In response to the perceived stalemate between the U.S. Senate and Congress on the extension of unemployment benefits and other provisions of the Coronavirus Aid, Relief, and Economic Security Act of 2020 (CARES Act or Act), President Donald J. Trump issued an Executive Order and three Memoranda (known collectively as the “Executive Orders”) to his Cabinet and Executive Agency providing or extending COVID-19 relief to individuals and businesses. The signing of these orders occurred on August 8th, 2020.
Disaster Relief/Unemployment Insurance Benefits
Previously, the CARES Act provided a $600-per-week federally-funded unemployment compensation assistance to an eligible unemployed person, in addition to any standard state unemployment benefits the individual could receive. That benefit, however, expired July 31st, 2020. In response, the Disaster Relief Memorandum directs the Federal Emergency Management Agency (FEMA) to provide benefits from the Department of Homeland Security’s Disaster Relief Fund and also directs states to use their Coronavirus Relief Fund allocation to provide financial relief to unemployed individuals affected by COVID-19, principally through an up to a $400-per-week supplemental unemployment compensation benefit.
The Disaster Relief Memorandum makes two significant changes in eligibility compared to the $600 supplemental benefit under the CARES Act.
- First, the Memorandum requires that to be eligible, an individual must receive at least $100 per week in regular state unemployment compensation assistance (up from $1).
- Second, the Memorandum requires the individual to certify that his or her lost wages are attributable to disruptions caused by COVID-19.
Payroll Tax Deferral
The Tax Memorandum directs the Secretary of Treasury to defer the withholding, deposit, and payment of the employee portion of social security tax (but not Medicare tax) on wages or compensation paid during the period of September 1st, 2020, through December 31st, 2020, if the employee’s wages or compensation payable during any biweekly payroll period are generally less than $4,000, calculated on a pre-tax basis, or the equivalent amount during other payroll periods. Amounts deferred will be without penalties, interest, additional amounts, or additions to tax.
The Tax Memorandum also directs the Secretary of Treasury to issue guidance to implement the Memorandum and to also find ways to eliminate the deferred tax entirely. It should be noted that the Tax Memorandum provides only for the deferral of the employee portion of social security tax and, in the event the Secretary of Treasury does not eliminate the deferred tax entirely, an affected employee will ultimately be required to pay any remaining deferred tax. However, until the guidance from the Secretary of the Treasury is issued, it is unclear how an employee would pay the deferred tax following the end of the deferral period.
Student Loan Payment Relief
The Education Memorandum directs the Secretary of Education to create waivers of and modifications to the requirements and conditions of economic hardship deferments and provide such deferments as necessary to continue the temporary stop of payments and the waiver of all interest on student loans held by the Department of Education until December 31st, 2020. The Education Memorandum further provides that student loan borrowers may continue to make payments if they wish to do so.
The Housing Executive Order directs certain members of the Cabinet to consider, identify, review, and take action necessary to minimize, to the greatest extent possible, residential evictions and foreclosures during the COVID-19 pandemic. The Order directs:
- the Secretary of Health and Human Services and the Director of the Centers for Disease Control and Prevention to consider whether any temporary halting of evictions for failure to pay rent are reasonably necessary to prevent further spread of COVID-19;
- the Secretary of the Treasury and the Secretary of Housing and Urban Development (HUD Secretary) to identify federal funds that could be used to provide temporary financial assistance to renters and homeowners who are struggling to make monthly payments as a result of financial hardships caused by COVID-19;
- the HUD Secretary to also act to promote the ability of renters and homeowners to avoid eviction or foreclosure, including by providing federal funds to landlords; and
- the Director of Federal Housing Finance Agency to consult with the Secretary of Treasury to review existing authorities and resources that may be used to limit evictions.
As of the date of this post, none of the Executive Orders described above are operational. Since the President’s signing, the constitutionality of these actions has been questioned, and legal challenges have been threatened and may be instituted. It is important, however, for employers to have a basic understanding of these actions should they become effective in the near future.