How Will The Second Round of Government Stimulus Actually Help Me or My Business?
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More than two months after House Democrats proposed a $3 trillion HEROES Act coronavirus relief package to supplement the existing CARES Act passed in March, Senate Republicans countered this week with an outline for their $1 trillion HEALS Act. The latter emphasizes money for schools; liability protections for businesses; a second round of one-off stimulus checks for individuals and households; reduced unemployment benefits in favor of return-to-work incentives; and guidance for another iteration of the Paycheck Protection Program, among other items. The HEROES Act, meanwhile, stressed a continuation of existing unemployment subsidies, enhanced individual stimulus payments and greater allocations toward state and local governments and healthcare workers, to name a few of its core tenets.
The questions are myriad, particularly whether a compromise can be carved out and enacted before the Senate takes its mid-summer recess starting August 8. But beyond that unknown, there are uncertainties about the practical execution of any final legislation, not to mention whether it will effectively target and ultimately provide its intended unburdening to a wide enough swath of American employers and workers.
To help scythe our way through the regulatory weeds, we spoke with Peter Isberg, vice president of government affairs for payroll- and HR-service provider ADP. We will continue to update you on the progress of federal relief efforts as the situation evolves.
Between now and August 7, how, do you think this is all going to shake out in terms of effective and meaningful stimulus relief for the average American?
That's a very big question. We'll see what is eventually adopted. We're paying a lot of attention to the Paycheck Protection Program — the second round — because there were almost five million businesses that got a significant help early in the pandemic with PPP loans. And many businesses haven't been able to wrap that up and say, "Let's go ahead and document that I spent the money in accordance with the rules and therefore this is forgiven." The system isn't going to open for the forgiveness applications until at least August 10. A lot of them have a loan that has been received and spent and documented and is ready for forgiveness, and then you have another round coming, which is good news. You would be able to spend money on improvements to the work site for instance, or employee safety, personal protective gear, that kind of thing.
I'll switch gears then and talk about the employee retention tax credit, which will help employers get back to work. Previously, the CARES Act established our employee retention tax credit, which was essentially 50 percent of wages up to $10,000 for qualifying businesses that could demonstrate a reduction in revenues associated with the COVID situation. So you could either take an employee retention tax credit or get a PPP loan. A huge percentage of businesses took the loan route and therefore couldn't take the employee retention tax credit. That may be relaxed in this HEALS Act. It's going to get a lot more attention than it did with the CARES Act.
Will encouraging individuals to go back to work by reducing unemployment benefits have the intended effect if the economy is still opening slowly?
It varies dramatically by industry. If a business can't open at all, then what's helpful is to have a wage supplement. And that's exactly what they're debating today: What's the wage-replacement rate that makes sense? And a systems question is: Can we target that at an employee level so that we know don't give a broad $600 to everyone?
It took long enough to get the systems to adapt to the uniform expectation in the last relief package, so how would states possibly account for that kind of individual variance?
There's a system that states use to administer unemployment benefits, and that involves employers sending a report to every state unemployment insurance agency once a quarter, detailing the wages paid to each worker. But there's a huge lag. So the states won't have that wage information for wages paid in April, May or June until late August. The fear would be that if they're trying to customize the individual person's wage amounts, they've got a five-month lag.
Going back to PPP, what can be done in this latest package to assuage people who felt it didn't seem fair that the Omni Hotels of the world, who might've had alternative sources of capital, were able to access millions in loans?
I understand that there are provisions that would help to target the second-round loans more specifically and make clear that businesses that have access to public capital markets and things like that aren't eligible for these loans. And there's a number of points in there that clarify that certain trade associations and the like are eligible, so there are some new tweaks in the HEALS Act that we need to assess and understand.
Is there an item that's likeliest to bridge the divide between the HEROES and HEALS acts and make it through with bipartisan support?
I'd love to know that answer myself. I think we generally expect additional tax credits for employers and incentives to rehire and reopen and pay an employee. The PPP loans will certainly be there. There will be some debate about: Rather than the $600 [unemployment] supplement, what makes sense? What can they do down the road?
What group still hasn't had their needs fully addressed by either proposed legislation?
It's always difficult to address the gig economy. There are very different terms depending on your frame of reference, but there's an increasingly large percentage of the workforce that's not quite in the workforce as we know it. There's [been] an effort to extend some benefits, such as unemployment insurance to gig economy workers, and it's just tough to make that work within the systems that we have. So I think that's going to be something that they're going to struggle with, and it's going to be an interesting evolution to see. How do we extend benefits and government support to people who aren't employed in the traditional sense, but [who are] no less deserving than anybody else? That will be something to watch.
Is there an essential bit of advice for someone who's either trying to keep a small business open right now or stay employed, in terms of staying on top of all these legislative developments and not being left out?
Businesses and even employees need to pay close attention to state and local announcements on opening and to what extent you can be working or keeping your businesses open. That's all very local still and very sensitive. But otherwise, I would point to the fact that Congress almost certainly will enact further supports and supplements that will be helpful to employees, the unemployed and businesses that want to stay stay afloat. And know that it's going to be tough to plan. "When can I start to see that money?" is always a tough thing. Some of this, like the employee retention tax credits — at least in the HEALS Act — would be retroactive to the beginning of the quarter, so a business could do a little bit of planning. And they should understand they're going to recover those funds by reducing their payroll tax deposits going forward. It might be helpful to just become familiar with the mechanics of: If this does pass, how do I use it?