Congress continues to debate how to help navigate through the ongoing pandemic. In the meantime many benefits, including Federal Unemployment benefits, have expired. To help address this assistance gap, new Executive orders were signed by President Trump. Here is what you need to know:
Federal unemployment benefits
The additional $600 weekly Federal employment benefits expired in late July. The executive order makes an additional $25 billion available for extending Federal unemployment benefits through December 6 or until the funds run out. (approximately $100,000 annual income). The amount is limited to $400 per week of which $100 must be funded by states.
Complications.Typically funding must be approved by Congress. It will be interesting to see if this executive order is challenged. In addition, this order requires 25% of the obligation to be funded by individual states. It might be difficult to get timely approvals or states to set up their systems to implement this program.
The executive order defers payroll taxes from July through December. While not spelled out in the executive order, this typically refers to Social Security and Medicare payments from both employees and employers. The deferral only applies to those with pre-tax income of $4,000 bi-weekly (approximately $100,000 annually). This would provide an additional 7.45% in paychecks and a 7.45% deferral of employer payments.
Complications.This is a deferral not forgiveness of the payment. If Congress does not approve forgiving the payments, all employees and employers will need to cough up these funds at a later date. Implementing this order is also complex for payroll companies. Some employee payroll taxes are deferred, while others are not. How do you handle employees with multiple jobs? What if an employer still wants to pay the tax on time versus deferring it?
Student loan repayments
The current student loan payment and interest relief expires in September. The current relief moves interest to 0% during the deferral period. The new Executive order extends payment relief until December.
Complications. The old relief only applies to select loans. It does not apply to private loans taken out to finance college. Nor, is it clear if the extending time-frame of the payment deferral will also provide interest relief.
A new Executive Order takes lawful measure to prevent evictions and foreclosures resulting from financial hardships caused by COVID-19. This order extends this relief to match the time-period of the nationally declared disaster dates. The order only applies to programs related to and controlled to some degree by Federal programs. These include, but are not limited to, Fannie Mae and Freddie Mac loans, and any federally subsidized housing programs.
Complications. The Executive order directs The Secretary of Housing and Urban Development shall take action in conjunction with the Treasury department to implement the order.
One of the biggest questions is how much of these Executive orders is within the power of the Executive branch. Only time will tell.
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