Monday, November 29, 2021

The CARES Act Explained

Ask the CFP Professional

“Change, like sunshine, can be a friend or a foe, a blessing or a curse, a dawn or a dusk.” ~ William Arthur Ward (1921-1994).

Question: Can you explain the CARES Act and how it will help individuals and businesses? 

Answer: The facts, as known on April 6th when this is being written, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was passed on March 27th to lessen the economic hardship for the country, small business and individuals resulting from COVID-19.

The pandemic has affected life in ways we couldn’t imagine, the deadly virus and efforts to contain the spread have prompted a significant government response. The legislation is intended to combat the economic risks associated with a slowdown in individual spending and helps businesses of all sizes avoid closures and employee layoffs. It also provides necessary funds to support states and municipalities. 

The $2+ trillion emergency fiscal stimulus package is intended to mitigate some of the economic effects of dealing with COVID-19. There are two primary areas of support being Individuals and Small Businesses as complied by Raymond James.

Here’s a look at some of the key provisions.

  1. A Check – Based on income and family makeup, most Americans can expect to receive $1,200 individually ($2,400 for joint filers) and $500 per dependent. Amounts phase out for those who reported adjusted gross incomes over $75,000 for individuals and $150,000 for joint filers in 2018 or 2019.
  2. A Buffer – The CARES Act eliminates the 10% early withdrawal penalty for coronavirus-related distributions from retirement accounts. Withdrawn amounts can be repaid to the plan over the next 3 years. In addition, required minimum distributions (RMDs) are waived for 2020. Investors who have already taken an RMD for 2020 have options that may include returning the amount or rolling it over, as long as the distribution was not made from a beneficiary IRA. 
  3. Support For Small Businesses – In the form of more than $350 billion, including forgivable loans (up to $10 million) to help keep the business afloat, a paycheck protection plan and grants. 
  4. Expanded Unemployment Benefits – Unlimited funding to provide workers laid off due to COVID-19 an additional $600 a week, in addition to state benefits for up to four months. This includes relief for self-employed individuals, furloughed employees and gig economy workers who have lost work during the pandemic. 
  5. Fortified Healthcare – $100 billion is allocated to hospitals and other health providers to help offset costs and provide relief. In addition, the legislation provides funding for numerous other areas including state and local COVID-19 response measures, an increase to the national stockpile for medicine, protective equipment, medical supplies and additional FEMA disaster relief funding. 
  6. Enhanced Education – $30 billion to bolster state education and school funding, as well as the deferral of federal student loan payments through the end of September. 
  7. State and Local Government Funding – $150+ billion allocated to “state stabilization funds” to combat the pandemic and economic crisis and provide supplemental funding for joint state-federal programs like unemployment compensation and Medicaid. 
  8. Other Provisions – A $500 billion buffer for impacted and distressed industries and general economic support, with loan guarantees for medium to large businesses, as well as states and municipalities. This includes specific provisions for airlines, air cargo and national security organizations. The Economic Stabilization Fund is intended to provide loan support for businesses/nonprofits between 500 and 10,000 employees with the interest rate capped at 2% and forbearance on federally backed loans for 60 days.

What’s Next? 

Treasury Secretary Steven Mnuchin has targeted early April to deliver the funds. Discussions are starting in D.C. around a possible next phase of economic relief, although it’s just talk for now. If you’d like more details and to delve into more specifics, please feel free to contact us; we’re here to help. In the meantime, stay healthy. 

While we are familiar with the tax provisions of the issues presented herein, as financial advisors of Raymond James, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional Investing involves risk, and investors may incur a profit or a loss. There is no assurance any of the trends mentioned will continue or that any of the forecasts mentioned will occur. Economic and market conditions are subject to change. Investing involves risk including the possible loss of capital. Past performance may not be indicative of future results. The opinions expressed are those of the writer as of April 1, 2020, but not necessarily those of Raymond James and Associates, and are subject to change at any time based on market conditions and other factors. “Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.” This article provided by Darcie Guerin, CFP®, Vice President, Investments & Branch Manager of Raymond James & Associates, Inc. Member New York Stock Exchange/SIPC 606 Bald Eagle Dr. Suite 401, Marco Island, FL 34145. She may be reached at 239-389-1041, email Website:

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