Keenan Briefings


COVID-19 Update: CARES Act Passes

March 27, 2020

On March 27, 2020, President Donald Trump signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act. This $2.2 trillion, 880-page spending bill is the third piece of major federal legislation intended to address the COVID-19 emergency. Having passed the United States Senate by a 96-0 vote, and the House of Representatives by a voice vote, the bill was a result of intense week-long negotiations between both parties. The provisions most likely to impact Keenan clients and their employees are summarized below.

Recovery Rebates

The most widely reported provision would provide tax relief to individuals and families in the form of Recovery Rebates of up to $1,200 ($2,400 for joint files) plus $500 for each child. Rebate amounts are phased out for taxpayers making $75,000 ($150,000 for joint filers) and completely phased out for taxpayers making $99,000 ($198,000 for joint filers).

Unemployment Insurance

The CARES Act creates a temporary Pandemic Unemployment Assistance program, which will provide additional unemployment assistance to people unable to work due to the COVID-19 emergency. Its scope of coverage is wider than traditional unemployment benefits and will cover self-employed individuals and independent contractors in addition to employees. The benefits have been extended from 26 weeks (in California and most other states) to 39 weeks, beginning on January 27, 2020 and ending on December 31, 2020. The one-week waiting period is waived and the amount of the benefit includes that which the individual would be entitled under state law plus an additional $600 per week for up to four months.

Retirement Plans

The CARES Act makes several changes to the laws that govern retirement plans. All of the following changes apply for calendar years beginning after December 31, 2019, to allow plan participants who have already taken plan distributions to benefit from these provisions:

  • It waives the 10% additional tax for premature distributions related to the coronavirus for individuals who have been diagnosed with COVID-19 by a test approved by the Centers for Disease Control (CDC), their spouse or dependent who has been diagnosed by such a test, or a person who experiences adverse financial consequences as a result of being quarantined, furloughed, laid off, or suffered reduced working hours, or who is unable to work due to lack of child care.
    • This applies to retirement plans and IRAs.
    • Amounts can be paid to a qualified plan or an IRA so long as the account is one to which a rollover contribution could be made under the Internal Revenue Code.
    • Amounts distributed may be repaid at any time over a three-year period from receipt of distribution.
    • To the extent that the amounts are not repaid, the income inclusion of the distribution can be included over the three taxable years beginning with the year in which the distribution was received.
    • Distributions under this provision will satisfy the hardship distribution provisions of the code and will be treated as exempt from tax withholding.
  • It increases the dollar amount available for loans from qualified plans from $50,000 to $100,000 and increases the percentage test limit for loans from half the present value of the participant’s benefit to 100% of present value. If the plan repayment is due before the end of this year, it can be delayed for one year from the original due date.
    • This provision applies to the same group of people who are eligible for penalty-free distributions, as set forth above.
  • It permits a one-year delay in required minimum distributions for defined contribution plans under IRC 401(a), 403(a) and (b), 457 as well as IRAs. This delay applies to required minimum distributions for 2019 and 2020. It also allows amounts subject to the required minimum distribution rules in 2020 to be rolled over.
  • With regard to plan amendments required by the CARES Act, amendments can be made up until the last day of the plan year beginning on or after January 1, 2022 (or January 1, 2024 for governmental plans).
  • It delays the minimum funding contributions for qualified plans, including quarterly contributions until January 1, 2021.

Additionally, the IRS has issued guidance extending the due date for IRA contributions and plan contributions to July 15, 2020. The IRS guidance can be found at:

Health Coverage of Testing and Preventive Services

With regard to the coverage of COVID-19 testing and preventive services, the CARES Act makes the following changes applicable to both fully insured and self-funded group health plans:

  • It expands the types of testing covered with no cost sharing as set forth in the Families First Act to include in vitro diagnostic testing (i.e. a blood test or swab) for which the testing developer has requested, or intends to request, an emergency use authorization from the U.S. Food and Drug Administration (FDA) or that a state has authorized.
  • It requires that the group health plan or insurer reimburse the provider for either the negotiated cost of the testing or, if there is no negotiated price, for the cash price of the diagnostic testing as reflected on the provider’s website. The CARES Act requires providers to publicize the price of the testing on a publicly available website, with a fine of $300/day for those that fail to comply.
  • It provides that if preventive measures to prevent or mitigate COVID-19 become available, then group health plans and insurers must also cover such preventive measures with no cost-sharing.

Health Savings Accounts and Flexible Spending Accounts

Regarding Health Savings Accounts (HSAs) the CARES Act:

  • Clarifies that for plan years beginning on or before December 31, 2021, a plan will not fail to be a high deductible health plan by failing to have a deductible for telehealth and other remote care services.

Regarding both HSAs and Flexible Spending Accounts (FSAs), the CARES Act:

  • Repeals the ACA rule prohibiting non-prescribed over-the-counter medicines from being “qualified medical expenses.”
  • Adds menstrual products to the definition of qualified medical expenses.

Paid Sick Leave and Family Leave

The CARES Act also makes some amendments to the leave provisions in the Families First Act (a summary of which can be found at

Regarding the FMLA provisions of the Families First Act, the CARES Act:

  • Includes as an “eligible employee” an employee who was laid off by the employer on March 1, 2020 or later, had worked for the employer for at least 30 days in the 60 days prior to the lay-off, and was then rehired by the employer.

