We know this is a highly unsettled and uncertain time. We are all grasping for clarity and comfort as we self-quarantine and check in (virtually) on loved ones and colleagues. Know that our remote-first team is fully operational and here to support our clients in whatever way we can. We will be regularly compiling relevant information and keep you apprised by way of this blog and newsletters. Feel free to send us your questions and we will assemble responses into an FAQ. Let us be a resource to summarize the rapidly changing information into useful guidance.
Here is our first newsletter: news and resource bulletin.
March 27 Update: Coronavirus Aid, Relief, and Economic Security (“CARES”) Bill
On Wednesday, March 25, the Senate unanimously (I know, right!) passed the CARES Bill, a $2 trillion economic rescue plan. This Bill just (March 27) passed the House, and now needs to be signed into law by the President. Note that this information may change; we will continuously monitor the legislation and keep this blog up to date.
This CARES Act addresses economic impacts of, and otherwise responds to, the COVID-19 outbreak. The rescue plan includes a stimulus payment to individuals, expanded unemployment coverage that includes the self-employed, small business loans, pay-roll tax relief for businesses, and student loan changes.
Payments to Individuals
- Individuals: People earning up to $75,000 a year will be eligible to receive $1,200. Individuals earning up to $99,000 a year will receive a reduced amount (reduction of $5 for every $100 in income above $75,000).
- Married couples: Couples are eligible for a $2,400 check if their adjusted gross income is less than $150,000 a year. Reduced checks on a sliding scale will go out to married couples who earn up to $198,000. Married couples also will receive an additional $500 for every child.
- Head of Household: People who file tax as a “head of household” (usually single parents with children) are eligible to receive $1,200 if they earn up to $112,500 a year. Reduced checks on a sliding scale are available for heads of household earning up to $136,500 annually. Heads of household will also receive an additional $500 per child.
- Calculation: Based on your most recent tax return. If you have not filed 2019, your 2018 tax return will be used. If you have not filed your 2018 return, you can use a 2019 Social Security statement showing your income. Here is a calculator.
- Application process: None necessary. If the IRS has your bank account information, it will transfer the money via direct deposit.
- Payment: Within 3 weeks by direct deposit or check. However, in the past (2008) it took up to 8 weeks.
Unemployment Benefits Expansion
- Eligible Workers: Expanded to include partially unemployed and self-employed individuals (including individual contractors, gig workers, freelancers) that cannot work because of COVID-19 (for example, workplace being shut, or caring for a child).
- Ineligible Workers: Those who can tele-work for pay and those who receive paid or sick leave benefits.
- Amount of Benefit: Depends on each state. Eligible workers (including the self-employed) would get an extra $600 per week through the end of July on top of the state benefit. In addition, for those who need it, the Act provides an additional 13 weeks of benefits beyond what states typically allow.
- Calculation of Benefit: Benefit amounts would be calculated based on previous income
- Duration of Expanded Benefits: Expanded coverage would be available to workers who were newly eligible for unemployment benefits for weeks starting on Jan. 27, 2020 and through Dec. 31, 2020.
- How to apply: see our first newsletter for information.
Paycheck Protection Program
- Eligible businesses: any business concern, nonprofit organization, veterans organization, or Tribal business concern with 500 or fewer employees, including self-employed individuals, sole proprietor, and independent contractors (if they provide adequate documentation), as well as small business as defined the Small Business Act
- Amount: The lesser of:
- the sum of 1) average monthly payroll costs (see below) for the 1-year period ending on the date the loan was made (an alternative calculation is available for seasonal employers) multiplied by 2.5;
- any disaster loan taken out after January 31, 2020 that has been refinanced into a paycheck protection loan; or
- $10 million.
