Trail Financial Planning, LLC is a fee-only financial planning and investment management firm located in Bellingham, WA

The CARES Act – a glimmer of hope

The CARES Act – a glimmer of hope

The news of late has been a cold, bleak landscape.  However, the creation and passing of the CARES Act by our US federal government last week provided me with a glimmer of hope, like seeing the first little leaves of Spring bursting from bud.  While it is likely going to be a long road before we reach a metaphorical summer, any hope is welcome.  The CARES Act, or the Coronovirus Aid, Relief, and Economic Security Act, will have widespread impact.  And the impact will be massive.  I feel hope for two reasons. 

First of all, the financial supports provided by the CARES Act create incentives to support the efforts to “flatten the curve.”   As an individual, a community, a state, a nation, a world, as a humanity, we need to hit the collective “pause” button on non-essential activities.  The stay-at-home orders and social distancing are all designed to help this effort, to help flatten the curve by reducing the speed at which the virus spreads from person-to-person.  However, life does not pause.  One of my favorite children’s books, Everyone Poops, sums it up nicely: “Since we all eat, we all must poop.  All of us!  Everyone!”  (See note [1] for author and link).  We need groceries, toilet paper, supplies.  We need to keep our housing, our health insurance.  We need to keep supporting each other.  Everyone needs to do this. 

Secondly, I was buoyed to see our federal government come together, and quickly enact legislation that is thoughtful, strategic, and may create real results.  The CARES Act is designed to provide numerous supports.  It is likely that you will either be directed affected by some provision in the bill.  You probably know people who could be affected by other provisions.  As I stated before, the bill is massive, and multi-faceted.  In this post, I am going to describe a few areas of the bill, who stands to benefit, and who you might be able to contact to learn more about how you may be affected.  I’ve written it more like a reference book, and less like a story.  Thus, I don’t think you should read the entire blog from top to bottom.  Rather, I think you should read my “top-ten list,” then scroll to the relevant section.  There you will find a succinct summary, and some recommendations on how to learn more.  In addition, if you know people who are experiencing financial stress.  Reach out to them!  Listen.  If it would be helpful, share this post with them.  In times of stress, we need to share and process our thoughts and feelings.   

Here is my top-ten list of provisions, effects and their benefits from the CARES Act:

  1. Nearly 90% of US taxpayers will receive cash, likely in May.  These payments are called “Recovery Rebates.”  My hope: This will inject cash into the economy.
  2. Small businesses, whose revenues are reduced due to the COVID19 situation, (including sole proprietors AND non-profits!) can get emergency loans to keep their businesses afloat, and to keep paying their employees.  Some expenses such as payroll and group health insurance payments may be 100% forgiven from the loan principal (at least for the two months after the business receives the loan), turning a loan into a grant.  My hope:  This provision may allow employers to keep people on the payroll rather than laying them off.
  3. Numerous other additional tax credits and supports for small businesses.  My hope:  This provision may allow employers to keep people on the payroll rather than laying them off.
  4. Unemployed benefits are temporarily expanded.   Payments will be greatly increased so people can wait with less pressure to go out to find a new jobMy hope:  This provision may allow people to temporarily stay home and stay safe with less financial strain.
  5. Self-employed people are now (temporarily) eligible for unemployment benefitsMy hope:  This provision may allow self-employed and contract workers to temporarily stay home and stay safe with less financial strain.
  6. There are expanded tax benefits for charitable givingMy hope:  This will provide (modest) incentive to help support others.
  7. People who have qualified retirement plans (life 401ks or IRAs) have numerous new abilities to access those funds.  My hope:  People experiencing significant cash flow strain will be able to access funds to keep their lives afloat and out of negative outcomes (like hunger, loss of housing or bankruptcy).  
  8. All federal student loan payments are temporarily paused without any accrued interest.  My hope:   This will ease cash flow for many people.
  9. Expansion of the healthcare-related costs eligible to be paid for/reimbursed through Medicare and Health Savings Account/Archer Medical Savings Accounts/Flexible Spending Accounts.  My hope:   Thes provisions will give better flexibility in using healthcare benefits.  
  10. There are other financial supports apart from these that I won’t speak about (like to big businesses) because they don’t apply as directly to readers of this blog.  However, one highly commendable provision is that lawmakers explicitly stated that they may not benefit from these provisions.

