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  • The CARES Act is intended to be a broad economic stimulus and relief package.  In addition to benefits-related issues, it includes relief for businesses, cash assistance for individual taxpayers, public health provisions and other provisions. 
  • The Senate hopes to vote on March 25. Once the bill moves through the Senate, the House is expected to act on March 26 or 27.

Retirement Provisions

  • The CARES Act includes funding relief for defined benefit plan sponsors, distribution and plan loan provisions for participants and beneficiaries and delay of minimum required distributions. 
  • Defined benefit funding relief:
    • Delay in required contributions: The CARES Act allows plan sponsors to delay contributions due during 2020 until January 1, 2021. This would not apply to cooperative and small employer charity plans, multiemployer plans and money purchase pension plans.  Late payment interest would apply.
    • Benefit restrictions: Plan sponsors may elect to use the plan’s funded status for the 2019 plan year to determine whether benefit restrictions apply for the 2020 plan year (for non-calendar year plans,  the language would result in the 2018 plan year AFTAP being applied to both 2019 and 2020 plan years, which likely was not the intent).
  • Plan distributions from 401(k), 403(b) and governmental 457(b) plans:  Employers can offer “coronavirus-related distributions” of up to $100,000.
    • Favorable tax and repayment treatment apply to eligible distributions taken during calendar year 2020.
    • The distributions can include funds that would otherwise not be considered distributable.
    • The distributions would be penalty-free and would not be subject to 20% withholding.
    • Recipients can include the distribution in their income over a 3-year period.
    • The distributions would be repayable to a plan or IRA within 3 years and such repayments would be treated as a direct trustee-to-trustee transfer made within 60 days of the distribution.
    • Distributions would be available to individuals
      • Diagnosed with COVID-19 by a CDC-approved test
      • Whose spouse or dependent has been diagnosed with COVID-19
      • Who experience an adverse financial consequence as a result of being quarantined; being furloughed, laid off, or having hours reduced; being unable to work due to a lack of child care; closing or reducing hours of a business owned or operated by the individual; or other factors as determined by the Secretary.
      • Plan administrators may rely on an employee’s certification that the employee satisfies the conditions for coronavirus-related distribution. 
  • Plan loans: During the 180-day period beginning on the date of enactment, the limit on plan loans would be increased to the lesser of (1) $100,000 (from $50,000); or (2) 100% (from 50%) of the present value of the participant’s vested benefit.  Individuals who have plan loan repayments due after the enactment of the CARES Act and before 2021 and who would qualify for a coronavirus-related distribution generally have an extra year to make such repayments.
  • Required minimum distributions: Required minimum distributions are waived for distributions required to be made in 2020. The provisions would apply for defined contribution plans (including 401(k), 403(b) and governmental 457 plans) and IRAs.

Health Care Provisions

  •    Telehealth: The CARES Act would provide a safe harbor to allow HSA-qualifying HDHPs to provide telehealth or other remote health care services for all conditions without a deductible or with a deductible that is lower than the applicable HDHP deductible. Telehealth and remote health care services would not be considered other, disqualifying care for purposes of HSA eligibility. The safe harbor would be effective from the date of enactment until the end of the 2021 plan year.
  • COVID-19 vaccine and preventive care: If the U.S. Preventive Services Task Force (USPSTF) gives a COVID-19 vaccine or treatment an A or B rating, group health plans and other plans subject to the ACA preventive service mandate would be required to cover the vaccine or treatment no later than 15 business days after the recommendation is made. Generally, when an item is added to the USPSTF list with an A or B rating, plans are not required to cover such item until the plan year starting one year after the date of the recommendation.
  • Coverage of COVID-19 diagnostic testing: The CARES Act would clarify that the coverage mandate enacted by the Families First Coronavirus Response Act on March 18 is not limited only to diagnostic products approved by the FDA. In addition, it clarifies that testing performed by in-network providers would be paid at negotiated rates. For testing conducted by non-network providers, health plans would pay the “cash price” listed by the provider on the provider’s website.  Providers would be required to post the cash price of the diagnostic test on their websites or face civil monetary penalties. 
  • Other provisions: The legislation also includes provisions addressing the confidentiality of records relating to substance use disorders, the disclosure of protected health information related to COVID-19 and providing that menstrual care products would be qualified medical expenses eligible for payment or reimbursement through health FSAs, HRAs, HSAs and Archer MSAs.

Restrictions For Companies That Take Federal Loans Or Loan Guarantees

  • Companies that receive federal aid through emergency loans from the Federal Reserve and other federal financial aid under the act would be subject to restrictions that fall into 3 categories: 
  1. Stock Buybacks and Dividends: Recipients of federal financial assistance would be prohibited from engaging in stock buybacks and paying dividends until 1 year after the assistance is repaid.  The Treasury Secretary could waive this provision under limited circumstances.
  2. Maintain Employment, Compensation and Benefit Levels: Mid-sized companies with between 500-10,000 employees must retain 90 percent of the workforce with full compensation and benefits until September 30, 2020, or restore those workforce, compensation and benefit levels if layoffs have happened.  Companies could not offshore jobs or abrogated collective bargaining agreements for 2 years after repayment of the loan, and must remain neutral in any union organizing efforts for the term of the loan; and
  3. Executive Compensation Limits:   There are two tiers of limits:
    1.  No officer or employee whose total compensation exceeded $425,000 in 2019, for the term of the loan:
    2. Can receive any pay increase from 2019 levels, nor
    3.  Can receive a severance payment at termination that exceeds 2 times the compensation received in 2019, and
    4. No officer or employee whose total compensation exceeded $3 million in 2019, can receive compensation above the sum of ($3 million) plus (50 percent of the excess of the $3 million the employee received in 2019).  For example, an executive who received $5 million would be limited to $4 million for the remainder of the term of the loan.

We await final legislative language to determine if compensation for these purposes is any differently than presented in the company’s Summary Compensation Table.

Other Provisions

  • The legislation generally would provide an exclusion for employer-provided student loan assistance for payments made after the date of enactment and before January 1, 2021. 
  • The legislation includes clarifications and adjustments to the paid leave provisions enacted by the Families First Coronavirus Response Act but does not expand the requirements to employers not subject to the Families First Coronavirus Response Act.

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