What you need to know about the COVID-19 Stimulus
After days of negotiations, the Senate and White House signed a historic $2 trillion stimulus plan to help manage the economic fallout of COVID-19. Here’s what you need to know about the COVID 19 Stimulus also known as The Coronavirus Aid, Relief and Economic Security Act (CARES.)
Stimulus checks
One of the most crucial elements of the bill is the plan to distribute stimulus checks. This check will go to Americans in the middle class and lower-income levels. Officials hoped to deposit the one-time payments as soon as early April. But it looks as though you likely won’t see the funds until a few weeks later.
Aid amounts will be based on household income reported in 2018 taxes (or 2019 taxes if they’ve already filed). The payments will average $1,200 for each adult earning up to $75K a year and married couples earning up to $150K a year. Each household will also receive an additional $500 for every child under the age of 17.
Increased unemployment benefits
The enhanced unemployment insurance includes four months of unemployment pay for laid-off workers. It includes expanded coverage for employees who were furloughed. And also includes workers who generally do not qualify for unemployment, like gig workers and freelancers. It includes, increased unemployment benefits for all eligible workers by $600 a week for four months.
Funding for the health care system
The stimulus plan will pump $150 billion in the country’s overtaxed health care system. This money is to help it meet the overwhelming demands of the pandemic. $130 billion will go directly to hospitals struggling to deal with a shortage of masks, ventilators, beds, and protective gear. $1 billion will go to the Indian Health Service. The remaining money will fund research and treatment and help the Strategic National Stockpile raise medical supplies and equipment.
Small business bailouts
The stimulus plan will offer $350 billion worth of funds to small businesses to help them remain financially sound during the pandemic. These funds take the form of loans. These loans may be forgiven.
Retirement Plans
The act calls for waiving the 10% early withdrawal penalty for distributions up to $100,000 for purposes relating to COVID-19, retroactive to January 1. Withdrawals still will be taxed; however, taxes are distributed over three years, or taxpayers have the three years to roll it back over. Also, the loan limit for 401(k) loans has increased from $50,000 to $100,000. The required minimum distributions (RMDs) from IRAs and 401(k) plans (at age 72) are currently on hold.
Student Loans
Federal student loan borrowers may pause payments on their loans. Beginning March 13, 2020, loans are in forbearance for at least 60 days. No payments should be due until after September 30, 2020.
Federal student loan interest rates will automatically be set to 0% for a minimum period of 60 days until September 30, 2020. If borrowers continue making payments, the full amount will be applied to the principal.
Borrowers do not need to take action to suspend loan payments. In addition, collection efforts, including the garnishment of wages and the seizure of tax refunds, will be suspended on federal student loans that are in default.
Mortgages
Some homeowners could be able to pause payments for at least six months with the possibility of an additional six months of forbearance, according to the act. Homeowners become eligible if they have one of the following types of mortgage loans:
- An FHA Loan
- A VA Loan
- A USDA Loan
- A 184/184A Mortgage
- Any mortgage backed by Fannie Mae
- Any mortgage backed by Freddie Mac
- You must pay back any missed payments; however, homeowners can work with their lenders at the end of the forbearance period to come up with a manageable payment plan. A suspension on foreclosures for borrowers with any of the above types of government-backed loans began March 18.
Additional provisions and addenda
There are several other components of the CARES Act, including the following:
- A distribution of $150 billion directly to state and local governments. This enables them to address their spending shortages and fund their increased labor.
- An establishment of a Treasury Department special inspector general for pandemic recovery. And the creation of a Pandemic Response Accountability Committee to oversee loans to businesses.
- Forbidding all businesses controlled by the president, vice president, members of Congress and heads of executive departments from participating in the loan or investment programs.
- Provisions to ban stock buybacks during the period of government assistance.
- An establishment of worker protections for businesses receiving federal loans.
- And Forbidding airlines from using federal loans for CEO bonuses.
This is what you need to know about the COVID 19 Stimulus package. Luckily, there are many options out there to help you during this pandemic. Keep your eye out for new posts on our MoneySmart Tips Blog.