Before I get into the details, I want to add an important asterisk – there are groups of people who will need help, but who are not helped by the CARES Act.  I am thinking primarily about people not “in the system” – the undocumented, those without income/assistance, and the homeless.  If you find yourself in a position of receiving assistance, but you don’t need it, you might consider creating your own personal CARES Act and donating some or all of your benefits to those in more need.

1. Recovery Rebates

One of the biggest stories to emerge from the bill is that every US citizen is expected to receive a check for cold, hard cash. 

What is it? 

The check will be $1,200 per individual; $2,400 for married couples.  In addition, there will be added $500 per child in the family under the age of 17.  Literally, the refund is a brand-new tax credit against your 2020 income tax owed, but the credit is being paid today.  When you file your taxes for the 2020 tax year (next April), your taxes owed will be less the amount of your refund. Since you will have already received the refund check (in May 2020), you won’t receive an additional refund in 2021!

Who will receive it?

The cash payment is targeted to low and middle-earning citizens.  Individuals and families who earned more than the threshold (in your most recent tax filing) will get a reduced rebate.  The thresholds are based on your Adjusted Gross Income (AGI) as reported on your most recent tax return:

  • $150,000 for Married Filing Jointly
  • $112,500 for Head of Household
  • $75,000 for all others

The phase-out is a reduction of the rebate by $5 per $100 of additional income over the threshold.  Two examples:

  • A single mom with $80,000 of AGI, and an 11-year-old child.  She will receive a $1,700 rebate ($1,200 + $500 for her child). 
  • A married couple with $160,000 of AGI, and three kids under age 17.  They will expect to receive $3,400 (calculation:  $2,400 for parents + $1,500 for kids less $500 phase-out).     

How will you get the money?

The government wants this money to get to people as soon as possible, but it will likely take several weeks to process 143 million possible payments.  I’ve read that a realistic time-frame is May 2020.  Right now, the payments are going to be distributed through one of 3 means:

a)  Through the normal way that Social Security pays out Social Security benefits.  If you are receiving benefits, the distribution will land in your account in this way.  

b)  Direct deposit to the bank account you had on file with your most recent tax return (either 2018 or 2019).

c)  A physical check sent to the last address you had on record with the IRS.

Do you need to do anything?

You should not have to file any special request.  The payments are going to be automatically calculated and distributed.   However, since they are going to be processed through the IRS, or Social Security system, you should make sure that the IRS knows where you are.  If you’ve moved, changed banks, or your family has changed since your most recent tax return, you should make sure that your contact information with the IRS is current. 

If you didn’t file a tax return in 2018 or 2019, then you might want to file a return.  Even if you did not earn any money, you can file a “simple return” to make sure that you are eligible.  There is a “free electronic filing system” with the IRS:  https://www.irs.gov/filing/free-file-do-your-federal-taxes-for-free, though I haven’t used it so I cannot speak to its effectiveness (or lack thereof).

Also, if you end up have more Adjusted Gross Income in 2020 compared to 2018/19, such that your AGI is above the phase-out threshold, the IRS won’t ask for a return of your rebate!    

Who should you contact to learn more?

You could try to contact the IRS, but I am going to guess that their phone lines are swamped.  Here is a link to the IRS site for more information:

https://www.irs.gov/newsroom/economic-impact-payments-what-you-need-to-know

Otherwise, if you have a Certified Public Account (CPA) or other financial professional, reach out to them.  If you are a current client of mine, you can schedule time with me through my on-line scheduler.  If you are not a current client, I am happy to schedule a free consultation with you to talk about your situation. 

What are the pitfalls/risks/what-could-go-wrongs?

I don’t see many pitfalls, unless you made an abnormally large amount of money in 2019 compared to 2018 or 2020.  In that case you might not qualify for a rebate though your current finances would qualify you.  If that turns out to be the case, you will still receive the rebate when you file your 2020 tax return.  Incidentally, if you earned a rebate based on your 2019 taxes, but your 2020 taxes disqualify you, the government will not ask for the rebate back.  

Why might this provision give John hope?

