News Brief provided by Acentria Insurance
President Trump Signs Executive Order on Pandemic Relief
President Donald Trump recently signed an executive order and three memorandums to address pandemic relief in response to the ongoing impact of the coronavirus (COVID-19) pandemic. After negotiations for a relief package between the White House and lawmakers collapsed, the executive actions are intended to extend pandemic unemployment benefits, student loan payment deferrals, eviction protections and payroll tax cuts.
Actions Address Unemployment Benefits
One of the memorandums signed is intended to extend federal unemployment benefits. This action is intended to create a new benefit of $400 per week into December—which is a decrease from the previous unemployment insurance of $600 per week. The $600 amount received approval in March and was scheduled to expire at the end of July. According to Trump, states will be responsible for covering 25% of costs, or $100 per week, per individual. Much of the workforce affected by COVID-19 has been reliant on unemployment benefits, which were scheduled to expire at the end of July. Congress and the White House had been negotiating a broader pandemic aid package, with unemployment benefits discussed as a core component. In the absence of an agreement, these actions were taken by Trump to address an extension for pandemic relief programs.
Student Loan Payments, Eviction Protections, Payroll Tax Cuts and Potential Challenges
Included in the series of executive actions was an executive order addressing renters and homeowners. According to the White House, this order, to the extent reasonably necessary to prevent the further spread of COVID-19, aims to take lawful measures to prevent residential evictions and foreclosure resulting from financial hardships caused by COVID-19. One of the memorandums issued addresses student loan payment deferrals. Payments on federal loans were suspended through September, and Trump’s memorandum seeks to extend payments through the end of 2020. Lastly, Trump issued a memorandum deferring payroll tax obligations through 2020, advising the Treasury Department to allow employers to defer payments for the employee portions of specific payroll taxes. Generally, federal funding is controlled by Congress, leading to potential challenges for these executive actions.
Trump’s executive actions include one executive order and three memorandums. These actions intend to extend pandemic relief after an agreement on a relief package was not reached.
Stimulus Relief Efforts
These executive actions did not address stimulus checks. The U.S. Senate has brought bills forward with stimulus relief as part of a broader pandemic relief package. Discussions regarding stimulus checks may extend into August and September.
President Trump Orders Payroll Tax Deferment
On Aug. 8, 2020, President Donald J. Trump ordered the U.S. Department of Treasury (the Department) to defer collecting certain payroll taxes from Sept. 1 to Dec. 31, 2020. Because the order is for a deferral, the unpaid taxes will need to be recouped at a later time, unless the Department can find an avenue to eliminate the obligation to pay the taxes.
Eligibility for Deferred Payroll Taxes
Under the order, employers will be able to defer taxes that help pay for Social Security and Medicare for individuals who receive less than $4,000 during any bi-weekly pay period (the equivalent of $104,000 per year) on a pre-tax basis. Affected taxes will be deferred without any penalties, interest, additional amount or addition to the tax. The White House’s position is that deferring this tax will alleviate the hardship of individuals affected by the economic consequences of the COVID-19 pandemic.
Government agencies hold employers and payroll providers responsible for withholding an adequate amount of payroll taxes from their employees’ wages and compensation.
At this time, it is still unclear whether employers will opt to release the affected payroll taxes to eligible employees for two reasons:
1. Implementing changes in payroll processes and procedures is not always a quick or easy process—an obstacle aggravated by the fact that the Department has a scarce few weeks to issue guidance to implement this presidential directive; and
2. There is a possibility that the deferred taxes will need to be collected at a future date.
Important Next Steps for Employers
Employers should actively monitor upcoming guidance from the Department of Treasury.
Employers should balance the benefit of releasing affected taxes to eligible employees against the possibility of having to recoup those taxes later.
Review Payroll Processes
Employers should take time to evaluate now how quickly they can alter their payroll practices and procedures in case they decide to opt for this payroll tax deferral.
The Department of Treasury will stop collecting certain payroll taxes between Sept. 1 and Dec. 31, 2020.
*This Legal Update is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice. ©2020 Zywave, Inc. All rights reserved.