Understanding the Coronavirus Aid, Relief, and Economic Security (CARES) Act

USAA Community CARES Act.jpg

I’ve read these words in a lot of different places: These are unprecedented times. I can’t argue. And we are all living them and looking forward to the time when we will be able to look back and reflect on how we came together to win this fight. Overcoming the novel coronavirus pandemic requires that we all do our part. As individuals, it could be as simple as following social distancing guidance, not panicking and being a good neighbor and friend.  For our economy, that means monetary and fiscal moves to keep things on the rails until we get to a better place.

The recently passed $2 trillion plus, Coronavirus Aid, Relief, and Economic Security (CARES) Act is the biggest fiscal move yet – and delivers a wide range of relief. The law is laid out in approximately 250 pages of text.  Here, I’ll use about two pages to highlight some of the major provisions for individuals and small businesses.


  • Direct cash payments. If you’re eligible, the “recovery rebate” a stimulus should be in your hands soon.  At $1,200 per person and $500 per eligible child (under age 17), these payments will provide individuals and families with a small measure of relief. Beware of scams suggesting the need to apply for these rebates; no application is necessary.

  • Expanded unemployment benefits. By both expanding eligibility rules –  for example including self-employed and independent contractors expanding benefits by up to  $600/week for four months – and extending the overall length of benefit eligibility to 13 additional weeks, these provisions will help the millions who have lost jobs as we shut down the country to fight the virus. While the federal government will fund these enhancements, the programs will continue to be run by your state unemployment agencies. So, seek assistance and clarification through those offices. And be patient.

  • Student loan provisions. Federal student loan payments are suspended. This applies only to Direct loans and FFEL loans held by the Department of Education. Interest will not accrue and for credit scoring purposes, will be reported as current. Learn more at studentaid.gov.

  • Eviction moratorium and mortgage forbearance. Properties lived in or owned with federally backed mortgages (VA, Fannie Mae, Freddie Mac, etc.) will be subject to a 120-day eviction moratorium for non-payment (ends 7/24/2020) and forbearance (for the property owner) of the mortgage payment. Only scheduled interest will accrue while the payment is not made. This forbearance provision is for 180 days. If you’re not sure if your loan qualifies, contact your mortgage servicer. Here again, for credit reporting purposes, the loan will be considered current.

  • Easier access to retirement funds. First, the law doubles what you can take as a loan from your employer plan like a 401(k) – from the lesser of  lesser of 50%, or $50,000, of your vested balanced in the current provisions to 100%, or $100,000, of your vested balance now. Next, the law allows you to make up to $100,000 for coronavirus-related distributions without an early withdrawal penalty. You’ll still have to pay ordinary income tax but will be able to spread the payment out over three years. To qualify for the distribution, individuals need to fall into one of two main categories: You, your spouse or a dependent is diagnosed with COVID-19, or you experience adverse financial consequences as a result of being quarantined, furloughed, laid off, having work hours reduced, being unable to work due to lack of child care or closures related to the coronavirus pandemic.

  • Eliminates 2020 RMDs. If you’re required to take a Required Minimum Distribution (RMD), you don’t have to this year. That’s a good thing as you don’t want be forced to unnecessarily sell what could be a hard-hit portfolio. Also, those who turned age 70-1/2 last year (2019) and who had planned to take their first RMD by April 1, 2020, are eligible for this waiver.

Small Business

  • Expanding SBA programs (visit www.sba.gov to learn more)
    • Access to SBA. The law creates access to SBA programs for newer businesses and lightens eligibility requirements. Sole proprietor, self-employed, gig-economy workers may now be eligible. The idea: Help small businesses keep the lights on and employees working during this difficult time.

    • Forgivable SBA loans. A new Small Business Administration Paycheck Protection Program rolled out as part of the law will offer loans of up to 2.5 times average monthly payroll. The portion of the loan used for payroll, rent, mortgage interest and utilities will be forgivable, and loan payments will be deferred for six months.

