Updated as of 4/1/20 – see new information in red
The PPP section (last section of this Q&A) has been updated as of 4/1/20 – see new information in red (please click on each tab to see any changes to existing questions and answers that have been updated).
In this uncertain time legislation is being issued daily and it is overwhelming to say the least. We understand that this is extremely stressful and we are here to help. Please review the information below and consider how these various pieces of legislation relate to your individual facts and circumstances as each business has its own unique situation. If you have additional questions please contact us.
Families First Coronavirus Response Act (FFCRA)
Employers are required to pay qualified sick leave wages for 2 weeks depending on the reason for an employee’s absence related to COVID-19.
If the reason for absence is one of the following they will be eligible for their full rate of pay (up to a maximum of $511 per day and $5,110 over the entire paid sick leave period):
-is subject to a Federal, State, or local quarantine or isolation order related to COVID-19
-has been advised by a health care provider to self-quarantine related to COVID-19
-is experiencing COVID-19 symptoms and is seeking a medical diagnosis
If the reason for absence is one of the following they will be eligible for 2/3 of their full rate of pay (up to a maximum of $200 per day and $2,000 over the entire paid sick leave period):
-is caring for an individual or is in self-quarantine
-is caring for a child whose school or place of care is closed for reasons related to COVID-19
-is experiencing any other substantially similar condition that may arise, as specified by the Secretary of Health and Human Services.
Employees can take expanded family and medical leave using accrued paid sick leave or substitute accrued vacation or other sick leave in existent under the employer’s policy. For the following 10 weeks employee would receive an amount no less than 2/3 of their regular rate of pay for the hours normally scheduled to be worked. The employee cannot receive more than $200 per day or $12,000 for the 12 weeks that include both paid sick and expanded family and medical leave if the reason for the leave is school or childcare related due to COVID-19.
Businesses with less than 500 employees. A small business election is available for businesses with less than 50 employees if the business meets criteria set forth by the DOL. More regulation is expected in the near future on this.
FFCRA goes into effect on April 1, 2020 and applies to leave taken between April 1, 2020 and December 31, 2020. This is NOT retroactive to prior to April 1, 2020.
Businesses are eligible for reimbursement of the costs of the leave through refundable tax credits (you should obtain appropriate documentation for your records and ensure that the appropriate IRS forms are completed to claim a tax credit). You should obtain documentation from affected employees to support their leave to the extent permitted under the certification rules for conventional FMLA leave requests.
If employees can telework they are not eligible for this compensation.
No. The employer and employee should agree upon intermittent sick leave or alternate schedules. Collaboration between the employer and employee is key.
No but your employees may be eligible for unemployment insurance benefits. This is true whether the business closes the worksite for lack of business or if required to close under a federal, state or local directive.
NOTE – If a business closes before all leave is taken the business must pay for any paid sick leave or expanded family and medical leave used before the business closed.
No – only the amount stated under FFRCA can be taken as a tax credit.
No – if there is not enough work or business for employees they are not required to be paid under FFRCA.
Emergency Injury Disaster Loans (EIDL)
These are loans may be used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid because of COVID-19.
These loans can be paid over 30 years, there is no fee to apply and a business may receive up to $2 million at either a 2.75% or 3.75% rate. No collateral is required for this loan. There is no loan forgiveness provision within this type of loan (see below where payroll protection loans are discussed).
It can take several weeks and up to a month to be processed per SBA officials. However, an emergency grant of $10,000 was approved under the CARES Act which the SBA will distribute within 3 days. The applicants will not be required to repay advance payments even if they are subsequently denied for an EIDL loan.
The grant must be used for providing sick leave to employees, maintaining payroll, meeting increased costs to obtain materials, making rent or mortgage payments and repaying obligations that cannot be met due to revenue losses.
Relief for Workers Affected by Coronavirus Act
CARES Act Pandemic Unemployment Assistance
The CARES Act expands unemployment to those not traditionally eligible for benefits (self-employed, independent contractors, workers who can’t reach their place of work as a result of COVID-19) who are unable to work as a direct result of COVID-19.
Employees who are laid off can file for unemployment immediately upon notification from their employer without the standard 10 day waiting period.
There is also a federal emergency increase of $600 per week to each recipient of unemployment insurance for up to 4 months (and yes this could result in an employee receiving more than they would have under their regular paycheck). An additional 13 weeks of unemployment benefits will also be granted through December 31, 2020 for those who remain unemployed after state unemployment is no longer available.
Furloughed employees can collect since they are on temporary layoff.
Employees should contact their state’s unemployment insurance program as soon as possible after becoming unemployed. It generally takes 2-3 weeks after filing to receive the employee’s first benefit check (see below for employer filing which results in much faster benefit payments).
Employers must file too!
Employers are required to file employer filed (partial) claims online on behalf of their full and part-time employees whenever it is necessary to temporarily reduce work hours or there is no work available due to COVID-19. Filing employer filed claims results in employees receiving unemployment insurance benefit payments faster (usually within 48 hours for claims filed electronically).
Employees must be expected to return to work when the COVID-19 emergency ends.
The following information is needed for each employee:
- Social Security Number
- Work authorization information for non-citizens
- Date of Birth
- Whether or not they want federal and/or state income taxes withheld (GDOL will withhold 10% for federal and 6% for state taxes.)
- Earnings (Report gross wages—amount of pay before deductions— for any work they performed during the week for which you are filing. Report any vacation pay, holiday pay, and/or earnings during the week in which it was earned, NOT during the week it was paid to the employee. Report any additional income employees are receiving to the GDOL, except Social Security benefits, jury duty income, and pay for weekend military reserve duty.)
