Demystifying the CARES Act

The Coronavirus Aid, Relief, Economic Stimulus (CARES) Act is a sweeping piece of legislation passed on March 27, 2020 in response to the COVID-19 pandemic’s economic fallout. Up to 6.5 million Americans have contracted the coronavirus,¹ others have been furloughed, churches and businesses have been shuttered temporarily due to lockdowns, and some establishments have faced permanent shut down.

The CARES Act has offered a financial lifeline for eligible individuals, churches, and businesses. To serve our members during these uncertain times, MMBB created a list of frequently asked questions about the CARES Act and MMBB’s own assistance programs to offer a clear explanation of the aid most relevant to members and employers. The FAQs are available on www.mmbb.org. Read on for a summary of the CARES Act provisions that most affect MMBB members and employers and MMBB’s non-contractual benefits. First, let’s look at the programs for members.

Aid for Members

• Unemployment. The CARES Act temporarily expanded benefits to include the self-employed, independent contractors, people with limited work history and others not usually eligible for unemployment. The federal government has provided 13 weeks of unemployment pay beyond the standard 26 weeks, if state benefits were no longer available. The amount of the federal benefit was the same as the amount that states provide. Both the expanded eligibility and the additional weeks of unemployment are still under legislative consideration.
• Student Loans. Borrowers can defer payments on federal student loan principal and interest without penalty through December 31, 2020. However, borrowers have the option to continue payments if they wish. Employers can contribute up to $5,250 towards an employee’s student loans from March 27, 2020 through December 31, 2020. The employer can make this payment to the employee or directly to the lender. As an added benefit, the payment does not count as taxable income for the employee.
• Required Minimum Distributions (RMDs). The CARES Act waived RMDs for everyone in 2020, so no one needs to take an RMD this year unless they wish to do so. You should contact MMBB for more information by December 11, 2020 if you still want to receive your RMD this year (1-800-986-6222).
• Distributions. Under the CARES Act, the federal government has created a special Coronavirus Related Distributions’ (CRDs) category for certain qualified retirement plans, including 401(a), 401(k) and 403(b) plans. Eligible people can take up to $100,000 in distributions from their qualified retirement plans. See the CARES Act FAQs on www.mmbb.org for eligibility criteria. If you are under 59 ½, you are not subject to the 10 percent early withdrawal penalty.

You can pay back the funds to a qualified retirement plan over three years, beginning the day after the date when you receive a CRD. The repaid funds will not be considered taxable income. You will still owe income taxes on amounts you withdraw that you don’t repay. Therefore, a CRD should be considered as a last option.

CRD Withdrawals from the MMBB Member Contribution Plan. CRD withdrawals can be taken from elective deferrals in the MMBB Member Contribution Plan. Please contact the Service Center at 1-800-986-6222 or [email protected] for more information.

• Loans. The amount that someone eligible for a CRD can borrow from a 401(a), 401(k), 403(b) and government plan has doubled from the lesser of $50,000 or 50 percent of the borrower’s vested account balance to the lesser of $100,000 or 100 percent of their vested account balance. You won’t owe income tax on the amount borrowed from your retirement account if it’s paid back within five years. To qualify, you must take the loan within 180 days after the enactment of the CARES Act. Though members who take an MMBB loan will be eligible for the income tax benefit of this CARES Act provision, MMBB will not be offering the increased plan loan limits.
• MMBB Loans. Qualified individuals with an outstanding loan from their plan taken before March 27, 2020 with a repayment due from March 27 to December 31, 2020 can delay loan repayment. However, interest will continue to accrue on these postponed payments. The delayed repayments of loans will restart on January 1, 2021.

Aid for Employers

The CARES Act provides many forms of relief that churches and church-related organizations may be able to use. These include the Emergency Economic Injury Disaster Loan (EIDL), a limited payroll tax credit, and the delay of payroll tax payment for a limited time.

• EIDLs are low-interest, fixed-rate loans that can provide assistance to small businesses to cover costs during an emergency. The CARES Act relaxed certain requirements, particularly when a business exhausts other funding options before obtaining an EIDL. In addition, the EIDL provides an immediate $10,000 advance grant to borrowers while they await the processing of the application. The applicant does not have to repay this advance if their loan is denied. EIDL loans can go up to $2 million for up to 30 years determined on a case-by-case basis, however, EIDL loans are not forgivable.
• The Payroll Tax Credit is a refundable tax credit for 50 percent of wages, up to $10,000 in qualified wages (including health plan expenses), paid after March 12, 2020 and before January 1, 2021 by employers who:

- fully or partially suspended operations due to a COVID-19 related shutdown order, or

- or whose gross receipts declined by more than 50 percent compared to the same quarter last year.

The refundable credit is capped at $5,000 per employee and applies against certain employment taxes on wages paid to all employees. Eligible employers can reduce federal employment tax deposits in anticipation of the credit. They can also request an advance of the employee retention credit for any amounts not covered by the reductions in deposits.

• Payroll tax deferral. Employers may defer payment of the employer share of the Social Security tax due from March 27, 2020 through December 31, 2020. The employer will have to pay the deferred taxes between January 2021 and December 31, 2022.

See the CARES Act FAQs on the MMBB web site for other CARES Act loans or credits that may affect EIDL and the payroll tax credit or deferral.

MMBB’s Non-contractual Benefits Program

MMBB helps its members and employers through our non-contractual benefits program. Read information about MMBB’s assistance programs below.

• On a case-by-case basis, MMBB offers limited tax-free emergency financial assistance to ordained members and active lay members based on need. Because of the extraordinary circumstances surrounding the COVID-19 pandemic, the support available is limited to one $3,500 grant per member to ensure sufficient funds are available for a variety of needs.
• MMBB will place qualifying ordained pastoral leaders on a $10 a month continuance, paying these premiums on behalf of the employer for up to two years. This will allow pastoral leaders to maintain important group term life insurance and disability benefit protections through the Comprehensive Plan. While the pastor is enrolled in this continuance program, any life insurance or disability benefits will be based on the average lifetime compensation used to pay Comprehensive Plan premiums.

Please contact MMBB at 800.986.6222 or [email protected] for information about either of these programs.

¹. “Coronavirus in the U.S: Latest Map and Case Count.” The New York Times, September 16, 2020