04/01/2020
Dear Client,
In an attempt to summarize the ever-changing and complex world of COVID-19, we are noting the relief already available and hopefully, shedding additional light on some of the provisions. We can’t reach out to all of you one-on-one, as much as we wish we could, so please continue to educate yourself as much as possible.
Families First Act – paid sick leave and extended leave due to COVID-19
Your official source: https://www.dol.gov/agencies/whd/pandemic/ffcra-employer-paid-leave
• This is effective today, April 1st
• Applies to private employers with less than 500 employees
• Eligible employees with a qualifying need related to the COVID-19 pandemic will be entitled to paid leave if they cannot work or telework. Note: employees that are under “shelter-in-place” orders are not considered subject to government quarantine. This provision is for specific individuals that have been ordered to quarantine themselves. Therefore, these employees would not qualify for mandated employer sick leave for this reason alone.
• Employers must disseminate the following labor poster to their staff:
https://www.dol.gov/sites/dolgov/files/WHD/posters/FFCRA_Poster_WH1422_Non-Federal.pdf?mkt_tok=eyJpIjoiTURRM016ZzRNV1kzWlRabSIsInQiOiJtaTg0cTJcL2VOSVV0WGt2VXA1WWM2SUpRaW1jbEw5TjJ2KzRmZnFDZXJQUk5KZGV3Rm9qWUxMVnlZaUJlTkhZZGUybEF5T05aSEp6U1NMYjlRZG9oZUN1REZ4T09xSjZ0dEdZRStyRXVxaXh1TnNwNHJndkpzTXZ1a3NhVEM2WG4ifQ%3D%3D
• Covered employers will be entitled to off-setting or partially-offsetting tax credits for these payments.
• Most major payroll companies have new payroll codes for employees that fall into either the higher, two-week emergency sick leave or the lower up-to-twelve week expanded family medical leave act.
Our advice: if you are paying a full salary to staff that qualifies, start tracking your eligible employees’ time now. The DOL has clarified that workers whose ability to work has been diminished, would still qualify. Also, pay attention to your payroll company’s email alerts and read the Department of Labor FAQs. https://www.dol.gov/agencies/whd/pandemic/ffcra-questions
CARES ACT – provisions for expanded unemployment benefits
Your official source: your state’s department of labor and workforce. For SC residents, https://dew.sc.gov/covid-hub
• Workers will be eligible for a $600 weekly boost on top of regular state unemployment benefits.
• Gig workers, freelancers, and the self-employed are all eligible.
• The SCDEW has updated their application to include self-employed workers as of yesterday.
• Unemployment application systems are overwhelmed so keep trying.
• If employees are still employed but making a fraction of their regular pay, they can qualify for benefits to cover the difference.
Our advice: if you are considering temporarily laying off your workforce, look into filing a claim on behalf of your workers. You will be able to rehire them once funding is available to your business. If you are self-employed and work has dried up, apply for benefits.
CARES ACT – Employee Retention Credit
Your official source: https://www.irs.gov/newsroom/faqs-employee-retention-credit-under-the-cares-act
• Employers with fully or partially suspended operation during 2020 due to government orders to limit commerce, travel or group meetings or those with a significant decline in gross receipts during the calendar quarter, qualify for this benefit.
• The payroll credit is 50% of wages paid, including qualified health plan expenses, capped at wages of $10,000 per employee, i.e. a maximum credit of $5,000 per employee.
• The credit will be provided in the form of a refundable payroll tax credit on the employer’s Form 941 for the quarter.
• Employer’s may withhold their payroll tax payments up to the credits they will receive for the quarter.
• Employer’s may receive both the benefits on the Families First Coronavirus Act for expanded sick and family leave and the Employee Retention Credit, but not on the same wages.
• NOTE: SC withholding payments as well as sales tax are deferred until June 1, 2020 https://dor.sc.gov/emergencies. Please check your state’s revenue website for potential deferral dates.
Our advice: not ALL employers will qualify but at this time, under the IRS’s wording of those affected, we feel most will. We don’t have guidance on what may be required to substantiate the decline in operations. We suggest keeping a log of all the ways this pandemic is affecting daily business. For example, if you are a realtor, you may want to record showings and listings to compare with this time last year, a contractor may see a delay in delivery of materials or may have a project start date pushed back, an attorney may have to delay work because courts are closed. This log will help create a paper trail.
CARES ACT – delaying payment of Employer’s Social Security tax
Your official source: we were unable to find an updated IRS page for this provision currently. Here is a link to a good article that lays out the benefit and discusses the pit-falls: https://www.lanepowell.com/Our-Insights/200505/Who-Really-CARES-How-the-Delayed-Payment-of-Employer-Payroll-Taxes-Will-Help-Business-Until-it-Hurts
• Employers may withhold the Social Security tax portion of payroll taxes (6.2% of Social Security Wages) from now through the end of the year. Note: this does not apply to the employer’s Medicare portion.
• Self-employed individuals are afforded the same delay.
• 50% of the withheld Social Security will be payable December 31, 2021 with the final 50% due December 31, 2022.
• Employers that receive a loan under the SBA’s Payroll Protection Program will not be eligible for this delay.
