COVID-19 Policy Update — What the Coronavirus Aid, Relief, and Economic Security (CARES) Act Means for You

Candace A. Bankovich

On March 27, 2020, the President signed into law the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act” or “Act”) which provides support to both individuals and businesses.  Below are some frequently asked questions and answers with links to resources.


Title I of the CARES Act contains a provision that provides assistance for small businesses trying to meet payroll during the COVID-19 pandemic; this portion of the Act is referred to as the Paycheck Protection Program.

Q: What benefits does the Paycheck Protection Program offer?
A: It dedicates up to $349 billion in potentially forgivable loans to small businesses to assist in meeting payroll costs (including medical and other benefits) mortgage interest, rent, and utilities incurred during the 8-week period beginning on the date of the origination of the loan.

Q: Who qualifies for a loan under this program?
A: All employers, including nonprofits, with 500 or fewer employees are eligible.

Q: How much is available for each borrower?
A: A business can borrow up to 2.5 times the average total monthly payroll costs it incurred during the 1-year period before the date on which the loan is made.

Example: During the prior 1-year, the business’s average monthly payroll costs were $950,000.  Under this program, the business can borrow up to $2,375,000, that is, 2.5 X $950,000.

Q: Does the business have to pay the loan back?
A: It is possible that all of the loan may be forgiven, depending on how the funds are used.  Here is a breakdown on the requirements for loan forgiveness:

    • The business may obtain forgiveness up to an amount equal to the sum of payments made for payroll costs, mortgage obligations, and utilities.
    • If the business reduces the number of employees after origination of the loan, the amount that may be forgiven will be proportionately reduced. To determine whether the business has reduced employee headcount, the Act looks back at a period from February 15, 2019 to June 30, 2019.  If the average monthly number of employees for the 8-week period beginning on the date of the loan is less than the average monthly number of employees from February 15, 2019 to June 30, 2019, then then the amount of the loan forgiven will be reduced proportionately.Example: From February 15, 2019 to June 30, 2019, the employer had a monthly average of 100 employees.  The employer obtains a loan on April 3, 2020.  For the next 8 weeks, the employer has a monthly average of 95 employees.  If the employee spent $1,000,000 on payroll costs, mortgage, rent, and utilities, then only $950,000 may be forgiven; that is the amount that may be forgiven is 95/100 X $1,000,000.
    • If the employer reduces employee compensation, this reduction may result in a reduction in the amount forgiven. This applies to employees who made no more than $100,000 on an annualized basis during 2019.  For these employees, a baseline is established by looking at the employee’s total salary during the most recent full quarter before the covered period.  The employer may reduce compensation up to 25% of that amount during 8-week period following origination of the loan without affecting loan forgiveness.  Any reduction in excess of 25% for this period will reduce the amount of the loan forgiveness.

Q: For any amounts that the business has to repay, when do repayments start?
A: Loan payments are deferred for 6 months after dispersal of loan funds.  However, interest accrues on the loans during the deferment period.

Q: What is the interest, and how long does the business have to repay the loan?
A: The interest is 0.5 %; it may vary in the future but is capped at 4.  The loan must be repaid in 2 years.

Q: How can a business apply?
A: The application can be found on the United States Treasury web site or by clicking here. The borrower must submit the application to its lender, which can be any federally approved depository institution or credit union or other SBA-approved lender, along with documentation sufficient to determine the number of employees and compensation.  A lender can provide more specific information about the documents required in order to process your loan.

Q: How soon and how late can a business apply?
A: Small businesses and sole proprietorships can apply as early as April 3.  Independent contractors and self-employed individuals can apply as early as April 10.  All applications must be submitted and processed by June 30.  These loans are “first come, first serve.”

Q: What assistance is available to larger businesses?
A: Congress has also authorized up to $500 billion for loans, loan guarantees, and investments in larger businesses that would not qualify for assistance under the Paycheck Protection Program.  The program for these larger companies is set forth in Title IV of the Act. These packages come with certain restrictions that are not present for loans made under the Paycheck Protection Program.  Most significantly, loans to larger businesses are not forgivable, regardless of the purposes for which the loan proceeds are used.  In addition, larger companies availing themselves of assistance have to agree that they will conduct no stock buybacks and issue no dividends until one year after the loan is repaid.  They must also agree to maintain employment at the same level as of March 24, 2020 through September 30, 2020.  Finally, executive compensation must be held at 2019 levels.

The CARES Act provides for a refundable payroll tax credit (Employee Retention Tax Credit) with respect to certain wages paid to employees during periods of a business shutdown or significant decline in gross receipts resulting from the COVID-19 pandemic.

Q: Who qualifies for this tax credit?
A: An employer is eligible for the payroll tax credit if, during any calendar quarter of 2020, it either has (i) operations fully or partially suspended due to a governmental order related to COVID-19 or (ii) a decline in gross receipts of more than 50% compared to the same quarter of the prior year.

Q: What is the amount of the tax credit?
A: A tax credit is given against employment taxes paid by eligible employers in an amount equal to 50% of the first $10,000 of “qualified wages” paid to employees.

Q: What are qualified wages?
A: It depends based upon employer size.

    • For employers with more than 100 full-time employees, “qualified wages” only covers wages paid to those employees who are not providing services due to a COVID-19-related impact as described above.
      • For these employers, qualified wages taken into account for an employee may not exceed what the employee would have been paid for working an equivalent duration during the 30 days immediately preceding the period of economic hardship.
    • For employers with 100 or fewer full-time employees, “qualified wages” covers wages paid to all employees of the employer during any applicable quarter in which a COVID-19-related impact as described above, including employees who are continuing to provide services to the employer.

