The U.S. Senate yesterday released details of additional relief it is proposing in response to the coronavirus (COVID-19) pandemic. It builds upon the March 2020 enactment of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. This legislative package is formally being described as the Health, Economic Assistance, Liability, and Schools (HEALS) Act. It contains provisions for a second round of direct payments to Americans, a modified version of the CARES Act unemployment compensation subsidy, liability protection for businesses and schools that re-open, and numerous other provisions.
The House of Representatives previously passed its version of more COVID-19 relief, H.R. 6800, the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act. Senate and House approaches and magnitude differ markedly. If the current Senate package is approved it will require significant compromise between the House and Senate for another round of COVID-19 relief to become law.
Among the HEALS Act provisions of note in this multi-bill Senate package are the following.
Money Purchase Pension Plan Relief
The CARES Act granted penalty-free early withdrawals from retirement savings arrangements, permitted taxpayers to pay the associated tax over three years, allows taxpayers to recontribute withdrawn funds, and increased to $100,000 the maximum limit on retirement plan loans. The CARES Act excluded money purchase pension plans from this relief. This Senate package retroactively adds these provisions for such plans.
Employee Certification of Enhanced Plan Loan Eligibility
The CARES Act allows employer retirement plans to rely on an employee self-certification that he or she qualifies for a coronavirus-related distribution (CRD) from a retirement plan, which provides a distribution trigger to an individual who would otherwise not be eligible for a distribution. The CARES Act did not directly address employee self-certification of eligibility for an enhanced retirement plan loan. The HEALS Act would codify this clarification, which was previously made in regulatory guidance under IRS Notice 2020-50.
Payments of Single-Employer DB Pension Plans
The HEALS Act would clarify the due date—delayed for 2020 by the CARES Act—by which certain minimum required contributions to single-employer defined benefit (DB) plans must be made.
Paycheck Protection Program
The HEALS Act would make modifications and provide for a second round of loans under the Small Business Administration’s Paycheck Protection Program (PPP), a CARES Act creation designed to help small businesses retain employees during the pandemic with low-interest, potentially forgivable loans. Loan proceeds may be used for such payroll-related expenses as retirement and health benefit costs.
The HEALS Act would allow businesses with 300 or fewer employees to receive a second PPP loan if their first or second quarter 2020 revenue declined by 50 percent or more compared to the same time period in 2019. The HEALS Act would also permit certain nonprofits—including chambers of commerce and trade associations—to receive PPP loans.
The HEALS Act would allow up to $2,750 in unused health and dependent care flexible spending arrangement (FSA) benefits in 2020 because of the pandemic to be rolled over and used in 2021. Unused health FSA balances above $500 generally cannot be carried over and are forfeited; dependent care FSA balances of any amount have heretofore not been eligible for carryover. Both could be carried over from 2020 to 2021 under HEALS Act provisions.
The timeline for negotiation and enactment of further COVID-19 pandemic relief is short, as both the House and Senate are expected—barring a deviation from their schedules—to leave for a month-long district work period in early August.