CARES Act Summary | Key Provisions

published by:
TED TOAL, CFP®
September 3, 2020
CARES Act Summary

CARES Act Summary

Perhaps you had time to read the entire H.R. 748 Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, while isolated. If not, here is a summary of many of the key provisions within the CARES Act. Questions? Please be in touch

In General

  • Direct payments/recovery rebates: Most Americans can expect to receive rebates from Uncle Sam. Depending on your household income, expect up to $1,200 per adult and $500 per dependent child. To calculate your payment, the Federal government will look at your 2019 Adjusted Gross Income (AGI) if it’s available, or your 2018 AGI if it’s not. However, you’ll receive an extra 2020 tax credit if your 2020 AGI ends up lower than the figure used to calculate your rebate. This Nerd’s Eye View illustration offers an excellent overview:
CARES Act Stimulus Checks
From Michael Kitces at Nerd’sEye View; reprinted with permission.
  • Dollars set aside for industry-specific relief: Please be in touch for a more detailed discussion if your entity may be eligible for industry-specific relief (e.g., airlines, hospitals, and state/local governments).

For Employees/Plan Participants

  • Retirement plan loans and distributions: Maximum amount increased to $100,000 on up to the entire vested amount for coronavirus-related loans. Delay repayment up to a year for loans taken from March 27 through the year-end 2020.
  • Paid sick leave: Paid sick leave benefits for COVID-19 victims are described in the separate, March 18 H.R. 6201 Families First Coronavirus Response Act. Sick leave benefits are above and beyond any benefits received through the CARES Act. 

For Employers/Plan Sponsors

  • Relief for funding defined benefit plans: Due date for 2020 funding is extended to January 1, 2021. Also, the funding percentage (AFTAP) can be calculated based on your 2019 status. 
  • Relief for facilitating pre-retirement plan distributions and expanded loans: As described above for Employees/Plan Participants, employers “may rely on an employee’s certification that the employee satisfies the conditions” to be eligible for relief. The participant must self-certify in writing that they or a direct dependent was diagnosed, or the pandemic has financially impacted them. No additional evidence (such as a doctor’s release) is required.   
  • Potential extension for filing Form 5500: While the Dept. of Labor (DOL) has not yet granted an extension; the CARES Act permits the DOL to postpone this filing deadline.
  • Exclude student loan pay-down compensation: Employers can help employees pay off current educational expenses and student loan balances through year-end.  Employees may exclude up to $5,250 of either payment from their income. 
For Unemployed/Laid Off Americans
  • Increased unemployment compensation: Federal funding increases standard unemployment compensation by $600/week, and coverage is extended 13 weeks.
  • Federal funding covers the first week of unemployment: The one-week waiting period to collect benefits is waived.
  • Pandemic unemployment assistance: Unemployment coverage is extended to self-employed individuals for up to 39 weeks. Plus, the Act offers incentives for states to establish “short-time compensation programs” for semi-employed individuals.
For Students
  • Student loan payments deferred to September 30, 2020:  No interest will accrue either. Important: Voluntary payments will continue unless you explicitly pause them. Plus, the deferral period will still count toward any loan forgiveness program you’re in. So, be sure to pause payments if this applies to you, lest you pay on debt that will ultimately be forgiven.
  • Delinquent debt collection suspended through September 30, 2020: Including wage, tax refund, and other Federal benefit garnishments.
  • Employer-paid student loan repayments excluded from 2020 income: From the date of the CARES Act enactment through year-end, your employer can pay up to $5,250 toward your student debt or your current education without it counting as taxable income to you.
  • Pell Grant relief: Several clauses ease Pell Grant limits, while not eliminating them. 
For Estates/Beneficiaries
  • A break for “non-designated” beneficiaries: 2020 can be ignored when applying the 5-year Rule for “non-designated” beneficiaries with inherited retirement accounts. The 5-Year Rule effectively ends up becoming a 6-Year Rule for current non-designated beneficiaries.

There. You’re now familiar with much of the critical content of the CARES Act! That said, given the complexities involved and unprecedented current conditions, there will undoubtedly be updates, clarifications, additions, system glitches, and other adjustments to these summary points. The results could leave a wide gap between intention and reality. 

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