COVID-19 Financial Resources from the Prosperity Center

Monday, April 20, 2020

The Prosperity Center for Financial Opportunity has compiled this basic overview of COVID-19 resources, responses, and policy changes contained in federal recovery legislation, as a resource for financial, employment, and benefits access coaches seeking to help clients understand and navigate existing and new assistance available.

Many of the policies summarized here are contained in the Coronavirus Aid, Relief, and Economic Security (CARES) Act signed into law on March 27, 2020.

Note that this reflects The Center’s best understanding of basic policies as of the date cited on the cover slide; we know that COVID-19 responses are rapidly-evolving and that implementation may vary significantly at the state and local levels. In many cases, government agency guidance on various provisions of the CARES Act is forthcoming. It is also possible that Congress will pass additional coronavirus-related relief packages in the coming weeks or months. We will attempt to update, refine, and clarify this summary periodically as additional information and federal/state/local agency guidance becomes available.   

Economic Impact Payments (a.k.a. “Stimulus Checks”): When will payments go out and how much should someone expect to receive?

•$1,200 payment for single individuals w/ income up to $75,000; $2,400 payment for married filing jointly up to $150,000.

•Additional payment of $500 for each “qualifying child” — which will generally mean a dependent child age 16 and under by the end of 2019.*

•Payments are reduced by $5 for every $100 of income in excess of the above income limits and phased out completely at $99,000/$198,000 for single/joint filers.

•IRS currently indicates that payments will go out in the next three weeks.

*The stimulus legislation uses the same definition for “qualifying children” as is used for the Child Tax Credit, which only covers dependent children under 17 years old at the end of the tax year. Families with 17-18 year-old children will not receive a $500 for those children, and if the children were claimed as dependents on their parents’ tax returns then they will not receive their own stimulus payments.

What do people need to do to receive their stimulus payment?

•Anyone who’s filed a 2018 or 2019 tax return: no action needed; IRS will send payment based on 2018 or 2019 income*

•Social Security/Railroad Retirement Board beneficiaries: no action needed; IRS will use information on Social Security/RRB statement*

•Anyone who was required to file a 2018/2019 tax return but did not do so must file a simple tax return to claim their economic impact payment.

•Others who didn’t file 2018/2019 because their only income was from a non-taxable source (e.g. TANF, SSI, workers’ comp, veterans’ benefits) will need to file a simple tax return.

•Note: IRS will process stimulus payments through the end of 2020, for anyone who cannot presently access VITA or another tax preparation service

Other important information to know

•IRS will use direct-deposit information already on file from 2018/2019 tax returns but is in the process of creating a portal on IRS.gov where people can input their direct deposit information if not already on file with the IRS.

•Note: only individuals with a Social Security Number are eligible to receive the payment (i.e. undocumented/ITIN tax filers will not receive a payment). At present, it also appears that if a citizen/legal permanent resident/SSN- holder has anyone undocumented (e.g. a spouse or dependent child with an ITIN) on their tax return, then the SSN- holder will not receive a payment either.

•The stimulus checks are not considered taxable income to the recipient*

•Garnishments are temporarily suspended; stimulus payments will notbe applied to someone’s past-due taxes or delinquent student loan debt (garnishment for child support arrears may still occur, pending clarification/additional info.)

*Stimulus checks are structured as a tax credit on 2020 taxes that are filed in 2021, with an “advance” on that tax credit paid now.

•Watch out for scams! See IRS tips on avoiding emerging stimulus-payment scams.

•Taxpayers on an existing Installment Agreement for a federal tax balance from a prior year may suspend payments due Apr. 1-Jul. 15, 2020. (Interest will still accrue, but IRS will not place in default Installment Agreements with suspended payments).

•Reminder: the federal deadline to file and pay 2019 income taxes is extended to July 15, 2020. (Check your state tax agency for extensions on state taxes.) 

Expansion of Unemployment Assistance

Clients Participating in 2/3 or 3/3 services

Historic expansion of Unemployment Assistance: examples of who’s covered

In addition to workers who would originally have qualified for their state’s Unemployment Insurance, the CARES Act signed into law on March 27, 2020 includes a broad federal expansion of unemployment assistance (still administered through the states) that can cover a broader range of workers whose employment has been affected by COVID-19, including (more details on following slides):

•Freelancers, “gig,” 1099 workers

•Workers who previously exhausted their maximum weeks of state UI benefits

•Workers who haven’t established sufficient work history to otherwise qualify for their state UI

•Workers who’ve been forced to quit a job for coronavirus-related reasons (including needing to care for children whose schools are closed due to COVID-19)

•Individuals who were scheduled to start a job but the job was suspended (or the individual cannot reach the employer) due to COVID-19

Additional federal assistance for individuals eligible for state UI

Pandemic Emergency Unemployment Compensation (PUEC)

•Additional 13 weeks of state UI benefits after claimant has exhausted their maximum weeks of state benefits (most states provide a max. of 26 weeks.)

•Must be actively searching for work, but CARES Act provides for states to offer flexibility on work-search requirements in light of illness, restriction on movement/gathering, quarantine, etc.

