Authored Articles & Publications Jul 13, 2020

Best in Law: COVID-19 Federal Legislation for Businesses

BB&K's Allison De Tal Writes About FFCRA and CARES Act for the Southern California Newspaper Group

In response to the COVID-19 pandemic, the federal government passed three phases of legislation and a slew of administrative guidance.

Phase 1 primarily provides emergency funding to various federal agencies. But provisions in Phase 2 — known as the Families First Coronavirus Response Act, or FFCRA — and Phase 3 — the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act — benefit businesses and individuals.

Here are key provisions of the FFCRA and CARES Act.

Expansion of the Family Medical Leave Act: Generally and until Dec. 31, employees working for an employer with less than 500 employees for at least 30 calendar days are eligible for additional FMLA leave if he or she cannot work because he or she is required to care for a child due to certain COVID-19 related circumstances. The additional FMLA leave period is up to 10 weeks.

Emergency paid sick leave: Until Dec. 31, employers with less than 500 employees are generally required to provide up to 10-days — or 80 hours — of paid emergency sick leave if an employee cannot work due to certain COVID-19 related circumstances.

Circumstances include being subject to a government quarantine order and caring for a child because the child’s child care provider is unavailable due to COVID-19 precautions.

Tax credits for businesses providing expanded paid family leave and paid emergency sick leave: Employers required to make expanded FMLA or emergency sick leave payments are generally entitled to a refundable credit against the employer portion of Social Security taxes for such payments.

Employers are to deduct the credit they are entitled to from the amounts withheld from employees that would normally be deposited with the IRS.

Delayed payment of employer payroll taxes: All employers may defer the payment of their share of payroll taxes otherwise required to be deposited from March 27 until Dec. 31.

To avoid penalties, half of the deferred amounts must be paid by Dec. 31, 2021, and the remainder by Dec. 31, 2022.

Individual tax credit for 2020: For 2020, eligible individuals are allowed a refundable income tax credit of up to $1,200 (or $2,400 for those filing jointly), plus $500 for each qualifying child for the child tax credit.

Those who would have qualified as eligible individuals in 2019 are entitled to an automatic advance refund equal to the amount of the credit that would have been allowed had it been in effect in 2019.

Waiver of an additional 10% tax for COVID-19-related retirement plan distributions: Employers may amend retirement plans to allow employees affected by COVID-19 to withdraw up to the lesser of the plan balance or $100,000 during 2020 without incurring the additional 10% tax normally imposed on withdrawals by those under the age 59 ½.

Employees that repay the amount to the plan within three years will not have to recognize the withdrawn amount for income tax purposes.

Loan flexibility for qualified retirement plans: Before Sept. 23, qualified employer plans may be amended to allow for loans of up to the lesser of the employee’s vested accrued benefit or $100,000 for those affected by COVID-19.

Participants affected by COVID-19 with outstanding loans may be allowed to defer payments due between March 27 and Dec. 31, for up to 1 year.

Waiver of required minimum distributions: Participants in defined contribution plans—like a 401(k)—and IRA owners are required to take minimum distributions each year after reaching a certain age (70 ½ or 72 depending on the distribution date).

These required minimum distributions are waived for 2020. Participants and IRA owners who took required minimum distributions in 2020 before the CARES Act was enacted may rollover such amounts or repay them until Aug. 31.

These are only some of the provisions in the FFCRA and CARES Act that benefit individuals and businesses. State and local laws and orders also provide additional relief. Finally, businesses and individuals should be prepared for evolving guidance as the pandemic continues.

This article first appeared in Daily Bulletin and other Southern California Newspaper Group publications online on July 12, 2020. Republished with permission.

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