March 31, 2020

Key Takeaways From The CARES Act

The spread of COVID-19 has created unprecedented volatility in financial markets, and updates about the virus are being released on a near-constant basis. At Sound View, it’s our job to distill all of this information, follow the markets closely, and provide you with the information needed to chart the course ahead.

The most recent development was the Coronavirus Aid, Relief, and Economic Stability (CARES) Act that passed the House and was signed by President Trump on March 27th. The bill was massive both in size and scope: the $2 trillion of economic aid is roughly 9% of U.S. GDP, and there are several provisions that may impact your wealth management strategy.

We’ve reviewed the bill and highlighted the information we feel is most relevant. If you have any questions about the information covered below, we encourage you to reach out to your team at SoundView.

Support For Large Companies

Many state and local governments have issued stay-at-home directives and required non-essential businesses to close or limit their opeations. While these measures are necessary to prevent the pandemic from worsening, the lost income poses a threat to many businesses. The bill contained provisions to help large companies that have been hit hardest.

The airline industry is receiving significant support, with $50 billion set aside for passenger airlines and $8 billion for cargo airlines. Half of this money is to cover employee wages, salaries, and benefits during the shutdown. The other half is structured as loans to help airlines cover other operating costs like fuel, airport fees, taxes, and maintenance.[1]

The bill also sets aside $17 billion for “businesses critical to maintaining national security.” Much of this money will likely go to Boeing, the country’s only domestic airline manufacturer and the maker of the F-18 Super Hornet. Boeing has struggled financially since last March when faulty instruments in the 737 MAX (Boeing’s flagship commercial jet) caused a second fatal crash in five months. Since then, all 737 MAX planes have been grounded, and Boeing reported a full-year net loss of $18.4 billion in January.[2]

All of these capital injections come with stipulations. For one year after the loans are repaid, companies that receive funds may not participate in stock buybacks, and any executive earning more than $425,000 may not receive a raise.[3]

Support For Small Businesses

The pandemic’s impact on small businesses has been even more acute, and a significant portion of the stimulus package is earmarked for small businesses.

The government is offering a total of $350 billion in loans to small businesses to cover salary, wages, and employee benefits up to 250% of an employer’s monthly payroll. The loans have a $10 million limit, are tax-free and interest-free, and loan payments are deferred for one year.

In addition, small business owners whose businesses closed or had sales decline by 50% or more are eligible for a tax credit equal to 50% of all wages paid during the pandemic. Small businesses will also be allowed to defer their payroll taxes for 2020; 50% of those deferred taxes will be due in 2021, and the other 50% will be due in 2022.

Support For The Healthcare Sector

The stimulus provides support for states, counties, and hospitals working to contain the spread of COVID-19. In total, $117 billion will be put towards hospitals and healthcare for veterans, and $16 billion will be used to create a strategic national stockpile of much-needed pharmaceutical and medical supplies.

The bill also stipulates that group health plans and insurance providers must cover 100% of any preventive care that is directly related to COVID-19 without copays or out-of-pocket costs for patients.

Enhancements To Unemployment Insurance

Last Thursday, the Labor Department reported that a record 3.28 million unemployment claims were filed in the week ending March 21st—nearly five times higher than the previous record of 695,000 during the market correction of 1982.[4]

The stimulus adds an additional $600 per week to the standard unemployment benefit for up to four months. Also, individuals who otherwise could not receive unemployment benefits—freelancers, self-employed individuals, and independent contractors—may now be eligible.

Direct Payments To Americans

The bill also allows for one-time direct payments to many Americans. Individuals earning up to $75,000 will receive $1,200; the payment amount decreases once an individual hits the $75,000 income threshold and stops entirely at $99,000.

Married couples will receive $2,400, but the sliding scale applies to them as well. Payments decrease starting at $150,000 of combined annual income and end at $198,000. An additional $500 will also be paid out for each child in the household under the age of 17.

It is still unclear when Americans can expect to receive their stimulus payments, but Treasury Secretary Steven Mnuchin suggested that the checks will be sent within three weeks of the bill’s signing.

Finally, federal student loan payments have been suspended through September 30th, and no interest will accrue on those loans in the interim.

Final Thoughts

There are many moving pieces in the CARES Act, and the full impact on your tax and wealth management strategy will become clearer in the coming days, weeks, and months. We will be monitoring the situation closely as it develops and be following-up as needed; if you have any questions about the specifics of the bill or how it might impact your wealth management strategy, please don’t hesitate to reach out to your team at SoundView.


Melissa Bouchillon, CFP®

Melissa co-founded Sound View Wealth Advisors to realize her vision of creating an independent and client-focused boutique firm with the goal of creating a lasting, positive impact on her clients’ financial lives. Melissa is a Certified Financial Planner™, a designation awarded by the Certified Financial Planner Board of Standards, Inc. Melissa specializes in detailed, customized financial planning, including cash flow management, gifting strategies and estate planning techniques that can help families secure their financial futures through intergenerational wealth.

In addition to her passion for helping her clients, Melissa is on the board of organizations near and dear to her heart, including the Landings Military Relief Fund, Marshes of Skidaway Island and the Savannah Music Festival. She is a wife and mother, an active runner and an avid volunteer.

[1] Investopedia, Which major expenses affect airline companies? (Link)

[2] Seattle Times, Boeing reports worst full-year loss in its history, but CEO Calhoun vows ‘we’ll get through it’. (Link)

[3] CNBC, Here’s what’s in the $2 trillion coronavirus stimulus bill. (Link)

[4] CNBC, Jobless claims soar past 3 million to record high. (Link)

Disclaimer: The information, analysis, and opinions expressed herein are for general and educational purposes only. Nothing contained in this commentary is intended to constitute legal, tax, accounting, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. All investments carry a certain positive risk, and there is no assurance that an investment will provide performance over any period of time. An investor may experience loss of principal. Investment decisions should always be made based on the investor’s specific financial needs and objectives, goals, time horizon, and risk tolerance. The asset classes and/or investment strategies described may not be suitable for all investors and investors should consult with an investment advisor to determine the appropriate investment strategy. Information obtained from third party sources are believed to be reliable but not guaranteed. Sound View Wealth Advisors Group, LLC makes no representation regarding the accuracy or completeness of information provided herein. All opinions and views constitute our judgments as of the date of writing and are subject to change at any time without notice.

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