As employers, we know that the Covid-19 pandemic will have an unprecedented impact on our employees. From loss of childcare due to school closures, reduction in family income because of a spouse’s layoffs, or the added expense of caring for medically fragile loved ones, our workforces are likely to be under extreme financial pressure.

Now you have a way to help:

On Friday, March 13, 2020, President Trump declared a national emergency regarding the Covid-19 pandemic, specifically invoking the Stafford Act. Among other things, the Stafford Act officially recognizes the pandemic as a qualified disaster as defined by Internal Revenue Code Section 139. This section of the code also provides that qualified disaster relief payments from any source, including employers, which reimburse or pay individuals’ specified expenses in connection with qualified disasters are not taxable as income and are not subject to employment taxes or withholding.
As defined by the IRS, qualified disaster relief payments include payments received for reasonable and necessary personal, family, living, or funeral expenses incurred as a result of a qualified disaster.

This means you do not have to rely on an existing employee hardship fund. The national disaster designation changes the rules about who can be considered eligible and opens the door for other types of charitable support. Now an employer can use funds from its private foundation or an employer-sponsored donor advised fund to provide direct employee assistance for Covid-19 related expenses. Employers may also provide direct assistance through a non-exempt fund, which would also not be taxable as income for the recipient.

Detailed information on employee assistance and qualified disasters can be found in IRS publication 3833 and on the IRS Disaster Relief Information page.

If you have questions or need additional information about how to assist your employees through this difficult time, please contact us. We’re ready to help.