Q: Are there other limitations?
A: Wages:

    • The Act pertain to wages paid by an Eligible Employer to employees after March 12, 2020, and before January 1, 2021.
    • Qualified wages include the Eligible Employer’s qualified health plan expenses that are properly allocable to the wages.

A: Availability:

    • This credit is not available to employers that receive a loan under the Paycheck Protection Program, the program under the CARES Act providing loans of up to $10 million to offset certain payroll costs for employers with fewer than 500 employees.

The CARES Act also permits employers, and self-employed individuals, to defer payment of the employer portion of payroll taxes (social security taxes, but not Medicare taxes) owed on wages paid through December 31, 2020, for up to two years.

Q: What is the period for which the payroll taxes can be deferred?
A: Employers and self-employed individuals may defer payment of the employer share of payroll taxes owed on wages paid for the period ending December 31, 2020.

Q: When are the deferred taxes due?
A: The deferred taxes are due in two installments: 50% by December 31, 2021, and 50% by December 31, 2022.

Q: Are there other limitations?
A: Yes.  The deferral is not available to any employer that receives loan forgiveness with respect to the Paycheck Protection Program loan as described above.  However, the payroll tax deferral applies to all employers, with no requirement to show any specific COVID-19-related impact.


The CARES Act provides for direct payments to individuals through a stimulus check, expanded unemployment benefits, and availability of loans from retirement plans.

Stimulus Check

Q: Who qualifies for a stimulus check?
A: A stimulus check of $1,200 will be provided to individuals earning up to $75,000, and couples earning up to $150,000 will receive $2,400.  Other individuals and couples may receive stimulus checks on a sliding scale (5% for every $100 of income over the thresholds), but the payments stop for those earning $99,000 individually or $198,000 as a couple.

Q: Which year’s tax return will be used to determine the payment?
A: Payments are based upon 2019 adjusted gross income if a tax return was filed for 2019.  If not, it is based upon adjusted gross income for 2018.


Q: Who is eligible for the expanded unemployment benefits under the CARES Act?
A: The CARES Act provides for two different type of relief for individuals: (1) Pandemic Unemployment Assistance; and (2) Pandemic Emergency Unemployment Compensation.  Pandemic Unemployment Assistance is available for individuals eligible for unemployment compensation under Indiana law.   Pandemic Emergency Unemployment Compensation is available for individuals who otherwise may not be eligible for unemployment benefits under Indiana law or have exhausted all rights to unemployment benefits under Indiana law and is unable to work because of any of the COVID-19 related circumstances.

Q: If an employee is eligible for Pandemic Unemployment Assistance, what does that mean?
A: The Pandemic Unemployment Assistance provides for a weekly payment of $600 in addition to the amount the state provides for unemployment compensation for up to 39 weeks.  Employees should apply through the Indiana Department of Workforce Development.

Q: Who is eligible for Pandemic Emergency Unemployment Compensation?
A: The Pandemic Emergency Unemployment Compensation provides for unemployment benefits for individuals who otherwise may not be eligible, such as self-employed individuals, people seeking part-time employment, gig workers/independent contractors, people who have exhausted state-provided unemployment benefits, or otherwise do not qualify for state-provided unemployment benefits.  Covered individuals mean an individual who is otherwise able to work and available for work but is unemployment, partially unemployment, or unable/unavailable to work because:

    • The individual has been diagnosed with COVID–19 or is experiencing symptoms of COVID–19 and seeking a medical diagnosis;
    • a member of the individual’s household has been diagnosed with COVID–19;
    • the individual is providing care for a family member or a member of the individual’s household who has been diagnosed with COVID–19;
    • a child or other person in the household for which the individual has primary caregiving responsibility is unable to attend school or another facility that is closed as a direct result of the COVID–19 public health emergency and such school or facility care is required for the individual to work;
    • the individual is unable to reach the place of employment because of a quarantine imposed as a direct result of the COVID–19 public health emergency;
    • the individual is unable to reach the place of employment because the individual has been advised by a health care provider to self-quarantine due to concerns related to COVID–19;
    • the individual was scheduled to commence employment and does not have a job or is unable to reach the job as a direct result of the COVID–19 public health emergency;
    • the individual has become the breadwinner or major support for a household because the head of the household has died as a direct result of COVID–19;
    • the individual has to quit his or her job as a direct result of COVID–19;
    • the individual’s place of employment is closed as a direct result of the COVID–19 public health emergency; or
    • the individual meets any additional criteria established by the Secretary for unemployment assistance.

The Indiana Department of Workforce Development has issued Claimant FAQs and Employer FAQs.  Due to the recent laws and anticipated additional guidance, individuals and employers should frequently check websites for updated and current information.

Retirement Accounts

Q: Can employees access their IRA or retirement funds during the COVID-19 pandemic?
A: The CARES Act allows employees to receive up to a $100,000 coronavirus-related loan or distribution without any early distribution penalties.  To be coronavirus-related, it must satisfy the following qualifications:

    • Be taken on or after January 1, 2020, and before December 31, 2020,
    • By an individual—
      • who is diagnosed with the virus SARS–CoV–2 or with coronavirus disease 2019 (COVID–19) by a test approved by the Centers for Disease Control and Prevention,
      • whose spouse or dependent is diagnosed with such virus or disease by such a test, or
      • who experiences 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.