- Payroll costs include: for employees, the sum of wages, commissions, salary, or similar compensation to an employee or independent contractor, payment of a cash tip or equivalent, payment for vacation, parental, family, medical or sick leave, allowance for dismissal or separation, payment for group health care benefits, including premiums, payment of any retirement benefits, and payment of state or local tax assessed on the compensation of employees. For self-employed individuals: the sum of payments of any compensation to or income that is a wage, commission, income, net earnings from self-employment or similar compensation and that is not more than $100,000 in 1 year.
- Payroll costs exclude: the compensation of any individual employee in excess of an annual salary of $100,000, payroll taxes, any compensation of an employee whose principal place of residence is outside the U.S., or any emergency sick leave or family medical leave for which a credit is allowed under the Families First Coronavirus Relief Act passed last week.
- Allowable Use: Proceeds may be used to cover payroll, costs related to the continuation of group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums, employee salaries, commissions, mortgage obligations, rent, utilities, and any other debt service requirements.
- Other terms:
- Maximum maturity of 10 years
- Interest rate not to exceed 4%.
- The standard fees imposed of the Small Business Act are waived, and no personal guarantee is required by the business owner.
- Possible deferment of repayment of the loans for a period of at least six months, but not to exceed a year.
- The loans are fully guaranteed by the federal government through December 31, 2020 (returning to an 85% guarantee for loans greater than $150,000 after that date).
- Considerations for Eligibility:
- Whether the business was operational on Feb 15, 2020; and
- Whether the business had employees or independent contractors it paid.
- Availability: The SBA is required to enact these programs within 15 days after the Act is signed into law. Loans would be available through more than 800 existing SBA-certified lenders, including banks, credit unions, and other financial institutions.
- Loan Forgiveness: A portion of the loans may be forgiven on a tax-free basis. The amount to be forgiven is the sum of the following payments made by the borrower during the 8-week period beginning on the date of the loan: payroll costs. mortgage interest, rent, certain utility payments.
Payroll Tax Relief for Businesses
- Employers may delay paying payroll taxes due from date of enactment of the CARES Act to December 31, 2020. Half of the 2020 payroll taxes will be payable on Dec 31, 2021 and the other half on Dec 31, 2022.
- Self-employed individuals may defer only 50% of payroll taxes due from date of enactment of the CARES Act to December 31, 2020. 25% of the 2020 payroll taxes will be payable in 2021, and the other 25% in 2022.
- This deferral is not available to any business that receive a paycheck protection loan that was forgiven.
- Corporation Estimated Income Tax: Any required installment of estimated income tax shall not be due before October 15, 2020, and all such installments shall be treated as one installment due on such date.
Modifications for Net Operating Losses
- Businesses are allowed to carry back losses from 2018, 2019, and 2020 to the previous 5 years, which enables access to immediate tax refunds.
Coronavirus Related Retirement Distribution
- The Act waives the 10% penalty on coronavirus-related early distributions from 401(k)s and IRAs, which applies to distributions made at any time during 2020.
- Americans that are subject to mandatory minimum distributions from their retirement accounts are able to keep their capital invested during 2020, instead of being forced to cash out to draw on that capital without penalty.
- Until September 30, 2020, there will be automatic payment suspensions for any student loan held by the federal government. Interest will not accrue during this time.
We will continue to update this as more information becomes available.
- (March 20, 2020) – Colorado secures SBA disaster loan funds; applications are open.
- (March 24, 2020) – Covid-19 Small Business Response Resources
- (March 24, 2020) – NCBA Webinar: Managing Finances and Cash During Crisis Wed, Mar 25, 2020 11:00 AM – 12:00 PM MDT
- (March 25, 2020) – Summary of Key Provisions of Families First Coronavirus Response Act not covered in our news and resource bulletin.
