What do I need to know about the COVID-19 Stimulus Plan?
You may have heard that the White House and the Senate have signed a historic $2 trillion stimulus plan to help ease the economic effect of COVID-19. The Coronavirus Aid, Relief and Economic Security Act (CARES) will get directly into the hands of consumers, provide desperately needed funding for hospitals and help struggling businesses remain afloat during the worldwide pandemic.
Here’s somethings you may want to know about the CARES Act.
One of the most important elements of the bill is the plan to distribute stimulus checks. The stimulus checks have started to make their way to the consumers here in April.
The amount of aid consumers will receive will be based on household income reported in 2018 taxes (or 2019 taxes if they’ve already been filed), and will average $1,200 for each adult earning up to $75k a year and married couples earning up to $150k a year. Check amounts will begin to phase out for individuals whose income exceeds the $75k threshold, and for couples who earn more than $150k. Individuals earning more than $99k, and couples with no dependents earning more than $198k, won’t receive stimulus checks. Each household will also receive an additional $500 for every child under the age of 17 living at home.
The federal government is hoping the stimulus checks will help the economy and will provide needed assistance to the millions of Americans struggling with job loss or decreased hours due to COVID-19. The checks will provide this much needed benefit quicker than a tax credit and offer more spending freedom for consumers.
Increased unemployment benefit
The federal government has enhanced unemployment insurance. This enhancement is in addition to each state’s predetermined unemployment compensation. Additions will include four months of unemployment pay for laid-off workers, expanded coverage for employees who were furloughed, the inclusion of workers who generally do not qualify for unemployment, like “gig” workers and freelancers, and increased unemployment benefits for all eligible workers by $600 a week for four months.
Increased funding for health care
The stimulus plan will drive $150 billion into the country’s burdened health care system to help it meet the devastating demands of the pandemic. Part of the funding, $130 billion, will go directly to hospitals dealing with the shortage of masks, ventilators, beds and protective gear, and $1 billion will go to the Indian Health Service. Remaining funds will be used to fund research and treatment and to help the Strategic National Stockpile increase the supply of ventilators, masks, and other equipment for hospitals across the country.
The waiving the 10% early withdrawal penalty for distributions up to $100,000 for purposes relating to COVID-19, retroactive to Jan. 1 is a major concession. Withdrawals still will be taxed; however, taxes are spread over three years, or taxpayers have the three years to roll it back over. Also, the loan limit for 401(k) loans has increased from $50,000 to $100,000 and required minimum distributions from IRAs and 401(k) plans (at age 72) are suspended.
Federal student loan borrowers will be allowed to pause payments on their loans. Loans will be put into forbearance for at least 60 days starting March 13, 2020. No payments should be due until after Sept. 30, 2020.
Federal student loan interest rates will automatically be set to 0% for a minimum period of 60 days until Sept. 30, 2020. If borrowers continue making payments, the full amount will be applied to the principal.
Borrowers do not need to take action to suspend loan payments. In addition, collection efforts, including the garnishment of wages and the seizure of tax refunds, will be suspended on federal student loans that are in default.
Some homeowners could be able to pause payments for at least six months with the possibility of an additional six months of forbearance, according to the Act. Homeowners become eligible if they have one of the following types of mortgage loans:
- Any mortgage backed by Fannie Mae
- Any mortgage backed by Freddie Mac
- An FHA Loan
- A VA Loan
- A USDA Loan
- 184/184A Mortgage
- Missed payments would be required to be paid back; however, homeowners can work with their lenders at the end of the forbearance period to come up with a manageable payment plan. A moratorium on foreclosures for borrowers with any of the above types of government-backed loans began March 18.
State and Local government funding
State governments have been active, they are the sole elected officials authorized to enact and enforce lockdowns on their jurisdictions. State treasuries are also have been stretched to the limit to meet the flood of requests for funding from hospitals and individuals seeking unemployment benefits. Likewise, local governments have been pushed to the brink during the pandemic, with law enforcement authorities in heavily infected areas putting in long, hard hours daily ensuring the safety and health of citizens.
The CARES Act will allocate $150 billion directly to state and local governments to assist them in addressing their spending shortfalls and to fund their increased labor costs..
Small businesses are among the hardest hit by the pandemic and national shutdown to help “flatten the curve.” The stimulus plan will offer $350 billion worth of funds to these corporations to help them remain in operation. These funds take the form of loans, some of which may ultimately be forgiven.
Other parts of the CARES Act:
- Establishment of a Treasury Department special inspector general for pandemic recovery and a Pandemic Response Accountability Committee to oversee loans to businesses
- Establishment of worker protections for businesses receiving the federal loans
- Prohibition for all businesses controlled by the president, vice president, members of Congress and heads of executive departments from participating in the loan or investment programs. Their children, spouses, and other relatives are also banned from receiving benefits.
- Provisions to ban stock buybacks during the period of government assistance. There is an additional ban of a year for all companies receiving a federal loan from the CARES Act
- Prohibition for airlines from using the federal loans for CEO bonuses
As we navigate these challenging times, we encourage all members to stay home and stay safe. If you need us, USX FCU is here, so you don’t have to be.