More COVID-19 Relief Via the Coronavirus Aid, Relief, and Economic Security Act CARES Act

The third law aimed at providing relief to those affected by the coronavirus was signed into law on March 27, 2020. The $2 trillion Coronavirus Aid, Relief, and Economic Security Act (CARES Act) offers a wide variety of assistance to businesses and individuals. Here’s a look at the law’s impact on employee benefit plans.

More COVID-19 Relief Via the Coronavirus Aid, Relief, and Economic Security Act CARES Act

Key Employee Benefits Provisions From the CARES Act

Retirement/Pension Plans

The CARES Act offers assistance for both defined contribution (DC) pension plans and single employer defined benefit (DB) pension plans. The DC plan assistance is available for individuals who are diagnosed with COVID-19 or whose spouse or dependent is diagnosed with the disease as well as for those who are negatively affected financially due to quarantine, furlough, layoff, work hour reduction or who can’t work due to lack of child care. Plan sponsor implementation of the DC plan provisions appears to be optional rather than mandatory.

Pension and retirement plan provisions include:

  • No required minimum distributions (RMDs) from employer-sponsored DC retirement accounts, such as 401(k) plans or individual retirement accounts (IRAs), in calendar year 2020
  • Creation of a new type of early distribution (up to $100,000) from DC retirement accounts. These distributions are not subject to the 10% early withdrawal penalty, if withdrawals are taken in the 2020 calendar year. Also, the typical 20% federal income tax withholding does not apply, because these are not eligible rollover distributions. In addition, participants may restore money to retirement accounts or stretch out income taxes owed on early distributions over three years.
  • Increase in the maximum amount allowed for retirement plan loans, up from $50,000 to $100,000 for 180 days after the enactment date
  • An extra year for employees to finish paying back a loan from a retirement account if the loan was due on or before December 31, 2020
  • Delay of required 2020 minimum contributions to a single employer DB pension plan until January 1, 2021. These delayed contributions will continue to accrue interest, however.
  • Option for a single employer DB pension plan to use its funding status in 2019 when determining whether it imposes benefit distribution restrictions typically imposed when a funding status falls below 80%.

[Upcoming Webcast: Understanding the Families First Coronavirus Response Act (FFCRA) of 2020 | March 31, 2020 (For Multiemployer Plan Sponsors]

Health Care and Other Benefit Plans

The CARES Act provides relief through health care benefit plans, employee leave programs and educational assistance programs.

Specifically, the law:

  • Amends and expands coverage of coronavirus testing included in the Families First Coronavirus Response Act (FFCRA) to include coverage of coronavirus testing services provided in an out-of-network setting at the rate the provider must publicly post on its website or at a lower rate negotiated with the provider
  • Requires coverage of COVID-19 vaccinations (once available) at no cost to the participant (Non-grandfathered health plans as defined by the Affordable Care Act (ACA) are excluded.)
  • Allows telehealth services to be covered under a high deductible health plan (HDHP) before the deductible is met for plan years beginning before 2022
  • Repeals exclusion for coverage of over-the-counter drugs with no prescription for health savings accounts (HSAs), health reimbursement arrangements (HRAs), health flexible spending accounts (FSAs) and Archer medical savings accounts (MSAs) and expands coverage to include menstrual care products as of January 1, 2020
  • Expands educational assistance programs to allow employers to contribute up to $5,250 for each employee toward tuition and textbook assistance combined with student loan repayment assistance, tax-free, through December 31, 2020
  • Allows employers to potentially receive tax credit advances for both emergency paid sick leave and emergency FMLA leave, capped at the same amount as the tax credits specified in FFCRA
  • Makes emergency FMLA leave accessible to rehired workers if they were laid off on or after March 1, 2020 and worked for at least 30 days of the last 60 calendar days before the layoff

[Upcoming Webcast: Benefits Together: Perspectives on Pandemic Response | April 2, 2020]

Other Key Provisions From the CARES Act

There are many other provisions of the CARES Act related to compensation and taxation that are notable, including:

  • Direct tax-free payments to individuals and families in amounts of $1,200 per adult and $500 per child. Payments are adjusted down for those individuals with adjusted gross incomes over $75,000 (higher thresholds for couples and families).
  • Federal loans for employers in distressed industries, including cities and states, provided limits on executive compensation and benefits are followed and the cash loaned is not used for stock buybacks or dividends
  • Aid specifically for the airline industry in the form of tax reprieves, grants and loans. A large portion of the aid must be used for the continuation of wages and benefits for employees.
  • Forgivable loans for small businesses and nonprofits
  • Aid for the overburdened health care industry

[Related Reading: Law Enacted to Enable Free Coronavirus Testing and Expand Paid Leave: Families First Coronavirus Response Act]

  • Extra unemployment insurance payments of $600 per week on top of current state unemployment benefits through July 2020. If individuals are still unemployed when state benefits run out, the federal government will pay unemployment benefits of $600 per week for up to 13 additional weeks.
  • Creation of a temporary, federally funded unemployment assistance program to provide unemployment benefits to self-employed, independent contractors, gig and part-time workers that are out of work because of COVID-19
  • Funding to support states that set up short-time compensation programs for employers that reduce work hours instead of laying off workers; results in a “work share” arrangement where employees receive partial unemployment benefits to make up for the work hours reduction
  • Refundable payroll tax credit of 50% of eligible wages (including compensation and health care benefits) paid each quarter by distressed employers up to $5,000 per worker; effective March 13 through December 31, 2020
  • Deferral of employer share of employment tax until 2021 and 2022
  • Suspension of all federal student loan payments interest-free for six months.

Additional government guidance is expected for these provisions. Stay tunedThe International Foundation will bring you additional COVID-19 updates.

Coronavirus Resources

Coronavirus and the Workplace

Learn more about the coronavirus and the workplace, including the latest guidance on the CARES Act:


Kelli Kolsrud, CEBS
Director, Research and Publications at the International Foundation

The latest from Word on Benefits:

Kelli Kolsrud, CEBS

Director, Research and Publications at the International Foundation Favorite Foundation Service: Personalized research assistance provided by the Foundation’s information specialists Benefits Related Topics That Interest Her Most: Health care benefits (they’re especially interesting post-ACA!); work-life benefits Favorite Foundation Conference Moment: Meeting and spending quality time with Olympic gold medalist Scott Hamilton at the 59th U.S. Annual Conference. Personal Insight: Kelli can connect you to the facts on nearly any benefits topic in the US or Canada, but when she gets away from her work, her focus often shifts to England. Favorite free time activities include watching Downton Abbey and immersing herself in Jane Austen.

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