Coronavirus (COVID-19) has impacted the way we work, live, and interact with each other. As a financial wellness benefit provider, we are acutely aware of the impact it has had on the wallets of working Americans as well.
The federal government is responding to these challenges through a bipartisan economic relief plan, which includes stimulus payments to individuals, expanded unemployment coverage, student loan payment holidays, special retirement account rules, and more.
This guide provides an overview of the government benefits and relief that is available to American households. Whether you have recently experienced income loss, or are simply looking to make sense of resources available during this time of uncertainty, we hope this guide will help you make informed decisions about your financial situation.
What you need to know:
- Stimulus payments
- Paid leave
- Family and Medical Leave Act (FMLA)
- Unemployment insurance
- Other types of relief
Last updated: April 8, 2020
We will keep this resource up to date with general information, but everyone’s individual situation is different. Please contact your HR team for questions specific to your employment, or consult a financial advisor regarding your personal financial situation.
What to expect from federal stimulus payments
As part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, direct stimulus payments will be made to individuals to address the economic impacts of the COVID-19 outbreak. Individuals who have an adjusted gross income of $75,000 or less ($150,000 for those filing jointly) will get $1,200 each, with an additional $500 for each eligible child. Above that income level, benefits will reduce on a sliding scale, until zero at $99,000 ($198,000 for those filing jointly).
Income levels will be based off of 2019 income tax returns for those who have already filed. Returns for 2018 will be used for those who haven’t. Those who made too much to qualify in those years, but will experience income loss in 2020 would receive a tax credit when they file their return next year.
What we don’t know yet:
- When and how people will receive payments. According to Treasury Secretary Steven Mnuchin, most Americans should expect to get their payments by April 17 via direct deposit. It is still unclear how Americans who do not have access to a bank account will receive their payment. 6% of people in the U.S. are unbanked, according to data from the U.S. Financial Health Pulse, and that number jumps up to 17% when looking at those who make less than $30,000 a year. That’s a total of 12 million people.
- How the government will protect the most vulnerable. People making less than $12,200 a year do not need to file income taxes, and the U.S. Treasury Department will use people’s most recent tax return to determine who is eligible for aid. Other populations likely to be hit the hardest by the economic crisis are the homeless, college students, and unemployed Americans. These populations are often harder to reach, and are among those most likely to fall through the cracks.
Who and what the new paid leave law covers
The Families First Coronavirus Response Act gives many American workers up to 10 days of paid leave if they need to take time off because of the coronavirus pandemic through the end of the year.
Most employees at small and midsize companies–between 50 and 500 employees–as well as government employees, can get paid leave as long as they’ve been employed at least 30 days, and one or more of the following scenarios applies to them:
- Subject to a government or health care provider order to be quarantined or self-isolate
- Have a child out of school or without childcare due to COVID-19
- Caretaker for someone with COVID-19
- Use the leave to get tested for COVID-19
What we don’t know yet:
- How employees who work for very small or large businesses will be impacted. This does not apply to all American workers, as employers with less than 50 employees can claim an exemption. While many workers at big businesses have access to paid sick leave, their low-wage workers–especially at retailers, restaurant chains and hotels–are the least likely to be covered.
- Where freelancers and gig workers fit in. People who are self-employed — including gig workers — can also receive paid leave by claiming their average daily income as a tax credit.
COVID-19 and the Family and Medical Leave Act (FMLA)
In addition to the new paid leave law, COVID-19 has been added as a qualifying reason under FMLA, guaranteeing eligible employees twelve weeks of job-protected leave. To be eligible, an employee must have worked for their employer for at least 12 months, at a location where at least 50 employees are employed by the employer within 75 miles.
Keep in mind:
The first ten days of leave may be unpaid or use existing paid time off or other benefits, including the new emergency paid time off. The remaining days must be paid by the employer at two-thirds of normal pay.
You can find more information from the Department of Labor, which has posted an FAQ.
What to know about unemployment insurance
Many employers have found themselves in the unfortunate position of having to lay off workers amidst the coronavirus pandemic. If that applies to you, here’s what you should know about unemployment insurance.
Unemployment insurance varies by state. Each state government sets their own eligibility requirements and benefits, which are generally calculated as a percentage of your income over the past year.
Unemployment generally replaces about 45 percent of the income you were previously earning and most states pay benefits for 26 weeks, but some cover as few as 12 weeks. As part of the federal government’s unemployment expansion, eligible workers will get an extra $600 per week on top of their state benefit to help further offset lost income. This does not affect eligibility for other benefits like Medicaid, CHIP, SNAP, and housing assistance.
Keep in mind:
If you’re quarantined or have been furloughed, but expect to return to your job eventually, you may still be eligible for unemployment benefits. You can find more details about your state’s unemployment benefits through CareerOneStop, a portal sponsored by the US Department of Labor.
Federal student loans
The Coronavirus Aid, Relief, and Economic Security (CARES) Act invokes an automatic six month payment holiday on federal student loans. Borrowers will not have to make payments to their loans through September 30, and interest will not accrue during this time, which means that these borrowers will not see their balances grow as the result of not making payments.
If an employer offers student loan repayment as an employee benefit, they can offer up to $5,250 of assistance between when the bill was signed and the end of 2020, without that money counting as part of the employee’s income.
Keep in mind:
While the CARES Act only covers federal student loans, if you have an outstanding loan through a private lender, the Consumer Financial Protection Bureau recommends contacting your servicer to find out what options are available to you. Many private lenders offer their own reduced or deferred payment options.
New rules on access to retirement savings
In addition to the benefits described above, the Coronavirus Aid, Relief, and Economic Security (CARES) Act establishes special rules to waive penalties on some retirement plan withdrawals.
Required minimum distributions (RMDs) from some retirement accounts for 2020 have been waived. This means individuals of retirement age will not be forced to take mandatory withdrawals from accounts that may have fallen in value. In addition to this, through the end of 2020 you’ll be able to take a coronavirus-related distribution of up to $100,000 from your retirement plan or IRA without the 10% early withdrawal penalty.
CARES also relaxes the rules around retirement-plan loans, allowing you to borrow up to $100,000 from your 401(k)–double the amount you can normally take–and defer repayments for one year.
To qualify fo these benefits, an individual must:
- Be diagnosed with COVID-19
- Have a spouse or dependent is diagnosed with COVID-19
- Experience adverse financial consequences as a result of being quarantined, being furloughed or laid off or having work hours reduced due to such virus or disease, being unable to work due to lack of child care due to such virus or disease, closing or reducing hours of a business owned or operated by the individual due to such virus or disease, or other factors as determined by the Secretary of the Treasury, or the Secretary’s delegate
Keep in mind:
While you may be able to withdraw some money from your retirement account penalty-free, experts recommend avoiding dipping into your 401(k) or IRA account if you are able. Taking money out of these accounts may set back your future financial goals, since the funds won’t have the chance to grow over time–essentially borrowing from your financial future.
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