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Legal Tracker


3/30/2020 | General

On March 27, 2020 the CARES Act, which outlines much publicized small business loans and enhanced unemployment benefits, was passed into law.  There are a few main components of the Act which are most critical for employers:  Small Business Loan programs (including tax relief, loan deferral and forgiveness), enhanced unemployment compensation (UC) benefits, and changes to employee benefits.  The key components are:

Small Business Programs

  • Deferral of employer’s share of Social Security tax
    • Amount deferred paid in two installments – December 31, 2021 and December 31, 2022
  • Payroll tax credit for 50% of wages paid to employees during COVID-19 crisis if:
    • Employer’s operations where fully or partially suspended due to COVID-19 shut down order; or
    • Employer’s gross receipts declined by more than 50% when compared to the same quarter in 2019.
    • Credit amount differs for employers over 100 employees vs. fewer than 100; up to first $10k paid per employee 3/13/20 to 12/31/20
  • Loans, Loan Forgiveness, Payment Deferrals
    • Employers with less than 500 employees
      • Includes full time, part time, and seasonal employees
      • Includes self-employed individuals
    • Loan proceeds can be used to pay for:
      • Wages, health benefits, cost of leave provided
        • Wages for employees earning up to $100k/year
      • Cash tip equivalents
      • State and local employee wage taxes
      • Mortgage interest, rent, utility bills
      • COBRA premiums
    • Loans available until 12/31/20
    • FORGIVENESS – loan amounts used for payroll costs may be forgiven if business maintains average number of monthly employees from 2/15/20 – 6/30/20
      • Employer must show that maintained same number of employees as employer had before crisis
      • Employer who laid off employees may still qualify for forgiveness if rehire employees by 4/1/20
    • Deferred payments for one year, fee waivers at loan distribution, no prepayment penalty
  • Coordination of provisions – i.e. wage tax deferral not permitted if employer obtains loan to cover payroll costs

Enhanced UC Benefits

  • Allows expanded types of workers to receive benefits including self-employed, independent contractors
  • Pays an EXTRA $600/week to each employee receiving benefits (i.e. employee receives state benefit plus $600)
  • Funds the traditional “waiting week” of benefits for states which waive that requirement for recipients
  • Provides employee with an extra 13 weeks of eligibility after state benefits run out

Employee Benefits Changes

  • Change to Emergency FMLA leave benefits (for employees who must stay home with child due to school closure)
    • Employees who are laid off and rehired are immediately eligible for leave if they worked for employer for at least 30 days before layoff
  • Tax credits for employers who pay for employee leaves
    • Employers can obtain advance tax credit to fund those leaves, rather than waiting for reimbursement on tax return
    • Regulations coming to establish procedures for obtaining tax credit funds
  • Changes to rules on 401(k) withdrawals by employees
    • Waives 10% penalty on withdrawals up to $100k if:
      • Employee, spouse, or dependent diagnosed with COVID-19; or
      • Employee experiences adverse financial consequences due to quarantine, layoff, reduced hours, or unable to obtain childcare due to COVID-19
    • Employee taxes on withdrawal can be paid over 3 years OR employee can repay the amount back into the plan over 3 years
    • Loan limits doubled to $100k or 100% of vested balance
  • Health care benefits
    • All testing costs for COVID-19 covered, including costs incurred leading to COVID-19 testing (i.e. doctor/telehealth costs)
    • High deductible plans paired with HSA accounts – telehealth services covered PRIOR to patient reaching deductible
    • Permits HSA and Flexible Spending Accounts funds to be used for over-the-counter medical products without a prescription

For those of you interested in more information on the Small Business Loan portion of the CARES Act, I recommend that you visit the U.S. Senate Committee on Small Business & Entrepreneurship’s “Small Business Owner’s Guide to the CARES Act.”  The link to that Guide is below:

Stay well, and please contact ELDI Founder Kimberly L. Russell, Esquire with any questions. Ms. Russell can be reached by email at, by telephone at (610) 941-2541, or through the Contact page at