Below is a link that will take you to the necessary location to begin your filings. Please contact us if you have questions regarding these filings.
CARES Act PPP Loan
Coronavirus Aid, Relief, and Economic Security Act “CARES Act” SBA 7(a) Small Business Interruption Loans “Paycheck Protection Plan (PPP)”
All businesses (including sole proprietors, other self-employed individuals, and independent contractors) with 500 employees or less (if more than one location each location is eligible as long as there are not more than 500 employees per location)
No – repayment ability is not required to be determined by lenders. The only criteria are as follows:
Must have been in operation on 2/15/20
Had employees or paid independent contractors
Was impacted by COVID-19
Must certify its needs for the loan for ongoing operations (payroll, lease and utility payments) and that the proceeds will be used for the purposes identified below as well as the fact that they are not receiving duplicative funds for the same use from another SBA program.
No loan guarantees or collateral are required.
2.5 times the total average monthly payments made by the borrow for payroll costs (including benefits, (excluding federal payroll taxes, railroad taxes and income taxes), health insurance, commissions, sick and vacation time and retirement benefits) incurred for the 1 year period prior to the date on which the loan is made up to $10,000,000.
No – independent contractors will be required to make their own requests for PPP separately. Independent contractors can use their net earnings from self-employment not more than $100,000 in 1 year.
The period – referred to as the “covered period” is February 15, 2020 through June 30, 2020
$349 billion is provided for the program through December 31, 2020.
No – that requirement, typically in place for an SBA loan, is waived by the CARES Act for PPP loans.
Payroll costs (same as those included in payroll costs noted above), mortgage or other existing interest payments (not principal), rent, utilities)
The maximum interest rate is
4% .5% and there are no prepayment fees.
Loan payments will be deferred for at least 6 months and not more than a year and SBA is going to provide guidance to lenders on the deferment process within 30 days.
Borrowers will be eligible to apply for loan forgiveness equal to the amount spent by the borrower during an 8-week period after the loan closing date on payroll costs, interest on mortgages, payments of rent, and utility payments, in each case that were in place before February 15, 2020. Principal payments of mortgage payments will not be eligible for forgiveness.
Per the US Treasury Department, no more than 25% of the amount forgiven can be used for non-payroll costs.
The amount forgiven is reduced proportionally by any reduction in employees retained compared to the previous year and by the reduction in pay of any employee beyond 25 percent of the prior year’s compensation; however, reductions in pay for employees who have an annualized salary of more than $100,000 are not considered in this calculation.
Note – borrowers which re-hire workers previously laid off from February 15 through April 30, 2020 shall not have those numbers counted against them during such period for loan forgiveness purposes, so long as they are rehired by June 30, 2020. Cancelled indebtedness shall not be included in the borrower’s taxable income for this year.
Borrowers must apply for loan forgiveness to their lenders by submitting required documentation and will receive a decision within 60 days.
If there is a balance remaining the amount will have a maximum maturity date of 2 years after the application for the loan forgiveness.
The CARES Act provides a limitation on a borrower from receiving this assistance and an economic injury disaster loan through SBA for the same purpose. It does allow a borrower who has a disaster loan unrelated to COVID-19 to apply for a PPP loan, with an option to refinance that loan into the PPP loan. The emergency EIDL grant award of up to $10,000 would be subtracted from the amount forgiven under the Paycheck Protection Program.
Can I convert an EIDL Loan to a PPP loan?
Unfortunately not since one is administered by the SBA and the other is obtained through banks.
The PPP loans are to be administered by financial institutions under SBA Authority. We advise you to reach out to your banking relationship to see whether they are qualified to process these loans. If they are not please reach out to us so that we can make an introduction to a lender who can be of help to you.
You will be required to provide your payroll costs for the prior 12 months prior to the application for the PPP loan. If you have questions on how to perform this calculation we will be glad to assist you in any way.
Businesses and sole proprietors can apply beginning April 3, 2020 and independent contractors
and self-employed individuals can apply beginning April 10, 2020.
We have been informed that some banks already have the procedures in place to process these loans which include having a portal set up to upload the required documentation (documentation requirements are specific to individual banks). The banks have the authority to approve the loans and the application is very simple. Once an application is received by the bank the loan can be processed and the funds direct deposited to borrowers’ bank accounts within 48 hours is what we have heard.
A copy of the application can be found here:
There is a cap on the funding in total ($349B) so it is wise to begin gathering the payroll information needed to apply.
We have heard that it is expected that there will not be a requirement to prove the negative effects of COVID on a business other than the certification that is a required part of the application.
Guidance is being awaited from the SBA but it is expected that you will need the following:
- Payroll reports for 2019 and 2020 year to date showing the following by employee and/or officers –
- Gross wages
- Paid time off
- Paid vacation
- Pay for family medical leave
- State and local taxes (Form 940, 941, or 944)
- 1099’s for independent contractors (if applicable)
- Completed 2019 tax return OR 2019 profit and loss report and balance sheet
- Documentation showing:
- Funds received in the form of an Economic Injury loan obtained 1/31/20 or later
- Payments for group health care benefits including premiums paid in 2019 and 2020 year to date
- Payment of any retirement benefits paid in 2019 and 2020 year to date
For verification of forgiveness amount:
- Quarterly Forms 940, 941, or 944 for the following dates:
- March 31, 2019 and June 30, 2019
- March 31, 2020 and June 30, 2020
- Documentation in the form of canceled checks, payment receipts and bank statements showing payment of the following items from 2/15/20-6/30/20:
- Mortgage interest
- Rent payments
If a small business already has a relationship with an SBA Express lender they can access up to $25,000 with little or no paperwork. These amounts would be repaid by proceeds from an EIDL Loan or a PPP loan.