- (March 25, 2020) – Cooperative Development Foundation’s Disaster Recovery Fund
- (March 25, 2020) – Colorado Public Health Order Implementing 50% Reduction in Nonessential Business In-person Work and Extreme Social Distancing – THIS HAS BEEN UPDATED (March 26, 2020)
- (March 25, 2020) – Denver Shelter in Place Order
- (March 25, 2020) – Colorado Small Business COVID 19 Response Resources
- (March 25, 2020) – Navigating Employee Leave during COVID-19 Pandemic
- (March 25, 2020) – Legal and Practical Considerations for Layoffs and Possible Alternatives
- (March 25, 2020) – Contractual Obligations during COVID-19
- (March 25, 2020) – Legislative Updates that Employers Need to Know Thursday, March 26, 2020
- (March 25, 2020) – COVID 19 and Compensation
- (March 25, 2020) – Conducting Annual Meetings during COVID 19
- (March 25, 2020) – Freelancers Resources
- (March 25, 2020) – Resources for Gig Economy Workers
- (March 25, 2020) – How Freelancers can claim Paid Sick Leave
- (March 25, 2020) – Mutual aid tool for gig workers.
- (March 25, 2020) – What the Families First Coronavirus Act means for Small Businesses and Self-Employed Individuals.
- (March 25, 2020) – COVID Co-op Update
- (March 25, 2020) – Boulder County Stay-At-Home Public Order with details on essential businesses
- (March 25, 2020) – USDA Measures for Relief for Rural Residents, Businesses, and Communities
- (March 25, 2020) – US Federation of Worker Cooperative Resource Page for Cooperatives and Small Businesses
- (March 25, 2020) – Cooperative Fund of New England Emergency Enterprise Relief Loan Program
- (March 25, 2020) – Shared Capital Emergency Loan Fund
- (March 26, 2020) – Employee Benefits and Furloughs due to Coronavirus
- (March 26, 2020) – City of Boston Resources for Small Businesses
- (March 26, 2020) – Colorado Stay At Home Order
- (March 26, 2020) – Colorado Employee Health Screening Form
- (March 26, 2020) – Colorado Business and Workplace Orders and Forms
- (March 26, 2020) – Massachusetts Emergency Order re Essential Services
- (March 26, 2020) – Massachusetts Order Prohibiting Gatherings of more than 25 people
- (March 26, 2020) – Massachusetts Guidance and Directives for Businesses and Employers
- (March 26, 2020) – New York State PAUSE Order
- (March 26, 2020) – New York State Essential Services
- (March 26, 2020) – New York State Coronavirus Fact Sheet
- (March 26, 2020) – New York State Coronavirus New Yorker Poster
- (March 26, 2020) – New York State COVID-19 Main Page
- (March 26, 2020) – Denver City COVID Information
- (March 26, 2020) – Department of Labor Summary of Employee Paid Leave Rights
- (March 26, 2020) – Employee Rights Paid Leave Notice – note the mistake: $12,000 should be $10,000
- (March 26, 2020) – COVID Tax Resource Center from Wegner CPAs
- (March 27, 2020) – SBA Express Bridge Loan Program – expedited SBA-guaranteed financing on an emergency basis for disaster-related purposes to eligible small businesses, while the small businesses apply for and await long-term financing. Only for businesses with current relationship with SBA.
- (March 27, 2020) – NCBA CLUSA COVID Resources for Cooperatives
- (March 27, 2020) – Colorado Small Business Bilingual COVID Hotline – 303-860-5881
FREQUENTLY ASKED QUESTIONS:
- What is the most recent status of the law?
A – The President signed Families First Coronavirus Response Act on March 18, 2020. The Coronavirus Aid, Relief, and Economic Security Bill has not been enacted yet.
2. Do you know of any resources to guide our transition to remote work?
A – Yes, in fact we do. This webinar will give practical tips on working remotely. This series from our friends and client, The Ready, will send out a new podcast every 48-hours on remote-work topics and guidance. This guide from our friends at nRhythm for how to operate regeneratively.
3. How are freelancers or contractors supported?
A – The Families First Coronavirus Response Act supports self-employed individuals in the following ways:
- The Act allows self-employed persons to claim a credit against their federal income-tax bill. If the credit exceeds your bill, the government will issue you a payment for the excess. The credit is allowed for sick leave as well as for family leave. To properly claim the credits, maintain whatever documentation the IRS requires in future guidance.
