CARES Act provides temporary fringe benefit for employer repayments of employee student loans

By Greg Daugherty and Victoria Hanohano-Hong on April 22, 2020

The Coronavirus Aid, Relief and Economic Security (CARES) Act has provided a wide range of programs that affect employee benefit plans, employers and employees. One benefit that has flown under the radar is a new, temporary tax-qualified student loan repayment plan. Section 2206 of the CARES Act allows employers to claim a tax deduction for repayments of employee student loans, and allows employees to exclude these payments from taxable income, in amounts up to $5,250 a year. In essence, the CARES Act treats student loan payments as an education assistance fringe benefit. Normally, such benefits may be paid only for (i) books and equipment, (ii) tuition and fees, and (iii) necessary school supplies. The CARES Act adds employer student loan repayments made on or after the effective date of the CARES Act (March 27, 2020) through Dec. 31, 2021.

Practically speaking, we have seen little interest from employers to adopt such a plan. That is probably because employers, like everyone else, are currently doing what they can to conserve cash, including suspending matching and profit sharing contributions to qualified retirement plans. Continue Reading

Stop and review COVID-19 distribution and loan forms carefully

By Greg Daugherty, Deb Boiarsky, Victoria Hanohano-Hong and Rich Helmreich on April 22, 2020

The Coronavirus Aid, Relief and Economic Security (CARES) Act, authorizes employers to make changes to their qualified retirement plans to increase loan limits, delay loan repayments, and make distributions to plan participants experiencing certain COVID-19 related circumstances. Due to a lack of guidance from the IRS, there’s confusion among third-party administrators (TPAs) about how to administer these changes, resulting in potential issues with forms used by TPAs to approve these CARES Act loan and distribution changes.

We have reviewed several third-party administrator forms and client communications, and wanted to provide some clarity with regard to the following CARES Act changes:

Plans that allow loans may be required to permit participants with qualifying COVID-19 related circumstances to delay loan repayments with due dates occurring between March 27, 2020, and Dec. 31, 2020, for one year.
Increasing loan limits from $50,000 to $100,000 for participants with qualifying COVID-19 related circumstances is optional.
Allowing distributions of up to $100,000 to participants with qualifying COVID-19 related circumstances is optional.

How to claim COVID-19 tax credits via payroll

By Victoria Hanohano-Hong, Dave Tumen and Porter Wright on April 21, 2020

Employers may claim the Employee Retention Tax Credit and the tax credits available under the Families First Coronavirus Response Act (FFCRA) for relief during the COVID-19 pandemic. They do this first, by reducing the employer portion of Social Security taxes, and then, by reducing the employer’s payroll deposits in an amount equal to the refundable portion of the accrued credits, instead of depositing said amount with the IRS.

Important update on the Payroll Protection Program

By Porter Wright on April 13, 2020

Since the passage of the Coronavirus Aid, Relief and Economic Security Act (CARES Act), the Small Business Administration (SBA) and the U.S. Treasury Department have released a series of interim final rules and updated Frequently Asked Questions (FAQs) (as of April 8, 2020) regarding Paycheck Protection Program (PPP). These updates provide critical guidance and information to borrowers and lenders alike in the implementation of the highly sought after program. This blog describes some of the key clarifications to the program since its enactment.

UPDATE: SBA loan eligibility FAQs

By Porter Wright on April 13, 2020

Certain government programs, including SBA loan programs, are reserved for “small businesses.” In order to qualify for those programs, a business must satisfy both the SBA’s definition of a “small business concern” as well as the size standards for a small business.

Workplace exposure to COVID-19: Can employers be liable?

By Rich Helmreich on April 8, 2020

As COVID-19 cases continue to mount nationwide, so have lawsuits relating to fallout from the virus. On April 6, 2020, in one of the first COVID-19-related lawsuits of its kind, the estate of an Illinois Walmart Supercenter employee sued Walmart and the premises owner for wrongful death in Toney Evans v. Walmart, Inc., et al. My colleague Brodie Butland details the lawsuit in this Employer Law Report blog.

The Employee Retention Tax Credit

By Victoria Hanohano-Hong on April 7, 2020

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (CARES Act) was signed into law. The CARES Act introduced the Employee Retention Tax Credit (ERTC), a new tax credit to incentivize employers, who are economically distressed due to COVID-19, to retain employees.

How to claim COVID-19 tax credits under the FFCRA and the CARES Act

By Victoria Hanohano-Hong on April 7, 2020

There are three COVID-19 related tax credits that were introduced under the Families First Coronavirus Response Act (FFCRA) and the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which are subject to various limitations:

Emergency Paid Sick Leave Act tax credits – a dollar-for-dollar tax credit for qualifying wage payments of emergency paid sick leave;
Emergency Family and Medical Leave Expansion Act tax credits – a dollar-for-dollar tax credit for qualifying wage payments of family leave; and
The Employee Retention Tax Credit – a tax credit equal to 50% of qualifying wages payments made to employees.

UPDATE: Tax credits available under the Families First Coronavirus Response Act

By Victoria Hanohano-Hong on April 7, 2020

On March 18, 2020, the Families First Coronavirus Response Act (FFCRA) was signed into law requiring employers with fewer than 500 employees to make payments for COVID-19 related FLMA leave and paid sick leave required by the Act. To lessen this financial burden to employers, the act provides for refundable tax credits to offset payroll taxes. The FFCRA tax credits will be provided for eligible wages paid from April 1, 2020, to December 31, 2020.

How ESOP sponsors can survive the disruption from COVID-19

By Greg Daugherty and Deb Boiarsky on April 1, 2020

The spread of COVID-19 and the resulting disruption to the economy has led many employers to think creatively about how to manage cash, provide for the sustainability of their businesses and preserve the culture they have created with their employees and customers. These issues are especially critical for employee stock ownership plan (ESOP) companies, many of whom are in the process of their annual appraisal. These appraisals are important because they directly affect the size of the repurchase obligation – the cash companies must pay to participants for their distributions and diversifications during the year. Fortunately, there are some tools that ESOP companies may be able to utilize. This blog will describe ERISA fiduciary and other strategies ESOP companies can consider with respect to valuations and the related cash management needs those valuations will create.