It will supply people with money to use, spend, save or give as they feel appropriate.  It will inject additional cash into the economy.  In a time of slowing economic growth, that may be helpful.  My advice to people on how to use the money is,

First of all, just like the advice from the safety notices on airplanes, place the Oxygen mask over your own face first.  If you need the cash to help keep your own household or business afloat, use the cash for that purpose.  Secondly, if you don’t have a good emergency fund in place, put the cash there for your reserve “Oxygen tank.”  Why is an emergency fund important?  You can read my post on “Why an emergency fund is like a superpower.”   

If your household finances are strong, then consider passing the economic relief on. 

  • Do you have friends or family who need extra help? 
  • Is there a local business you love that might be willing to provide lunch for the childcare center nearby who is caring for the kids of the first responders (I am thinking about Tacos Tule, mmmm)? 
  • How about sending some or all of the money to your local Food Bank (Bellingham’s Food Bank is a well-run organization, and would make good use of your donation:  https://www.bellinghamfoodbank.org)? 
  • Are there international relief efforts that you want to support?

Plus, you’ll could receive a small tax break (see point # 6 below).  Get creative!  Giving can be very rewarding.  

2. Loans for Small Businesses

In the US, nearly 50% of people are employed through small businesses (see Note [2]).  Small businesses form the structure to support many people through a paycheck, and often health insurance.   Individuals, families, and businesses all need support to be able to hit the “pause” button, AND be positioned in order to emerge from this time intact. 

What is it? 

There are two loan programs – one is direct from the Small Business Administration, the other is guaranteed by the Small Business Administration but administered through FDIC-insured banks. 

(i)  Loan #1 is called the “Economic Injury Disaster Loan Emergency Advance” or EIDL.  This loan will be administered by the Small Business Administration, so applications are made through the SBA directly.  Businesses must make a good faith declaration that they are, or are going to be, adversely affected by the COVID19 situation.  An important piece is that up to $10,000 will be available as an “advance” and will not need to be repaid!  In other words, the advance is a grant!  Free money!  (Again, for businesses who are adversely affected).  

 (ii)  Loan #2 is called the Paycheck Protection Program” or PPP.  These loans will be processed and managed through your banking institution.  The Small Business Administration is guaranteeing the loans, which should make underwriting simpler.   The amount of the loan can be a maximum loan amount of $10 million or 2.5 x average monthly payroll for the last twelve months.  A key provision to the PPP loan is that you must keep people on payroll.  Apparently, even if the business already laid people off, that decision may be reversed and the business will still qualify for the PPP program.  The loan proceeds may be used to cover the costs of:

  • payroll
  • Group health insurance premiums and other healthcare costs
  • Salaries and/or commissions
  • Rent or Mortgage interest
  • Utilities
  • Other business interest

In addition, if the business receives the loan, a portion of the loan will be 100% forgiven.  The forgivable portion is the amount spent by the business in the 8 weeks after receiving the loan for the following business expenses:    

  • payroll costs, excluding prorated amounts for individuals with compensation over $100,000
  • Rent pursuant to a lease in force before Feb. 15, 2020
  • Bills and utilities including – Electricity, gas, water, transportation, telephone, or internet access expenses for services began before Feb. 15, 2020.  I have seen guidance of whether or not self-employed individuals working from home can pay the business portion of their utilities, but early reports are saying “probably not.” 
  • Group health insurance premiums and other healthcare costs

Did you read that correctly?  The business can keep paying its employee payroll costs and NOT NEED TO REPAY THE EXPENSES.  As if the business was earning revenue.  The US government is stepping in as the customer for the time being.  That’s a solid pause button.

Who will receive it?

The loans are for small businesses with fewer than 500 employees, who give a good faith certification that the loan is necessary due to the uncertainty of current economic conditions caused by COVID-19.  In addition, nonprofit organizations, Veterans organizations, Tribal businesses described in the Small Business Act, as well as self-employed or independent contractors are eligible.  Supposedly the restrictions/requirements for the good faith certification are a low hurdle to cross. 

Do you need to do anything?

If you are a small business owner, or you work for a small business, you DEFINITELY should pay attention to these programs.  This program could be the difference between a business staying afloat and going bankrupt.  It could be the difference between employees of that business losing their health insurance or not.  It could be the difference between our society emerging from this crisis ready to go, or into an economic depression mired in unemployment.  

Who should you contact to learn more?

