White House 2020 $2T Stimulus Package: How It Impacts You

The White House has agreed to the first Fiscal Stimulus Package in over 10 years, effective Friday, March 26. This bill does not have the same mandate as the rescue plan of 2008. Whereas the rescue plan dealt with shaky financial institutions, this is a relief bill to help ordinary Americans weather the health crisis through a wide variety of initiatives.

How does this impact you, and what are the eligibility requirements?

How does the bill impact your retirement accounts?

If you can provide certification/confirmation to your plan administrator that you: 1) have been diagnosed with COVID-19, 2) have a spouse who has been diagnosed with COVID-19, or 3) have experienced adverse financial consequences from quarantine (business closure, laid off, etc.), then the following actions may be taken on 401(k) and IRA retirement accounts:

• If under 59 ½, Retirement Account owners are eligible to make a distribution of up to $100k without paying the 10% early withdrawal fee.
• The sum withdrawn may be re-contributed to a retirement account within three years, without being subject to the usual annual contribution caps.
• If the account is not repaid, the withdrawal will be taxed as ordinary income tax rates over a three-year period.
• You can make a Roth conversion with this distribution. Before you typically must take out RMDs before making a Roth conversion.
• If you’re 70 1/2 or older this year, you can give up to $100,000 directly from your IRA to charity in what’s known as a charitable IRA rollover, or a charitable qualified distribution. Normally this type of rollover counts towards your RMD.

How will this impact Corporations?

The bill includes but is not limited to:**

• $100B in grant assistance to healthcare providers, to help respond to and prepare for the virus cases, including equipment, telehealth, and insurance reimbursements.
• $350B in loan assistance provided to small businesses assuming economic loss, in an effort for job retention and debt relief on existing loans.
• $500B in loan assistance for corporations in industries that have been hurt by the outbreak. This includes airlines, potentially in exchange for equity stakes taken by the treasury, and relief for companies which are part of the country’s national security.
• $150B in state and local stimulus funding, for expenses related to COVID-19 and costs related to significant unemployment levels.
• Corporation lending will be administered by the US Treasury through Federal Reserve emergency lending facilities, which new activity will be announced to the public over time.
• Firms who accept loans from the program are required to suspend any dividend payments and share repurchase agreements, ban all labor force cuts of 10% or more, and implement compensation caps for executive pay employees.
• Airlines receiving loans must maintain service to existing destinations and routes. Air travel excise and fuel taxes will be suspended for all of 2020. In addition to the loan program, $32 billion is earmarked for payroll assistance for airlines and contractors.
• In addition to lowering rates to 0, and implementing the first Quantitative Easing major asset purchase program since the 2008 Financial Crisis, the Federal Reserve has provided emergency funding access and waived capital adequacy requirements for Banks, so they can provide loan accessibility to households and businesses impacted by COVID-19.

**We will update this section as more details are released by the Treasury.

While the bill does not specifically single out any industries in which our holdings have direct exposure, we continue to monitor our existing portfolio holdings over time, as more details arise from the corporate stabilization efforts made by the federal government.