For both the paid sick leave and FMLA provisions in the Families First Act, the CARES Act:

  • Gives the U.S. Office of Management and Budget (OMB) the authority to exclude certain U.S. government employers and executive branch employees from the expanded FMLA and paid sick leave provisions; and
  • Gives employers a mechanism to receive an advance tax credit for their costs of providing these benefits.

Aid to States and Municipalities

The CARES Act provides economic stabilization and assistance to state and local governments, including:

  • $454 billion for loans, loan guarantees, and investments in support of facilities established by the Federal Reserve to support lending to eligible businesses, states, and municipalities.
  • $150 billion for states, territories, Indian Tribes, and local governments to respond to the COVID-19 emergency.
  • $45 billion provided to the Federal Emergency Management Administration (FEMA) Disaster Relief Fund to fund federal response operations across federal departments and agencies pursuant to mission assignments issued by FEMA, as well as reimbursements to state, local, territorial and tribal governments, as well as private non-profit organizations like universities, utilities, and hospitals, as well as nursing homes, food and sheltering operations, and other critical and essential services. These reimbursements will be made under the emergency declarations currently in place for all 50 states for eligible categories of activities including emergency protective measures such as medical response, personal protective equipment (PPE), and other types of personnel and procurement costs. Of these funds:
    • $25 billion is for “major disasters” such as the one declared in New York
    • $15 billion for all purposes
  • $25 million to the Distance Learning, Telemedicine, and Broadband Program to facilitate distance learning and telemedicine in rural areas.
  • $850 million to be distributed to states, territories, cities, counties and federally recognized Indian tribal governments through the Edward Byrne Memorial Justice Assistance Grant program. This money can be used to prevent, prepare for, and respond to coronavirus including obtaining personal protective equipment (PPE) and medical supplies, and providing overtime for officers.
  • $400 million in grants that can be disbursed for firefighters, emergency managers and providers of emergency food and shelter. Of these funds:
    • $100 million will be for assistance to firefighters to provide PPE, supplies and reimbursements
    • $100 million for Emergency Management Performance Grants for emergency preparedness
    • $200 million for the Emergency Food and Shelter Program which provides shelter, food and supportive services through local service organizations

The CARES Act also instructs the Treasury Secretary to “endeavor to seek the implementation of a program or facility” that “provides liquidity to the financial system that supports lending to states and municipalities.”

Aid to Healthcare Providers

The CARES Act includes the following provisions to support healthcare providers:

  • An appropriation of $1.32 billion in supplemental funding to community health centers on the front lines of testing and treating patients for COVID-19.
  • The Federal Communications Commission (FCC) will receive $100 million to support the efforts of healthcare providers addressing COVID-19 by providing telecommunications services, information services, and devices necessary to enable telehealth services.
  • The law establishes a Ready Reserve Corps to ensure we have enough trained doctors and nurses to respond to COVID-19 and other public health emergencies.
  • The law provides protections from liability for volunteer health care professionals during the COVID-19 emergency response.
  • It allows the Secretary of Health and Human Services (HHS) to reassign members of the National Health Service Corps to sites close to the one which they were originally assigned in order to respond to the COVID-19 public health emergency.

Additionally, private, non-profit hospitals are among the eligible entities for the $45 billion in Disaster Relief funding for FEMA described under Aid to States and Municipalities (above).

Aid to K-12 Schools and Community Colleges

Many schools have continued providing child nutrition services throughout the shutdown. The CARES Act provides $8.8 billion to the National School Lunch Program, the School Breakfast Program, the Special Milk Program, the Child and Adult Care Food Program, and the Summer Food Service Program to fund food purchases and demonstration projects for schools through September 30, 2021. Additionally, the CARES Act provides the following aid to schools and colleges:

  • More than $30 billion to The Education Stabilization Fund to provide Emergency Relief Grants to educational institutions, local educational agencies (LEAs), students, and teachers in their response to COVID-19. This funding includes:
    • $13.5 billion in formula funding to the Elementary and Secondary School Emergency Fund to make grants available to each state educational agency to facilitate schools’ responses to COVID-19.
    • $14 billion to the Higher Education Emergency Relief Fund to provide formula funding to institutions of higher education to cover any costs associated with the closure and the significant changes to the delivery of instruction and to provide emergency grants to students for expenses directly related to COVID-19 and the disruption of campus operations.
    • $3 billion for the Governor’s Emergency Education Relief Fund to provide flexible funding to be allocated to the states based on the needs of K-12s and colleges that have been affected by COVID-19.
  • $100 million to supplement funds otherwise available for the Department of Education’s Project SERV to help clean and disinfect affected schools and assist in counseling and distance learning.

Clearly, there is a lot to digest in a bill of this size that was drafted and passed within days. We expect that the coming weeks and months will see clarifying language in subsequent legislation as well as a raft of regulations that will be issued by federal agencies. Those who wish to review the bill in its entirety may do so by clicking on the link below.

For more information, please contact your Account Manager.

Keenan & Associates is not a law firm and no opinion, suggestion, or recommendation of the firm or its employees shall constitute legal advice. Clients are advised to consult with their own attorney for a determination of their legal rights, responsibilities and liabilities, including the interpretation of any statute or regulation, or its application to the clients’ business activities.