I’ve heard anecdotally that the loans are easy to apply for and receive.  To learn more from the Small Business Administration directly, visit:

https://www.sba.gov/page/coronavirus-covid-19-small-business-guidance-loan-resources

Or, contact your Certified Public Accountant (CPA) for more information.  Locally (In Bellingham), Larson, Gross & Associates has prepared a nice handout for CARES Act resources for businesses:

https://larsongross.com/wp-content/uploads/2020/03/COVID-19-CARES-ACT-Provisions-for-Businesses-1.pdf

If you are a current client of mine, you can schedule time with me through my on-line scheduler.  If you are not a current client, I am happy to schedule a free consultation with you to talk about your situation. 

What are the pitfalls/risks/what-could-go-wrongs?

Make sure you document all expenses well.  Pay attention to the difference between each program.

(i)  EIDL – Loan proceeds can be used for keeping your business afloat, but if you also apply for the PPP loan (with hopes of forgiveness), keep good records of which expenses were paid from which program.  Business owners CAN apply for the EIDL, take the advance, then refuse the loan!  So, there is little downside to applying for the EIDL (again, if the business is experiencing difficulty).   Also, since this loan is running through the SBA, it may take longer for the money to arrive than the PPP loan.

(ii)  Specific underwriting requirements for the PPP loans are being determined by each bank.  I’ve heard some banks are requiring very little documentation, while other banks have much more substantial documentation requirements.  Loan fees are supposed to be waived, and the interest rate is going to be very low (I’ve heard anywhere between 0.5 – 4%, but 1% may be the most likely.)

The PPP program is designed for the business owner to keep people on payroll.  Thus, the employer cannot lay people off or furlough them.  To qualify for the PPP forgiveness, your business must keep the same number of employees.  For details of how that is measured, be sure to contact your CPA.  If you’ve already laid people off, there are allegedly provisions to be able to hire them back.  Typically, loans and debt make your finances harder and less flexible.  Debt can be suffocating.  But worse is a lack of Oxygen (cash flow coming in).  If your business needs the money, or if you think it might need the money to stay afloat, I don’t see many pitfalls to applying for the loan.  Again, I’d advise you to consult your CPA or a financial professional before acting.   

Why might this provision give me hope?

In a very coarse metaphor, you can imagine that our US economy is like a car.  For the sake of environmental sustainability, I’ll invoke the image of a boring, but incredibly well-engineered vehicle, the Toyota Prius.  Businesses are a crucial part of our car, they are like the entire drive system.  The government has taken away the keys for now.  But, we don’t want that car to be stripped of its essential parts while it sits idle.  Once the keys are given back, we want the tires to be intact, the engine tuned.  You can think of the payments to businesses as keeping the car intact, keeping them from being towed, and allowing the driver and passengers to be secure until it is safe to get back out on the road.  No doubt my metaphor is crude, and has many “not exactlies,” but whatever.  I want to get this message out.

Last week, I heard a news story about similar economic measures being enacted in Europe.  I was like – whoa, what a great idea!  Why can’t the US create something so sensible I thought?  Lo, our representatives have done so!  You go legislators!

3.  Tax credits for businesses

There are various tax credits/breaks/deferrals for small businesses and their taxes owed for 2020.  

What is it? 

There are a few different programs, including:

i)  Employee Retention Credit – This tax credit is for up to 50% of employee wages up to a maximum of $10,000/employee.

ii) Deferral of payroll taxes – rather than owing 100% of payroll taxes (or Self-Employed taxes for the Self-Employed) in 2021, businesses my pay 50% of the amount in 2021 with the remaining due in 2022.

iii)  Net Operating Loss rules are loosened and extended across time

Who is eligible?

Small businesses (fewer than 500 employees) and self-employed businesses.

Do you need to do anything?

If you are a small business owner, or you are self-employed, you should investigate these program to see if they apply to your business, and your situation.  

Who should you contact to learn more?

Contact your CPA or another financial professional.  Current clients can schedule time with me through my on-line scheduler.  If you are not a current client, I am happy to schedule a free consultation with you to talk about your situation.   Also, see the resource in point #2 from Larson Gross and Associates for more information.

What are the pitfalls/risks/what-could-go-wrongs?

There are many picky details surrounding this provision.  Talk to a financial professional or your CPA for guidance.

Why does this give John hope?

