On Saturday, August 8, President Donald Trump signed four separate executive orders after congressional Democrats and Republicans were unable to come to an agreement over stimulus legislation. The executive orders have left many questions over what relief they will provide, and whether they can withstand legal scrutiny.
Payroll Tax Deferral
President Trump has directed Treasury Secretary Steven Mnuchin to defer the withholding, deposit, and payment of employee payroll taxes for some employees for the period of September 1, 2020 through December 31, 2020. The direction for a deferral only applies to employees who make less than $4,000 on a pre-tax basis during a bi-weekly pay period.
The deferral would prevent the imposition of interest and penalties, and further directs Secretary Mnuchin to explore methods, including legislation, to eliminate the obligation altogether. To accomplish this deferral, President Trump calls on Secretary Mnuchin to use the same qualified disaster authority he used to extend the income tax filing deadline from April 15th to July 15th this year.
Political and legal commentators are questioning the legality of the order, and criticizing the potential long terms effects it may have on Social Security. The order may do little to provide actual relief, since many employers may hesitate to stop withholding payroll taxes that are not forgiven but simply deferred.
Student Loan Payment Deferral
President Trump has directed the Secretary of Education to extend the deferral of student loan payments through December 31, 2020. Previously at the beginning of the pandemic, President Trump had requested a 60-day deferral, which was later extended through September 30, 2020 by the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Individuals that wish to continue making payments may still do so.
President Trump has redirected disaster relief funds in order to support lost wage payments and has called on the states to use the funds to create a new program – the “lost wages assistance program” – to provide for an additional $400 per week in unemployment payments. The additional payments would extend through December 27, 2020.
To obtain Federal funds for the increased unemployment payments, state governors must agree to a cash-sharing requirement, whereby Federal funds would cover $300 and state funds would cover the remaining $100. The executive order encourages states to identify other funds to continue the payments if and when the Disaster Relief Fund is reduced to $25 billion.
State governors are already criticizing the executive order, indicating that additional funds to pay the required contribution of $100 may not be available.
Renter and Homeowner Assistance
President Trump has indicated that his administration will minimize, to the greatest extent possible, evictions and foreclosures during the COVID-19 pandemic. To do this, President Trump has directed the Secretary of Health and Human Services and the Director of the Centers for Disease Control and Prevention to consider temporary measures to halt residential evictions which may be necessary to prevent the further spread of COVID-19. The executive order directs them to identify Federal funds that could provide financial assistance for those who are struggling to pay their monthly rent or mortgage.
The effects of this executive order are still unclear since it does not outright ban evictions, but instead instructs agency leaders to review whether a ban is necessary and identify funds that may be used.
We will continue to keep you informed as additional information becomes available and relief package negotiations continue. Please consult with your HBK advisor to determine whether and how you may be impacted by the recent executive orders.