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  • Marlene

Understanding Key Components Of The New COVID19 Federal Stimulus Law

On Friday March 27, 2020 President Trump signed into law the “Coronavirus Aid, Relief, and Economic Security Act” (CARES Act). The Act provides a host of provisions to help with funding and support to the many Americans affected by COVID19 and the associated shutdowns and job losses. These include a stimulus payment to be made directly to individual Americans, expanded unemployment compensation, funding support for small businesses, and many other provisions (the law is 880 pages!).

In this blog post, we’ll cover the expanded unemployment, funding for small businesses, and individual stimulus checks focusing both on what we know, and what we don’t know yet. It’s a long one but we wanted to make sure you had the information all at once. Feel free to scroll down to find the section(s) applicable to you.

If you’re having trouble sleeping, or are interested in learning more about the law’s other provisions, such as student loan payment suspensions, check it out: Here.

Expanded Unemployment Compensation

The Act shakes up the traditional unemployment system by expanding who is eligible, adding additional funds for weekly payments, and provides specific coverage related to situations created by the COVID19 pandemic. However, the details of how and when this will be ready to go is still in question. Let’s break it down.

EXPANDED ELIGIBILITY: The law provides benefits for those traditionally eligible for unemployment as well as expands eligibility to include self-employed, 1099 (contractor or “gig” workers), freelancers, and part time employees (though PA already provided some benefits for part-time employees).

We’ll get to what traditionally eligible employees get under the expanded bill in a minute but let’s focus on the criteria for those newly eligible. Under §2102 “Pandemic Unemployment Assistance,” the Act details that unemployment coverage will now include individual not eligible for regular unemployment compensation, extended benefits under State or Federal law, or pandemic emergency un-employment compensation under section 2017, including an individual who has exhausted all rights to regular employment or extended benefits (NOTE-if you own a business and pay yourself as a W-2 employee you MAY already be eligible benefits in PA prior to this law-though it depends and it may be best to wait until the new guidance comes up that will probably make it easier). If you are one of these individuals then to get benefits you must indicate such and provide self-certification that:

  • You are otherwise able to work and available for work within the meaning of applicable State law, except the individual is unemployed, partially unemployed, or unable or unavailable to work because:

    • You have been diagnosed with COVID19 or is experiencing symptoms and seeking a diagnosis;

    • A household member has been diagnosed with COVID19;

    • You are providing care for a family or household member with COVID19;

    • You are having to take care of a child or other person who is unable to attend school, daycare, or another care facility due to the COVID19 public health emergency;

    • You are unable to reach the place of employment because of a quarantine due to the COVID19 public health emergency (this likely includes shut down orders);

    • You have been unable to go to work because a health care provider has advised a self-quarantine;

    • You were supposed to begin employment and now do not have a job or cannot reach said job because of the COVID19 public health employment;

    • You have become the breadwinner or major support for a household because the head of household has died from COVID19

    • You have had to quit your job as a direct result of COVID19

    • Your place of employment has closed due to the COVID19 public health emergency;

    • You meet any other criteria established by the Secretary of Labor for unemployment assistance (yet to be released)

    • You are self-employed, is seeking part-time employment, do not have sufficient work history, or otherwise would not qualify for unemployment or extended benefits under Federal or PA law.

The provision will not include those who can telework or work remotely with pay or those who are receiving sick leave or other paid leave benefits.

COVERAGE: Coverage will apply to any eligible person while the person is unemployed, partially employed, or unable to work for the weeks of such unemployment. Coverage will apply to anyone falls under such definitions (and meets the normal and expanded qualifications) and has experienced such lack of, or reduced, employment beginning on or after January 27, 2020 (so unlike the FMLA and FSLA amendments, this law backdates) and ending on or before December 31, 2020 (that is when the law expires). Individuals are entitled for a max of 39 weeks of payment unless extended by law. This will not include any weeks in which an individual is able to work for their employer.

Coverage payments will be determined based on Pennsylvania’s normal unemployment calculations as all assistance will be run through the States. For self-employed individuals, the State will calculate benefits based on a special formula found: Here. However, it still depends on Pennsylvania’s interpretation and implementation. This is what we don’t know yet.

Pennsylvania will need to roll out an updated application and guidelines for these calculations. Pennsylvania does seem to be leaning towards strictly following the Federal instructions and guidelines, which also will still have to be issued by the Secretary of Labor. So the good news is, if you are self-employed, a freelancer, or otherwise not eligible, you are likely eligible now, but it maybe a little bit until we know how this will be implemented through the PA system.

ADDITIONAL MONEY. The other change to unemployment is that for those who were previously eligible, and now those who are eligible under this new law, will be entitled to an additional $600/week on top of their normal State benefits. It also extends all unemployment benefits by 13 weeks (used to be capped at 26 weeks, now you can receive up to 39 weeks).

All changes are in addition to the changes and waivers implemented by PA in the last few weeks, such as the removal of the one-week waiting period and work search requirement.

Small Business Assistance

The Act recognizes that businesses, especially small businesses, have been severely impacted by the pandemic and related shut down and stay at home orders. To help provide assistance in dealing with these challenges and losses, the Act provides for some tax credits and loans.