One of my favorite voices in the financial media is Morgan Housel.  He is a financial columnist, and active Twitter commenter (@MorganHousel).  He posted this on Twitter about a month ago:

— Morgan Housel (@morganhousel) March 12, 2020

Indeed, holy shit.  However, the human spirit is resilient.  The supports for small businesses, may help us get over this crisis.  But, holy shit.

4. Expanded Unemployment Benefits

Typically, unemployment is a state-delivered program.  Unemployment programs will still be administered by states, but the federal government is now greatly expanding and backstopping the program. 

What is it? 

For those who have lost their jobs, the government has expanded unemployment benefits.  It includes the following expansions:

  • Elimination of the 1-week waiting period (for the first week of unemployment)
  • Extra payments – the federal government is going to increase the weekly amount by +$600/week (on top of regular state benefit)
  • Extention of benefits – 13 extra weeks of unemployment
  • Incentives to Create Short-Time Compensation – for states without these programs, the federal government will pay up to 50% of the costs of setting up a state program for semi-employment compensation programs.

Who is eligible?

  • Self-employed individuals are now eligible through the “Pandemic Unemployment Insurance program” (see point #5 below)
  • Any other persons who aren’t qualifying for unemployment insurance under regular unemployment insurance
  • Any person who regularly qualifies for unemployment insurance.

Do you need to do anything?

Yes, if you qualify, you will need to apply for unemployment insurance.

Who should you contact to learn more?

Contact your state unemployment department.  In Washington state, the link is:

https://esd.wa.gov/unemployment

Or, contact your CPA or other financial professional.  If you are a current client of mine, you can schedule time with me through my on-line scheduler.  If you are not a client, I am happy to schedule a free consultation with you to talk about your situation. 

What are the pitfalls/risks/what-could-go-wrongs?

This program may make unemployment too enticing, and actually discourage people from going back to work.  It may lengthen the time that our country exists with high unemployment.  In fact, these provisions were some of the stumbling blocks that held up the CARES Act from being passed sooner than it actually was.   However, since the expanded benefits are temporary, the risk will likely be mitigated once the Covid-19 crisis is calmed.  

Why might this provision give John hope?

Traditionally, unemployment insurance has been a program that supports people, but not too much.  The rationale is that if you pay people too much in unemployment, they would not have a financial incentive to go out and find a job.  As a result, the weekly payments were only $300 – $400/week, not really enough to get by.  The CARES Act is adding $600/week.  At least for a while, an unemployed person will bring in closer to $900/week, or $3,600 per month.  That is going to be close to enough to cover the basics for people – housing, food, medicine, limited transport.  Again, it allows for the “pause” button to be pushed, and people won’t feel financially compelled to go out and search for a new job.

5. Unemployment can now cover the self-employed

What is it? 

There is a brand-new unemployment insurance program called the “Pandemic Unemployment Insurance program”

Who is eligible?

This program is a very broad safety net.  It covers many people who were not covered previously.  A notable group are self-employed individuals.  Now, self-employed persons, including 1099 contract workers, may receive Unemployment insurance.  

Do you need to do anything?

Yes, if you qualify, you will need to apply for unemployment insurance.

Who should you contact to learn more?

Contact your state unemployment department.  In Washington state, the link is:  https://esd.wa.gov/unemployment

Or, contact your CPA or other financial professional.  If you are a current client of mine, you can schedule time with me through my online scheduler.  Or, if you are not a current client, I am happy to schedule a free consultation with you to talk about your situation. 

What are the pitfalls/risks/what-could-go-wrongs?

Same as #4.   

Why might this provision give John hope?

Self-employed individuals also need to be encouraged to stay-at-home and flatten the curve.  This program supports that cause.

6. Expanded benefits for Charitable Giving

In the 2017 Tax Cuts and Job Act (TCJA), tax benefits associated with charitable giving were drastically reduced.  The CARES Act puts some new ways that you may be able to deduct donations made to charity.

What is it? 

There are two pieces to this provision:

i)  A new above-the-line tax deduction of $300 for a donation to a charity

ii)  The limit for charitable deductions has been raised from 60% of Adjusted Gross Income (AGI) to 100% of AGI.  

Who is eligible?

The first (i) applies to anyone who does not itemize deductions, while (ii) will apply only to someone who has enough deductible expenses to itemize.  Both provisions apply only to cash contributions made to a 501(c)(3) non-profit organization.  Thus, contributions of appreciated stock or contributions to a donor-advised fund do not qualify.

