Economic Relief Resources for Large Employers

The third phase legislation passed by Congress to afford relief for the coronavirus crisis is the Coronavirus Aid, Relief, and Economic Security (CARES) Act, passed March 27, 2020. The Treasury has authorized $500 billion in loans. $46 billion is reserved for air carriers, cargo air carriers and businesses important to national security. The $454 billion will help leverage as much as $4 trillion in lending by the Federal Reserve through its authorities under Section 13 (3).

Lending under this program must meet the following criteria:

  • Alternative financing is not reasonably available
  • The loan must be secured, and the interest rate of the loan will reflect the associated risk
  • The loan term will be as short as possible and not be more than 5 years
  • Borrowers and affiliates are prohibited from engaging in stock buybacks and dividend payments (unless contractually obligated) until the loan is no longer outstanding or one year after the date of the loan
  • Borrowers must maintain employment levels (as practicable) as of March 24,2020 and are required to maintain at least 90% of that level
  • Borrowers are required to certify that they are certified U.S.-domiciled business with employees predominantly located in the U.S.
  • The loan cannot be forgiven

The Treasury is also working to set up a lending program under the Federal Reserve’s 13 (3) authorities for mid-sized businesses with 500 – 10,000 employees. This program includes special, direct loans for businesses and nonprofit organizations at an interest rate of 2 percent per annum. No interest would be accrued for the first six months.

This lending program includes the following criteria:

  • The company must be located in the U.S. with significant operations and employees located in the United States
    • Specifically, the company must be organized in the U.S. or under the laws of the U.S. and must have a majority of its employees based in the U.S.
  • The uncertain economic conditions created by the COVID-19 pandemic make the loan necessary to support ongoing operations,
  • The company will use the loan to bring its employment levels back to no less than 90% of its workforce as it existed on February 1, 2020, and that it will maintain such levels until September 30, 2020
  • The company will restore all compensation and benefits to workers no later than 4 months following the end of the COVID-19 emergency
  • The company is not a debtor in a bankruptcy proceeding
  • The company will not engage in stock buybacks or dividend payments while the loan is outstanding unless required by contractual obligations
  • The company will not outsource or offshore jobs for the term of the loan and for 2 years following repayment of the loan
  • The company will not rescind existing collective bargaining agreements for the term of the loan
  • The company must remain neutral in any union organizing effort

Tax benefits are also available under certain circumstances. Employers are eligible for an Employee Retention Credit equal to 50 percent of wages paid during the COVID-19 crisis. This credit is available if:

  • The employer’s operations were fully or partially suspended due to a COVID-19 shutdown order; or
  • Gross receipts declined by more than 50 percent when compared to same quarter during the previous year

For employers with more than 100 employees, wages eligible for the tax credit are wages paid to employees for time that the employee is not providing services due to reasons above. More information on the credit can be found here.

Employers are also empowered to defer payment of the employer share of Social Security taxes through the end of 2020. Deferred amounts would be paid in two equal installments: half by the end of December 2021 and half by the end of December 2022.