Key Provisions of the CARES Act

Recently, the $2 trillion “Coronavirus Aid, Relief, and Economic Security” (“CARES”) Act was signed into law. The CARES Act is designed to help those most impacted by the COVID-19 pandemic, while also providing key provisions that may benefit retirees.

To put this monumental legislation in perspective, Congress earmarked $800 billion for the Economic Stimulus Act of 2008 during the financial crisis, not even half of the amount earmarked for the CARES Act.

The CARES Act has far-reaching implications for many. Here are the most important provisions to keep in mind:

Stimulus Check Details. Americans can expect a one-time direct payment of up to $1,200 for individuals (or $2,400 for married couples) with an additional $500 per child under age 17. These payments are based on the 2019 tax returns for those who have filed them and 2018 information if they have not. The amount is reduced if an individual makes more than $75,000 or a couple makes more than $150,000. Those who make more than $99,000 as an individual (or $198,000 as a couple) will not receive a payment. There is no set date for when these stimulus checks will arrive. If using direct deposit, it could be as soon as mid-April. If not using direct deposit the check could take much longer to arrive to you.

Business Owner Relief. The act also allocates $500 billion for loans, loan guarantees, or investments to businesses, states, and municipalities. This includes three different key loans. The first is the Economic Injury Disaster Loan and Emergency Economic Injury Grants. This is a $10,000 grant as a quick infusion of cash for the company. There is also the Payroll Protection Program and the Small Business Debt Relief Program, which provide much larger grants to small businesses in order to help them avoid laying off employees or getting behind on any loan payments.

Your Inherited Qualified Retirement Accounts. People who have inherited 401(k)s or Individual Retirement Accounts can suspend distributions in 2020. Required distributions don’t apply to people with Roth IRAs; although, they do apply to investors who inherit Roth accounts.

RMDs Suspended. The CARES Act suspends the minimum required distributions most people must take from 401(k)s and IRAs in 2020. In 2009, Congress passed a similar rule, which gave retirees some flexibility when considering distributions.

Withdrawal Penalties. Account owners can take a distribution of up to $100,000 from their retirement plan or IRA in 2020, without the 10-percent early withdrawal penalty that normally applies to money taken out before age 59½. But remember, you still owe the tax. Be weary taking money out of your retirement savings though. Just because you can, does not always mean you should. Before taking any distribution from your 401(k) plan or IRA you should speak to a financial advisor.

Many businesses and individuals are struggling with the realities that COVID-19 has brought to our communities. The CARES Act, however, may provide some much-needed relief. Please do not hesitate to reach out to us if you have any questions regarding how the CARES Act could help you.