This blog was originally published on March 30, 2020. On June 5, President Trump signed H.R. 7010 into law and this blog has been updated accordingly.
Part of Paycom’s job – especially in the thick of the current COVID-19 situation – is to keep you informed about new legislation with direct impact on employers. The Coronavirus Aid, Relief, and Economic Security (CARES) Act is certainly no exception.
Signed into federal law on March 27, the CARES Act is a $2 trillion emergency relief package with funds set aside for businesses large and small, governments state and local, individuals and hospitals.
Here are a few of the provisions most likely to be relevant to your organization.
Social Security tax deferral
A key provision of the CARES Act applies to companies liable for employer-side Social Security taxes between March 27 and Dec. 31, 2020. For these organizations, it is now possible to defer payment of these taxes, with 50% of the amount due Dec. 31, 2021, and the remainder due Dec. 31, 2022.
As originally passed, companies that received SBA PPP debt forgiveness would no longer be eligible for this deferral, but the Paycheck Protection Program Flexibility Act (PPPFA) signed into law on June 5, removed this restriction.
Tax credits
Eligible employers receive a credit for each calendar quarter, applied against their Social Security taxes. Qualifying businesses include those fully or partially suspended due to COVID-19-related government orders, or those whose gross receipts declined by more than 50% when compared to the same quarter of the previous year.
For organizations with 100 or more employees, the credit equals 50% of wages paid to employees not providing services due to suspension or revenue loss during a given quarter. For smaller organizations, the credit is 50% of all wages paid under the same circumstances. In both cases, credits are capped at $10,000 per employee.
Note, however, an across-the-board exception is in effect for businesses with loans under the SBA.
Expanded loans and debt forgiveness
The CARES Act expands qualification for SBA loans to include both private and public nonprofits, and “any other business concern” with 500 or fewer employees. Eligible businesses also qualify for debt forgiveness on a covered loan in an amount equal to the cost of maintaining payroll continuity between March 1 and June 30, 2020.
Small businesses that took out SBA loans before the CARES Act was finalized will receive loan payment assistance for a period of six months.
Other provisions
Also of potential interest to employers, the CARES Act requires all private health insurance plans to cover COVID-19 treatments and vaccines at no cost to the patient.
Employers may also make tax-free contributions of up to $5,250 per employee annually toward employee student loan debt through Jan. 1, 2021. Crucially, these contributions do not have the effect of raising the employee’s taxable gross income.
To review these and other provisions in detail, you can read the full text of the CARES Act at the U.S. Congress website.
In the meantime, Paycom will provide not only the tools and service you’ve come to expect, but also the information you need to help you understand a rapidly developing situation. Accurate workforce data, consistently reliable payroll and cloud-based communication between employees, managers and HR business partners is more important than ever.