Federal Pandemic Unemployment Compensation (FPUC)

•Additional $600 weekly benefit payment (on top of state UI weekly amount), through July 31 •Not considered income for eligibility purposes for Medicaid or CHIP.

•States can opt to pay FPUC combined with state UI payment or as a separate payment, but must pay on a weekly basis. 

Add’l federal assistance for individuals NOT otherwise eligible for state UI

Pandemic Unemployment Assistance (PUA)

•Benefit amount will be calculated based on federal Disaster Unemployment Assistance formula contained in the Stafford Act; min. benefit is 1⁄2 the state’s average weekly UI benefit

•Up to 39 weeks of benefits, Jan. 27, 2020-Dec. 31, 2020—benefits can be retroactive to Jan. 27, 2020 if cessation of work occurred prior to date of application for PUA

•Applicants must self-certify that they were fully or partially employed but now are out of work due to at least one of a list of COVID-19 related reasons (listed on following slide)

Federal Pandemic Unemployment Compensation (FPUC)

•Additional $600 weekly benefit payment (on top of state UI weekly amount), through July 31

•Not considered income for eligibility purposes for Medicaid or CHIP

•States can opt to pay FPUC combined with state UI payment or as a separate payment, but must pay on a weekly basis

Circumstances qualifying someone for PUA include...

•Diagnosed with COVID-19 or experiencing symptoms and seeking a diagnosis

•Household member diagnosed with COVID-19

•Caring for someone diagnosed with COVID-19

•Caring for a child or other household member who can’t attend school or work because of a COVID-19 closure •Quarantined or advised by a healthcare provider to self-quarantine

•Scheduled to start employment but job offer was rescinded or individual cannot reach the place of employment due to COVID-19

•Forced to quit their job as a direct result of COVID-19

•Place of employment is closed as a direct result of COVID-19

•Claimant has become the main breadwinner for their household as a result of COVID-19 related death of the head of the household

•“Other criteria as established by the Secretary of Labor”

•See p.3 of USDOL’s PUA Guidance issued April 5, 2020 for further details on the list above.

Additional eligibility criteria for PUA

•A self-employed/independent contractor who does not otherwise qualify for PUA under the criteria on the previous slide may be eligible for PUA “if he or she is unemployed, partially employed, or unable or unavailable to work because the COVID-19 public health emergency has severely limited his or her ability to continue performing his or her customary work activities, and has thereby forced the individual to suspend such activities.”

•See p. I-6 of USDOL PUA guidance issued April 5, 2020, for details and an example of how this may apply

Challenges, limitations, & unknowns

•Undocumented workers do not qualify for ANY unemployment assistance

•Regular UI policies, processes, weekly benefit calculations, etc. will vary by state; consult your state’s

department of employment services for additional state-specific guidance or FAQs

•State UI systems are overwhelmed with an unprecedented number of claims and now need to understand and execute the new fed provisions

•Additional guidance forthcoming from U.S. Dept. of Labor

Other important information to know

•Consult the website of your state unemployment agency. Some states are asking residents to temporarily refrain from submitting claims until the states can update their application systems to accommodate the CARES Act changes.

•Experts at the National Employment Law Project are encouraging everyone who could potentially be eligible to apply to their state for unemployment assistance, even if they’re unsure if they’re eligible. (Historically, UI benefits sometimes go unclaimed because a worker believes they won’t qualify; the CARES Act greatly expands eligibility.)

•States have partial UI benefits for workers still employed with their hours cut

•See detailed NELP fact sheet on immigrant eligibility for unemployment assistance (other than undocumented immigrants)

Other important information to know, cont’d

•UI benefits are considered taxable income; recipients will need to have federal and state taxes withheld from their benefits, in order to avoid owing those taxes in 2021 when they file their 2020 tax returns

•Per recent USDOL guidance (April 4, 2020), FPUC (the extra $600 weekly payment through July 31) is considered taxable income like regular UI. Child support obligations that are deducted from regular UI will also be deducted “in the same manner and to the same extent” from FPUC

•USDOL guidance released 4/4 reinforced that as long as the worker is eligible to receive at least $1 in weekly underlying UI benefits, they will receive the full weekly $600 amount of FPUC

•For multi-state regions (e.g. OH/KY, IL/IN): if a worker lives in one state but worked in another, must apply for UI in the state where they last worked, not their state of residence

STUDENT LOANS

Key student loan relief in the CARES Act

•Federal student loans automatically placed into “administrative forbearance” March 13-Sept. 30, 2020

•0% interest on federal student loans during the forbearance period

•To opt out of the forbearance and continue making payments, contact loan servicer

•Retroactive to March 13; eligible student loan borrowers who made a payment between Mar. 13-Mar. 27 can contact their loan services to request a refund of that payment

•Borrowers on a Public Service Loan Forgiveness (PSLF) plan—suspended months through Sept. will count as months in which loan payments were made

•Wage garnishments for defaulted student loans suspended March 13-Sept. 30, 2020*

*HR departments will receive a letter from U.S. Dept. of Ed. instructing them to cease garnishment; workers will receive a refund of any garnishment levied in error during that timeframe.