Our advice: this provision is tricky, at best. If the employer is applying for the 7(a) PPP loan (discussed further below) and has the funds to pay employees and tax payments, you may want to forego this option. Note that if the employer qualifies for the Employee Retention Credit, the employer could withhold all payments up to the $5,000 per employee anyway. If cash flow is tight, you could potentially retain the tax now and pay it in once the PPP funds are received. Self-employed individuals will not owe estimated tax payments until June 15th anyway so by then, they should know if they have been approved for a PPP loan. Be very careful with payroll taxes as the IRS is not lenient if these amounts are not paid in full when due, even if that date is a year and a half from now.
SBA Loans – the Economic Injury Disaster Loan and Loan Advance:
Your official source: https://www.sba.gov/page/coronavirus-covid-19-small-business-guidance-loan-resources. Here’s a great article on this and the PPP loan discussed below: https://www.forbes.com/sites/brianthompson1/2020/03/29/getting-cash-for-your-small-business-through-the-cares-act/ (may be slightly dated as some of the terms have been adjusted – see SBA website for specifics).
• Small business owners that were in operation by January 31, 2020, are eligible to apply for the Economic Injury Disaster Loan (EIDL) and advance of up to $10,000. Also, available to sole proprietors or independent contractors.
• These loans are up to $2 million, term of 30 years, interest at or below 3.75% and the first month’s payment is deferred for a year. No fees, guarantee fees or prepayment fees of any kind.
• EIDLS are approved directly by the SBA and based solely on an applicant’s credit score.
• Loans less than $200,000 require no personal guarantee.
• Borrowers can receive $10,000 in an emergency cash advance that can be forgiven if spent on leave, maintaining payroll, increased costs due to supply chain disruption, mortgage or lease payments or repaying obligations that cannot be met due to revenue loss.
Our advice: apply right now! Follow this link to apply for the SBA disaster loan directly: https://covid19relief.sba.gov/ #/. It’s a streamlined process so most of the information requested you will have at your fingertips. Additionally, the application requests the business’s gross revenue for the 2.1.19 – 1.31.20 fiscal year, as well as the cost of goods sold for the same period.
SBA Loans – the 7(a) Paycheck Protection Program (PPP):
Your official source: same as above. Here’s an article highlighting some of the unknowns in this program: https://www.forbes.com/sites/peterjreilly/2020/03/28/paycheck-protection-programdevilish-detailssome-uncertainty/ . Also, you can find a PPP loan fact sheet produced by the Treasury here:https://home.treasury.gov/system/files/136/PPP--Fact-Sheet.pdf
• Small business owners with fewer than 500 employees and self-employed individuals, sole proprietors and freelance workers are all eligible for this program, if the business was in operation before February 15, 2020.
• Loans are equal to 2.5 times the average monthly payroll costs, including wages paid to employees up to $100,000 annually, as well as sick leave, healthcare and other benefits during the 1-year period before the date on which the loan was made.
• Maximum interest rate is .5% with a loan term of 2 years.
• This loan will be fully forgiven if the funds are used for payroll costs, interest on mortgages, rent, and utilities. At least 75% must have been used for payroll. Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels.
• Loan payments are deferred for six months. No collateral or personal guarantee is required.
• You apply for this loan through your participating lender of choice. The SBA will begin accepting applications April 3rd.
• Sample application form can be found here: https://www.sba.gov/document/sba-form--paycheck-protection-program-ppp-sample-application-form.
Our advice: this loan program is too good not to explore. We recommend you touch base with your lender of choice as soon as possible to begin the process.
These benefits intersect in ways that are currently clear and in other ways that are definitely not. Of most pressing importance, employers that can layoff their workforce can do so now and re-hire that workforce once the SBA loans are approved. It’s not an either-or decision, but rather one of timing.
Health insurance – a note from our client Benefit Concepts, a local health insurance agent:
• The CARES Act—Paycheck Protection Program—considers health insurance premiums to be an eligible expenditure for the loan program.
• Insurance carriers are showing extreme flexibility regarding premium payments and late payments. It is the responsibility of the business owner to reach out to either their Broker or Insurance Carrier for help. Ask for a payment plan. Be ready to tell the carrier’s billing department how much can be paid and when they can expect to get paid. The health insurance carriers want to keep people covered.
• Employees that are laid off and lose health insurance as a result have several options to consider and should consult with their broker on which route is best for their personal situation:
o COBRA. Groups with 20+ employees are required to offer COBRA. In summary, the employee pays the full cost of the coverage and continue on COBRA for up to 18 months. But can they pay the premiums? In most cases, probably not.
o Individual ACA Plans. Loss of employment and loss of coverage are qualifying events that will open the door into the individual marketplace, aka www.healthcare.gov. It’s possible that some could get a health insurance plan at a greatly reduced premium through this channel.
o Short Term Coverage. This is a more catastrophic means of coverage but is the lowest in cost. It is a temporary plan and the applicant must pass a few health questions in order to get approved.
o Medicare. Are you 65 years of age or older? If so, chances are good you can transition over to Medicare.
• Health Insurance carriers are covering the costs of testing for COVID-19 in full. Insured members should not incur charges if being tested. As of this week, the costs for treating COVID-19 are subject to normal cost share provisions of the health plan, i.e. copays, deductibles and coinsurance.
Our advice: contact a health insurance agent, such as Sara DeBiasi with Benefit Concepts at [email protected] for your options.
If Nikki or Katie have spoken with you about these or other potential benefits, you should still refresh yourself on these provisions. Our understanding is changing rapidly, along with the information we are receiving and digesting.
Keep yourself informed as much as possible!
The .gov means it’s official. Federal government websites often end in .gov or .mil. Before sharing sensitive information, make sure you’re on a federal government site.
