unemployment compensation, which is $600 per week, for unemployment between now until July 31, 2020.

For additional information, see the Department of Labor website on the unemployment insurance expansion

Special Rules for Use of Retirement Funds

On or after January 1, 2020 and before December 31, 2020, individuals can withdraw “coronavirus-related distributions” of up to $100,000 from their retirement plans without incurring a penalty for an early distribution. Coronavirus-related distributions are to individuals who:

  • Are diagnosed or whose spouse/dependent is diagnosed with COVID-19 by a test approved by the Centers for Disease Control (CDC); or
  • Experience adverse financial consequences as a result of:
    • Having their hours reduced or being quarantined, furloughed, or laid off due to COVID-19;
    • Being unable to work due to lack of childcare due to COVID-19, or
    • Closing or reducing hours of a business owed by the individual.

Individuals either have the option of paying back the amounts or including it in their income over a 3-year period. For additional information on the retirement plan relief provided under the CARES Act, see our blog

Student Loan Benefits

Pre-tax benefits on Employer-Provided Student Loan Repayments

The CARES Act temporarily expands IRS Section 127 to permit employers to provide up to $5,250 in pre-tax benefits to employees to help pay for their student loans. The Act allows employers to deduct these contributions as a business expense and allows employees to exclude these amounts from their income. The amendment only applies to amounts contributed from March 27, 2020 to December 31, 2020 (unless it is extended by Congress).

Please note this benefit is temporary and requires employers to establish a formal Section 127 education assistance program in order to provide the benefit. Section 127 requires the following:

  • Employers must adopt a written plan document;
  • The benefit must be an additional employer contribution (i.e. the program cannot provide eligible employees the choice between loan repayment and taxable income);
  • The program cannot favor highly compensated employees and no more than 5% of the benefits can be provided to shareholders or owners; and
  • Employers must provide reasonable notification of the availability and terms of the program to eligible employees.

Student Loan Payment Suspension and Interest Waiver

The CARES Act also suspends student loan repayments on direct loans from the federal government taken out within the last 10 years. The loan repayments and interest will be suspended from March 13, 2020 until September 30, 2020.  For more information, see the Federal Student Aid website on the Coronavirus and Forbearance Info for Students, Borrowers, and Parents


Changes to Healthcare Plans

Expands the definition of COVID-19 testing under the FFRCA

The FFRCA requires all group health plans (including fully insured, self-insured and grandfathered plans) to provide COVID-19 testing without any cost-sharing (including deductibles, co-payments, or co-insurance) or pre-authorization requirements. The CARES Act expands the definition of covered COVID-19 tests to include:

  • tests that are approved by the Food and Drug Administration (FDA);
  • tests that developers intend to request emergency authorization by the FDA;
  • tests that are authorized by a state; and 
  • other tests the Secretary of Health and Human Services deems appropriate.

Group health plans are required to reimburse providers for the COVID-19 testing based on their negotiated rate, if a rate was in place before the COVID-19 public health emergency. If no such negotiated rate was in place, group health plans are required to reimburse providers based on the rate published on the provider’s website (which providers are required to post). 

Telehealth and High Deductible Health Plans (HDHP)

The CARES Act allows HDHPs, which are generally prohibited from providing benefits before an individuals’ deductible is met, to provide telehealth services without a deductible, or with a deductible below the minimum deductible for an HDHP until December 31, 2021. This means that individuals can receive telehealth services with little to no deductible without jeopardizing their Health Savings Account (HSA) eligibility.

Reimbursement of over-the-counter medicine, including menstrual products

The CARES Act eliminates the requirement under Section 9003 of the ACA that only permitted HSAs to reimburse medicine or drugs that were prescribed. The Act now permits HSAs, FSAs, HRAs and Archer MSAs to provide reimbursement for over-the-counter medicine (including menstrual care products) without a prescription. This provision is effective for expenses incurred after December 31, 2019 (with no expiration).

Group health plans must provide COVID-19 preventative services without cost sharing, once available

Group health plans will be required (without cost-sharing) to provide qualifying COVID-19 preventative services (services or immunizations that are intended to prevent or mitigate COVID-19) 15 days after the United States Preventative Services Task Force or the Centers for Disease Control recommends a preventative COVID-19 treatment.


This article is meant to provide a general overview of some of the notable provisions of the CARES Act and does not include all of the assistance provided under the law. The Act also includes a variety of tax provisions aimed at assisting employers, including, but not limited to, changes to rules involving net operating losses, interest deductions, and additional tax credits. Employers should seek advice from their tax advisor or seek advice from counsel to determine how they can benefit from the new provisions under the Act.

Additional Resources

The information and materials on this blog are provided for informational purposes only and are not intended to constitute legal or tax advice. Information provided in this blog may not reflect the most current legal developments and may vary by jurisdiction. The content on this blog is for general informational purposes only and does not apply to any particular facts or circumstances. The use of this blog does not in any way establish an attorney-client relationship, nor should any such relationship be implied, and the contents do not constitute legal or tax advice. If you require legal or tax advice, please consult with a licensed attorney or tax professional in your jurisdiction. The contributing authors expressly disclaim all liability to any persons or entities with respect to any action or inaction based on the contents of this blog.

Emerald Law – Emerald is a Client Compliance Consultant for Sequoia, where she works with our clients to optimize and streamline benefits compliance. In her free time, Emerald enjoys stand-up comedy, live music and writing non-fiction.