- See the resources listed above (15 – 19) and we will keep this blog updated with news. We are expecting the new stimulus package, agreed upon on March 25, to provide further relief.
4. Can employees get both unemployment insurance and paid sick leave?
No, it’s one or the other.
5. If someone is only working part-time due to taking care of a child, can FMLA be paid out intermittently?
6. Do you need to have a doctor’s note?
No. Employer does not have permission to ask for a doctor’s note. We would suggest to only ask whether employee has called doctor; a health care provider just needs to advise employee to stay home. Send an email to employee to document discussion, the reason for leave, how leave is calculated, and generally keep track leave taken.
7. What happens with employees’ benefits during a furlough?
‘Furlough’ is not a termination of employment, but rather a temporary, mandatory suspension of work without pay. In general, the impact of a furlough on employees’ health, retirement, and disability benefits depends on the structure of the benefit plans. Be clear that the reason for furlough is COVID-19. This affects the employees’ ability to receive unemployment benefits.
Health plans: Employers often offer health coverage to full-time employees, determined based on the number of hours worked in a prior period. Employers should firs review plan documents. If employees are required to work a minimum number of hours to stay eligible for benefits and if they will not meet those requirements during a furlough, employers could either 1) keep the employees on the plan by amending the plan; or 2) treat the furlough as a COBRA qualifying event (and consider offering COBRA coverage to the employee).
If employers choose option 1 (amending the plan to include employees during furlough), employers should consider the following:
- If employees are not paid during the furlough, think about how to handle the employee portion of the premium (usually a payroll deduction under normal circumstances). Options include employer covers employee portion, or employee pay their portion by check every month, or employee pays once work is back in full swing.
- Determination of who is eligible could cease to align with the definition of “full-time employee” under the Affordable Care Act (ACA). In terms of the ACA, coverage must be made available to 95% of the full-time employees, and if this is not met, employers may face penalties.
- Depending on the duration of the furlough, consider how a furlough in 2020 may affect the determination of full-time employee status for health coverage in the 2021 plan year.
- Coordinate any expansion with plan’s insurer, third-party administrator, or stop loss carrier.
If employers choose option 2 (treat the furlough as a COBRA qualifying event), employers should consider the following:
- The employer must issue COBRA notices to employees in order for them to allow them to receive COBRA coverage.
- Although many employers subsidize COBRA, this is not required. An employer can require an electing employee to pay up to 102% of the cost of the medical coverage in order to continue coverage under COBRA. The 102% represents the total premium (employee’s share plus the employer’s share) plus a 2% administrative fee.
- The CARES Act is not providing subsidies for COBRA.
- Note that an increase in the employee’s share of the group health plan premium due to unpaid leave or a reduction in hours is also considered to be a COBRA qualifying event.
For employees: Affordable Care Act enrollment has reopened in many states. Also, consider state health insurance exchange, Medicaid, or CHIP.
8. Could employees get unemployment insurance during a furlough?
9. Are paid sick leave and emergency family and medical leave retroactive?
No. Both these only start on April 1, 2020. Prior to April 1, 2020, employees should use accrued PTO.
10. How does paid sick and family medical leave overlap?
It can only overlap in one type of circumstance, and that is if someone stays at home to care for a child.
11. Which leave goes first?
Employers can’t force employees to choose PTO. However, remember that emergency paid sick and family leave only comes into effect on April 1, 2020.
12. Is there a tax benefit for employees providing emergency paid sick leave and emergency family and medical leave?
Yes. The credit is equal to 100% of family medical leave or sick leave pay for COVID-19-related leave. You get the credit when you file the quarterly 941 Form and if it creates a refund, you’ll get a refund payment from the IRS. The credit also includes the pro rata portion of the health insurance cost that the employer pays on the employee’s behalf during the time the employee is on paid sick leave or on the family medical leave.