What types of loans are eligible for the admin. forbearance?

Federal student loans (Direct, FFEL, Perkins other than FFEL loans owned by commercial lenders and Perkins loans owned by the educational institution)

Private student loans (the federal government has no legal authority to compel private lenders to suspend payments). However, private lenders may have implemented their own coronavirus relief policies; these borrowers should contact their loan servicer if they’re having trouble making payments

Borrowers who do not know who their servicer is or how to contact them can visit StudentAid.gov/login or call 1-800-4-FED-AID (1-800-433-3243; TTY for the deaf or hearing-impaired 1-800-730-8913)

See U.S. Dept. of Education FAQs on student loan forbearance and coronavirus for detailed guidance.

Paying Bills & Credit Reporting

Credit protection during COVID-19

•Federal COVID-19 response legislation does not automatically offer relief or protection around consumer/non- student loan debt.

•Some individual private lenders have established their own assistance policies; contact the bank/creditor for details. For reference, the American Bankers Association is keeping a list of publicly-stated steps that banks have taken to respond to COVID-19.

•The CARES Act does state that if a creditor makes an accommodation to defer, forbear, modify or provide other assistance on loans, then the payments will be reported to credit reporting agencies as current.

•This will extend for either the next four months or for four months after the date that the national emergency declaration is terminated.

Additional important information

•The majority of lenders are not making payment accommodation automatically; borrowers must contact their creditor for each individual account

•The CARES Act provision that modified payments will be reported to credit bureaus as current only applies to accounts that were current prior to the lender approving the modification. Accounts that were delinquent prior to the payment arrangement will continue to report as late to the credit reporting bureaus.

Where to report problems with Consumer Reporting Agencies

Consumer Financial Protection Bureau (CFPB) consumer complaint portal or toll-free phone at 1-855-411-CFPB (2372) or TTY/TDD phone number at 1-855-729-CFPB (2372)

Federal Trade Commission (FTC) consumer complaint portal or FTC Consumer Response Center at 1-877-FTC- HELP (1-877-382-4357).

Information on how to contact the Attorney General for each state or territory online here or by phone at 1-844- USA-GOV1 (1-844-872-4681).

Housing

Eviction and foreclosure relief during coronavirus pandemic

•Mortgage forbearance for up to 12 months for homeowners with mortgages held by Freddie Mac or Fannie Mae. (Contact info for Freddie Mac/Fannie Mae, including search function to determine if those entities own the mortgage.)

•Many private-sector mortgage lenders have implemented their own forbearance policies—homeowners should contact lender

•120-day moratorium on filing evictions for nonpayment (and no late charges) for rental housing in federally- assisted/covered properties (which includes most federal affordable housing properties/programs)

•Eviction/foreclosure relief for non federally-backed properties will vary according to state/local policy; National Low Income Housing Coalition is compiling a list of state and local eviction and foreclosure moratoriums

•NLIHC’s Disaster Recovery Housing Coalition is leading national calls/webinars on COVID-19 and housing/homelessness every Monday at 2:30 p.m.

•Just Shelter map/list of state-by-state organizations focused on housing assistance.

Utilities

Utility-related resources and relief policies

•No apparent blanket provisions in the CARES Act regarding utility non-payment or protection from service termination.

•Running list of companies that have signed the Federal Communications Commission’s “Keep America Connected” pledge to make their internet hotspots available to the public and not terminate customers’ broadband or telephone service over the next 60 days due to nonpayment.

•Regarding water, electric, other utilities: check with utility provider, as many providers and/or municipalities have implemented their own policies.

Tax favored withdrawals from retirement plans

• The CARES Act waives the 10% early withdrawal penalty on retirement account distributions for COVID-19- related purposes. This includes if you, your spouse, or a dependent is diagnosed with COVID-19 or you’ve experienced “adverse financial consequences” as a result of being quarantined, furloughed, laid off, having work hours reduced, or being unable to work due to lack of childcare because of the health crisis, or closing/reducing hours of a business owned by an individual due to COVID-19.

• This applies to individual retirement accounts (IRAs), 401(k)s, and certain qualified retirement plans and annuities. The maximum you can withdraw collectively from your accounts is $100,000. The usual mandatory 20% withholding for taxes won’t apply up-front, but the income from these distributions would be subject to taxes over three years.

You can pay it back to the account within three years. Doing so wouldn’t affect the maximum contribution you can make each year to your 401(k) or IRA.

**if this type of withdrawal makes sense for you, check with your employer to see if your retirement plan allows you to do so.

This provision is one where more details will be figured out in the coming weeks by the Internal Revenue Service (IRS) and the Treasury Department. We’ll keep you updated as it develops.

Loans from retirement loans

• If you have an outstanding loan from your retirement plan with repayment due in 2020, you can delay your repayments for up to one year. Subsequent payments will be adjusted to account for the delay.

• The loan cap is increased to $100,000 or 100% of your vested account balance, whichever is less, for loans taken within 180 days of the law’s enactment. Check with your employer to see if your retirement plan has chosen to allow this.

Contact the Prosperity Center for additional questions at 816-501-4239 or on Facebook.