Making Sense of Washington's Coronavirus Relief Package

Over the last few weeks Congress has worked aggressively to provide financial and economic stability in the wake of the Coronavirus health crisis. As of March 30, 2020, there have been three different acts passed by Congress and signed by the President addressing different aspects of the coronavirus (COVID-19) crisis. The Famlies First Coronavirus Act was the second act pass by Congress on March 18th. On Friday, March 27th, the CARES Act was passed, marking the third piece of legislative action to address the economic volatility facing our nation. With over 1,000 pages in the collective bills, there is a lot of information to digest. There are several provisions that specifically apply to physicians and dentists and can help you through this difficult time.  

Family Aid

CARES Act Resources for Doctors

Student Loans 

The student loan crisis affecting borrowers is well documented, and it’s no secret that physicians and dentists have unique complexities based on the size of their loans, repayments options, and the possibility of loan forgiveness.  

There are a couple beneficial developments specifically designed to help student loan borrowers. It is important to note that law only applies to borrowers of federal student loans.  

1. The interest rate on federal student loans is temporarily set at 0%, through September  30th, 2020. 
2. Borrowers making any form of Income Driven Repayment should expect to have their payments suspended until September 30th, 2020. (CARES Act Section 3513(a)) 
3. Borrowers pursuing Public Service Loan Forgiveness will receive credit toward the required 120 payments even during the months that the Department of Education suspends payments. 

Access our detailed article on Student Loan Changes HERE. 

Small Business Loans 

Like many small businesses across the country, most partner-owners in medical or dental practices, are experiencing a significant drop in revenue as a result of the response to the corona virus health risk. This has created enormous challenge and stress in meeting payroll and other operating expenses. 

The CARES Act aims to provide help to these practice owners directly through two very favorable loan options: 

1. 1. 1. Paycheck Protection Program – these loans are originated through your established banking relationship and provide funds equal to 250% of your monthly payroll. The most attractive feature of this program is that the loan is completely forgiveable if the funds are used on “allowable expenses” (payroll, rent, etc) within 8 weeks of loan originations. Even if there is part of the loan that is not forgiven, the  interest rate is just 0.5% and can be repaid over two years. 
      2. Economic Injury Disaster Loans – these loans are originated directly through SBA.gov and are more flexible in their use, but only $10,000 of the amount borrowed can be treated as a grant which doesn’t have to be repaid. The interest applicable to medical and dental practices is  3.75% and the loan can be repaid over a term up to 30 years in some circumstances. The EIDL funds are designed to provide working capital for a business. 

Download our detailed guide to CARES Act Provisions for Small Business HERE. 

Personal Relief

To provide direct help to individual Americans, there are several key provisions of recent legislation that may help physicians and dentists. 

1. 1. For individuals with income under $75,000 (most residents and fellows), the Treasury will be issuing checks (or direct deposit) for $1,200. The amount is doubled for households with less than $150,000, though there is a phase out above these income levels. If you’ve filed a tax return in 2018, you should not need to take any action to receive these funds. 
   2. In 2020, employers (including hospitals or private practices) can provide up to $5,250 in tax free funds to employees for payment toward their student loans. This may be a benefit added to many employment contracts for new providers this year. 
   3. The IRS is waiving the 10% penalty for 2020 on premature withdrawals from pre-tax retirement accounts (e.g. IRA, 401k and 403b plans) Even the income tax that would be due can be spread of three calendar years (2020, 2021, and 2022) to help minimize the impact. 
   4. Retired individuals over age 72 typically have to take Required Minimum Distributions from retirement accounts each year (and pay income tax on the withdrawal). This requirement is waived for 2020 and applies to beneficiaries of inherited IRA accounts as well. 

Download our detailed guide to CARES Act Provisions for Individuals HERE. 

Final Thoughts

During good times and bad, we’re here to help you make smart decisions with your money. If you have immediate questions, please click here to get in touch with an SDT Advisor.

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