EMPLOYEE RETENTION PAYROLL CREDIT. Under Section 2301 “Employee Retention Credit for Employers Subject to Closure Due to Covid-19”, employers will be eligible to receive a refundable payroll tax credit for 50% of wages paid by employers to employees during the COVID19 crisis to help encourage employers to keep on employees but balance the cost. The credit is available to employers whose operations were fully or partially suspended due to a shut down order or whose gross receipts declined by more than 50% compared to last year’s same quarter (so if you compared Q1 2019 to Q1 2020 and the business made half Q1 2019’s gross receipts or less in Q1 2020). The credit is based on qualified wages paid to the employee. The credit is provided for the first $10,000 of compensation, including health benefits, paid to an eligible employee. The credit is provided for wages paid or incurred from March 13, 2020 through December 31, 2020.

DELAY OF PAYROLL TAXES. Under Section 2302, “Delay of Payment of Employer Payroll Taxes,” employers and self-employed individuals are able to defer payment of the employer share of the Social Security tax that would normally be due to the Federal government. This is normally a 6.2 percent tax on all employee wages. Under the Act, the deferred employment tax will be paid over the following two years, with half needing to be paid by December 31, 2021 and the other half by December 31, 2022.

ECONOMIC INJURY DISASTER LOANS PROGRAM. The Act also expands the Economic Injury Disaster Loans program. These loans existed prior to the law to help businesses in events of disaster, however, the CARES Act provides changes and expansions that make the loans more accessible to a wider variety of businesses. The loans are provided through the Small Business Administration (SBA) and their local offices and the program allows for loans up to $2 million dollars, 30 year payment terms, 3.75% interest rates for small businesses and 2.75% for non-profits, and the first month’s payments are deferred a full year from the date of the loan contract.

The CARES Act builds off of these basic provisions to make it so the loans can be approved by the SBA based solely on an applicant’s credit score instead of repayment ability and loans smaller than $200,000 can be approved without a personal guarantee or collateral other than a general security interest. The Act also makes it so borrowers can receive $10,000 in an emergency grant cash advance that can be forgiven instead of paid back if the funds are spent on maintaining payroll, increased costs due to supply chain disruption, mortgage or lease payments or repaying obligations that the business can no longer carry out due to revenue loss.

Finally, the Act expands access to the program to sole proprietors, independent contractors (which includes freelancers and 1099s!), as well as ALL non-profits.

The $10,000 cash advances are designed to be the most easily accessible and will allow for “quick” (it is still the Federal government) access to funds for business in great need. Importantly, the funds are available even if you have other lines of credit or emergency loans.

PAYCHECK PROTECTION PROGRAM LOAN GUARANTEE. The CARES Act paycheck protection program loan guarantee makes it so small-business loans made through approved local lenders are backed by the SBA. This program is offered to small businesses with fewer than 500 employees, select types of businesses with less than 1,500 employees, 501(c)(3) non-profits with fewer than 500 workers and some veterans organizations. It is also offered to self-employed, sole proprietors, freelance, and other 1099 workers. All eligible businesses or non-profits have to have been in operation prior to February 15, 2020.

The loan amounts can be up to the lesser of $10 million or 2.5x the average monthly payroll costs, including wages for employees making under $100,000 as well as paid sick leave, healthcare, and other employee benefit expenses paid during the one-year period prior to the loan date. The maximum interest rate is 4%. And like the Economic Injury loan, no personal guarantee or collateral is required. Payments are deferred up to 6 to 12 months and part of this loan may be forgiven and not counted as income if it’s spent during the first eight weeks after the loan date on operating expenses.

Also like the Economic Injury loan, the loans can be forgiven if the funds are used for payroll costs (but not for employees with compensation greater than $100,000), rent pursuant to a lease in force before February 15, 2020, utilities (electricity, gas, water, transport, telephone, or internet) which began before February 15, 2020, and/or health care costs. However, in order for the amounts to be forgiven you have to have the same number of employees from February 15, 2020 to June 30, 2020 as you did during that same period the previous year (unless you rehire any employee previously laid off during this time or restore any decreased wages or hours).

If you have less employees (which will be likely for a lot of businesses unfortunately) then the forgiveness amount is reduced. There are also other reasons the forgiveness amount may be reduced and things to think about before applying so check out this guide and forgiveness calculation put out by the US Chamber of Commerce: Here.

We recommend reaching out to your locally certified SBA organizations for more information on these loans.

Individual Stimulus Checks

Ok, last but certainly not least, the personal stimulus checks. These are one-time payments to individuals and married couples to help provide additional funds during this trying time. The payments will be based on your 2019 income tax return (2018 tax return if not filed 2019 yet). The max a single person can get is $1,200, although some would get less. For every child age 16 or under, the family would receive an additional $500.

Single adults with Social Security numbers who are United States residents (including permanent residents) and have an adjusted gross income of $75,000 or less would get the full $1,200 amount. Married couples with no children earning $150,000 or less would receive a total of $2,400. Someone filing as head of household would get the full payment if they earn $112,500 or less. Above those income figures, the payment decreases until it stops altogether for single people earning $99,000 or married couple earning $198,000.

There is no application or additional filing you need to do if the IRS has your information. The money is also not considered taxable income, so you won’t have to pay income tax on it when you file for your 2020 taxes. The Treasury Secretary has indicated that payments should be sent within three weeks.


Whew! That was a lot and there are other specific details and components of the bill, but these are the highlights for individuals, small businesses, and unemployment. Hope this was helpful and good luck out there!


DISCLAIMER: This blog post is meant for informational purposes only and does not constitute specific legal advice or create an attorney-client relationship. Readers should discuss their specific situation with an attorney.

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