The CARES Act passes: what this means for Social Security

On Friday, President Trump signed the biggest stimulus bill in United States history into law: a mind-boggling $2 trillion relief package passed by unanimous Senate vote last Wednesday and passed by voice vote in the House by Friday.

Both in its scope and speed of passage (especially given the vitriol between party lines), the CARES Act is one for the record books. In a Congress that has seemed hopelessly divided, the COVID-19 crisis has united lawmakers in a way the public hasn’t seen in a very long time.

On a personal note, we can only hope that as time moves forward, our elected officials don’t forget the time they tabled partisanship to act quickly on behalf of the public. And that they apply this experience to all financial troubles lurking in the distance.

Obviously the hottest topic in the package is the issuance of direct relief checks to Americans, followed by the many provisions made to business owners to help them get through hard times. But much of this information is being analyzed through the lens of current workers and employers—not retirees.

So, we’re asking the question: how do the different pieces of the CARES Act affect retirees and the Social Security program?

Luckily, the House Committee on Ways and Means has given us a refreshingly simple and direct answer in the form of a one-page fact sheet:


The two biggest pieces of concern with regards to beneficiaries are 1. eligibility for those rebate payments and 2. the payroll tax delay for employers.

The simple answer to the first concern is yes. Both Social Security retirement beneficiaries AND Supplemental Security Income beneficiaries ARE eligible for the rebate payments. Everyone with a Social Security Number and an income less than $75,000 will be eligible for the full rebate of $1,200 and $500 for each child. At higher income thresholds, this rebate payment will be lower.

It is also worth noting that ALL Social Security beneficiaries will be eligible. This includes retirement, disability, and survivor beneficiaries.

When it comes to receiving your rebate, most people will get it from the IRS automatically if they’ve filed their 2019 or 2018 tax return.

If you do not file a return, you may need to file a different kind of return to make sure you receive your rebate. Part of the CARES Act directs the SSA and Treasury to conduct a public awareness campaign to make sure the public knows who should file in this way and how to go about doing so, so stay tuned for more instructions if this applies to your situation.

Now for concern #2: will delaying payroll tax contributions from employers have a detrimental affect on Social Security’s solvency?

The CARES Act allows employers another two years to make their 6.2% payroll tax contributions. By the end of 2021, employers will have to make 50% of their 2020 payroll tax contributions, and by 2022, they will have to pay the full amount.

This is essentially a loan being made to businesses in light of tough economic times—NOT a tax holiday. Full payment of those taxes will be expected in full by the end of 2022. The amount employers will have to pay is not being forgiven or reduced, just postponed until things get better.

And at the same time, while employees and retirees are receiving rebate payments, they will NOT be receiving any similar delay or reduction on their portion of the payroll tax bill. Workers will continue to see payroll taxes come out of their paychecks as they always do.

The takeaway is this:

  • Social Security is NOT going to crash and burn the second employers stop paying in. Workers will still be making regular contributions to the Trust Fund while this bill is in effect. Beneficiaries will still receive their full scheduled benefits. Don’t panic.
  • At this time, under the provisions of this bill, the projected insolvency date will not change. Employers will still be 100% on the hook for all owed payroll taxes from 2020 by 2022—this is not the same thing as the 0% payroll tax proposal. Now, we could talk about how lay-offs, furloughs, and rising unemployment could seriously adjust that insolvency date in time, but that’s another story. As it relates to strictly the payroll tax delay provision, the Trust Fund will NOT be eroded because the money will be paid in its entirety in two years.