Do you need to do anything?

If you are charitably inclined, and you don’t need the assistance that may be coming your way, help others through donating to high quality 501(c)(3) organizations!

Who should you contact to learn more?

Contact your CPA or another financial professional.  If you are a current client of mine, you can schedule time with me through my online scheduler. If you are not a current client, I am happy to schedule a free consultation with you to talk about your situation. 

Are there any pitfalls/risks/what-could-go-wrongs?

Not really, just lower tax revenue for the US government.  That said, the $300 above-the-line deduction is a pretty limited effect.  Even the highest tax bracket individuals (37%) would only save about $111 taxes. 

Why might this provision give John hope?

Giving and caring for others is part of what, I think, makes our world humane.  I am glad to see that the government is supporting individuals caring for others, though the support is modest.

7. New provisions for qualified retirement plans

There are many restrictions to how and when individuals can (or must) access their tax-preferred retirement accounts like 401ks and IRAs.  The provisions relax the requirements and allow for people to access retirement funds more flexibly.  Have you ever wondered when you filled out your taxes why you are asked if you lived in a federally declared disaster area?  The provisions described here are for people living in such a declared area.  

What is it? 

There are several pieces to this provision:

i)  Corona-virus distributions from Qualified Plans are allowed up to $100,000 (in aggregate across all accounts)

  • Maximum distribution is $100,000
  • No early withdrawal penalty (if you are under 59 1/2 years old)
  • No mandatory withholding for taxes
  • Eligible to be repaid over 3 years
  • Taxable, but the taxes may be realized all in 2020 OR spread over 3 years.  

ii)  Loans from a 401k or other employee-related qualified plan are expanded (IRAs and Roth IRAs do not apply). 

  •  Loan amount expanded from $50,000 to $100,000
  • Payments may be deferred for up to one year

iii)  Required Minimum Distributions are suspended for 2020 

  • All Required Minimum Distributions (RMDs) are suspended for 2020

Who is eligible?

i) There are many ways to qualify:

  • If you, or a spouse/dependent, is diagnosed with COVID-19
  • If you have adverse financial consequences as a result of being quarantined, furloughed, laid off, or even due to working reduced hours.
  • If your finances are harmed due to a lack of childcare as a result of the disease. 
  • Own a business that closed or operated under reduced hours b/c of the disease
  • Meet some other reason that the IRS decides to say is OK.

ii)  Anyone who has a 401k that allows for loans

iii)  Anyone who is currently required to take RMDs.  Typically, the provisions apply to anyone required to take a Required Minimum Distribution (RMD) whether due to:

  • Age (typically over the age of 72), or
  • Anyone who is the beneficiary of an IRA

Do you need to do anything?

i) and ii)  You don’t have to do anything.  These provisions just allow for access sooner (early distributions or loans).  

iii)  If you haven’t taken RMDs for the year, then you probably want to hold off (to lower your taxes).  Of course, if you need the money, you will still take a distribution.  You just aren’t required to.  However, that advice may NOT apply if your income is going to be low for the 2020 tax year.  Thus, specific advice will depend on your individual situation.   

Who should you contact to learn more?

Contact your CPA or another financial professional.  If you are a current client of mine, you can schedule time with me through my online scheduler.  If you are not a current client, I am happy to schedule a free consultation with you to talk about your situation.  

Are there any pitfalls/risks/what-could-go-wrongs?

This will depend on the individual’s situation.  Taking money out of a tax-sheltered retirement account is generally frowned upon unless you are actually using it to fund your retirement!  That said, when you need money, you usually need money now.  This program could give some optionality.

Why might this provision give John hope?

Giving people flexibility is usually a good thing.  This act forces nothing, but just gives people options.

8. Student Loan payments are deferred

Federal student loan payments are deferred and employers can exclude student loan repayments from compensation.  

What is it? 

There are two primary pieces to this provision:

i)  Federal student loan payments are deferred

  • No payment required until September 20, 2020
  • No interest will accrue during the interim
  • The time will still count towards loan forgiveness programs!

 ii)  Relief for student borrowers

  • Employers may pay up to $5,250 for student debt, and the payments will be excluded from income
  • Current students who are receiving Pell Grant and subsidized federal loans will not have incomplete semesters (due to a qualifying emergency) count towards the period of enrollment.  