    • Economic Injury Disaster Loans and Grants. Normally a part of natural disaster relief, this program is being used to deliver working capital to small businesses, including a new $10,000 advance that will provide immediate (within three days) relief for suffering businesses and does not have to be repaid. Visit the SBA website for a streamlined application. The application is made directly to the SBA, not your local bank, and the application form is now available at: https://covid19relief.sba.gov/#/ 

    • Small Business Debt Relief. The SBA will pay the principal and interest of new 7(a) loans issued prior to September 27, 2020 and current 7(a) loans for six months.

  • Employee retention credits. Employer will receive tax credits for their portion (6.2%) of the payroll tax they pay. This is capped at 50% in the first $10,000 of eligible wages.

That’s a very brief summary of some of the many provisions of the new law. For more information on the host of small business-targeted programs, visit the SBA website and www.treasury.gov/cares. Given the magnitude of the situation, it’s safe to say that more relief will follow. Stay well.



About the Blogger: JJ Montanaro is a Certified Financial Planner® professional and part of the Military Affairs team at USAA. He’s a graduate of the U.S. Military Academy and has over 20 years of financial planning experience.



Certified Financial Planner Board of Standards, Inc. owns the certification marks CFP® and CERTIFIED

FINANCIAL PLANNER™ in the United States, which it awards to individuals who successfully complete the CFP Board’s initial and ongoing certification requirements.

The information contained is provided for informational purposes only and is not intended to substitute for obtaining professional financial advice. Please thoroughly research and seek professional advice before acting on any information you may have found in this article. This article in no way attempts to provide financial advice that relates to all personal circumstances.


Photo from shutterstock.com



New Member

Great Info. Thanks USAA...! 

Briana Hartzell USAA

Thanks for commenting @DxJay, I am so glad you found it helpful! 

New Member

USAA does not participate in the Payroll Protection Program to help small business. Very, very disapointed! 

New Member

I was just getting ready to research this for my own small business, so thank you for posting.

New Member

Thanks for addressing this issue. As a self employed person I am having difficulty finding answers or any help on applying for a PPP. The SBA is swamped and not returning calls very quickly. That's understandable. I called USAA and I was told that USAA could. To assist me in processing an application because they are not an SBA lender.


could you point me in the right direction? I don't have any other banks that I use so I'm feeling a bit stuck.



New Member

Like many people I have temporarily lost my income due to the coronavirus.  I asked about forbearance and apparently instead of allowing the payment to be moved to the end of the loan or the term extended they want full payment at the end of forbearance.  Hello!  How do you expect us to create the lost money when some of us don't have a job right now and can't even consider getting one until the shutdown is over!  How do you expect people to magically make up the lost money?  I have had my insurance, auto loan, mortgage and banking with USAA for over 20 years and never even once had a late payment on anything.  If this is how we are going to be treated then maybe I should consider taking my business elsewhere.  Thanks for nothing USAA!

New Member

Great information. Thanks USAA.

New Member

Thanks JJ for the summary of the high points. But what about the low points? As most of us are citizen-soldiers -retirees, what is embedded in CARES that we are going to end up paying for long term? I realize you only have a limited amount of space to share in your BLOG, and it does take time to write cognitive, essential thoughts. I hope you will take time in the coming weeks to continue to break down CARES for those of us not embedded in finance and the legal industry, to explain more fully about "who gets what".


A grown-up Brat and former USArmy officer. Essayons!


Re:  Eliminating RMDs for 2020....  Current law permits return of RMD withdrawals to an IRA if done within 60 days. Those of us who took RMDs early in the year (January) were beyond the 60 day cutoff when CARES was enacted.  We will not benefit from the CARES elimination of the RMDs unless Congress extends to the end of 2020 returning (i.e., rollover) the money back to the IRA.  

New Member

At least two things are not clear about the stimulus payment.  (1) Dependents 17 and over are not eligible for the $500.  They have filed their own tax returns but are claimed as dependents on their parents return.  It appears they are not eligible either on their own or with their parents for the stimulus payment.  (2) If a person dies in 2018, 2019, or early 2020 is their family still eligible for the $1200 for that person?