Who is eligible?

Individuals with federal student loans.  

Do you need to do anything?

i)  Yes!  If you qualify, you need to contact your lender to ask for the payment to be suspended. 

ii)  A business needs to establish a student loan repayment program.  It is an allowed federal benefit but run through employers.  

Who should you contact to learn more?

Contact your CPA or another financial professional.  If you are a current client of mine, you can schedule time with me through my online scheduler.  If you are not a current client, I am happy to schedule a free consultation with you to talk about your situation.  

Are there any pitfalls/risks/what-could-go-wrongs?

Student loans are a big anchor for certain people.  Giving some breathing room is always welcome.  Plus, the little additional benefit that time spent in deferment still counts towards loan forgiveness is pretty great!

Why might this provision give John hope?

Most people with student loan debt are younger.  –Aside:  However, the fastest-growing group is over the age of 55, as adults take out loans to help their kids/grandkids with college.  Yikes!–  When we emerge from this crisis, it will be better if young people feel stronger and more capable.  Having financial strength is one pillar of feeling robust.  

9. Miscellaneous healthcare-related rules 

There are two primary provisions in this portion:

i)  Changes to rules surrounding Health Savings Accounts (HSA), Archer Medical Savings Account (MSA), and Flexible Spending Account (FSA)

  • Over-the-counter medications and menstrual products are now considered reimbursable.  
  • Telehealth services temporarily covered by HSA-eligible High Deductible Health Plans

ii) Changes to Medicare rules

  • Medicare beneficiaries will receive no-cost COVID-19 vaccine (when it becomes available)
  • Part D recipients can request up-to-90-day supplies of medications

10.  Other beneficiaries

There are numerous other beneficiaries in this bill including states, hospitals, large businesses, municipalities, the airlines, even Boeing.  

John’s endnotes

If you’ve read all the way to the end of this, you are a maniac for financial news!  This bill is massive and has the potential for doing some real good.  The reality, of course, is that a $2-trillion dollar program of relief/stimulus that seemed to have been hammered out in an incredibly short amount of time, will not be simple to implement.  I imagine that the logistical hurdles are going to be proportionally as massive as the dollar amount.  Probably there will be long phone waits, crashed websites, check sent to wrong address, fraud, cheats and Tiger people who use their rebate check to buy more illegally traded species.  Some news stories will probably highlight the good that the CARES Act will do.  I imagine that many more will focus on the problems.  I am going to be watching with keen interest.  There are many flaws in our system, in our preparedness, in our actions to battle the COVID pandemic.  But, on the whole, I think the CARES Act represents hope.  It shows that our government CAN be a force for good.  Martin Luther King Jr. once said,

The ultimate measure of a man is not where he stands in moments of comfort and convenience, but in times of challenge and controversy. 

The CARES Act, in my opinion, is a moment of our government, notably Congress, rising to meet a challenge.


I must give many, many thanks to Jeff Levine, CPA/PFS, CFP®, CWS®, MSA who prepared a detailed analysis of the CARES Act, and presented his findings through Kitces.com website.  Most of my writing and analysis is a repeat of what I learned from Mr. Levine’s detailed research.

Finally, if you would like to talk more about your specific situation, and you are a client of mine, please schedule a meeting through my online scheduler (virtual meetings only for now).

If you are not a client, but still want to talk through your specific questions, please contact me through our website:  Contact Trail Financial Planning.  I am happy to have a free consultation with you. 

 


[1] – Everyone Poops is written by Taro Gomi.  You can read more about the book through “Good Reads.”

[2] – Source:  U.S. Small Business Administration – 2018 Small Business Profile report.  https://www.sba.gov/sites/default/files/advocacy/2018-Small-Business-Profiles-US.pdf

[3] – Twitter link:  https://twitter.com/morganhousel/status/1237917894450778112?s=20

John Chesbrough
john@trailfp.com

I am a financial planner and investment manager. I also am the owner of a fee-only, independent financial advisory firm called Trail Financial Planning. I enjoy working with people who care for others and their community – parents, firefighters, therapists, doctors, nurses, and teachers. I may be spotted at through my blog or on the many winding trails of Whatcom County. To learn more, or contact me directly, please visit my firm's website: www.trailfp.com.