A GOOD NEWS AND BAD NEWS FOR EMPLOYERS New Paycheck Protection Program Flexibility Act HR 7090 PPPFA 980x719 1

For years I have used the idiom “It will take an Act of Congress” when there was something difficult needing to get done. Surprisingly, when it comes to Coronavirus legislation impacting employers, we have had several Acts of Congress. Yet, instead of helping get things like the Paycheck Protection Program (PPP) and Loan Forgiveness “done” for the many businesses who desperately need it, the seemingly endless new and updated legislation is placing more demands on businesses than ever before.

When I asked a colleague her opinion of the new Paycheck Protection Program Flexibility Act (PPPFA) HR 7010 just signed into law on June 5, 2020, she replied, “The good news is we have a new Act of Congress called the PPPFA. The bad news is, we have a new Act of Congress called the PPPFA.”

With more hoops to jump through, more burden to shoulder, more time, effort, and vigilance required, Employer Advantage is working hard to assist our clients in navigating COVID-19 legislation in order to ensure compliance and the ability to take advantage of the critical aid available.

Here’s a basic overview the Paycheck Protection Program Flexibility Act:


Small business owners now have more flexibility in using their PPP loan through the new Paycheck Protection Program Flexibility Act:

  • Lengthens the loan forgiveness period from eight weeks to 24 weeks.
  • Lowers the amount of PPP funds that must be spent on payroll from 75% to 60% and allows 40% for other qualifying expenses.
  • Delays employer payroll tax payments through the end of 2020.
  • Exempts borrowers from the FTE loan forgiveness reduction if borrowers are unable to return to the same level of business activity as before February 15th due to COVID-19.

THE BAD NEWS                  

The Act’s provisions are complex. For small business owners who are already struggling to maintain updated information on financial resources, handle unemployment insurance challenges, and manage workplace health and safety issues as businesses reopen, the additional burden of trying to understand and adhere to the PPPFA can seem overwhelming.


PPPFA extends the time in which to use funds. For new and existing loans, the loan period will start on the day the loan was disbursed and will end on the earlier of 24 weeks (168 days) after the loan disbursement date OR December 31, 2020.  Companies who received loans prior to June 5, 2020 may still elect to use the eight-week covered period from the original CARES Act.  Businesses can still apply for loans.

PPPFA reduces the payroll portion requirement of the loan from 75% to 60%.  The Act does not change the list of non-payroll expenses eligible for forgiveness (rent, mortgage payments, utilities, and interest on loans).  It does increase the portion of the loan, from 25% to 40%, that may be spent on non-payroll expenses.

PPPFA extends the Safe Harbor deadline for FTEs and Wages.  The original CARES Act had a Safe Harbor from reducing the loan forgiveness, for companies who were able to restore their FTE count and any wage reductions made between February 15 and April 26, 2020.  With the PPPFA, the Safe Harbor date has changed from June 30, 2020 to December 31, 2020 to return FTEs and wages to the February 15, 2020 levels.  PPPFA clarifies that loan forgiveness will not be reduced if the company is unable to rehire employees and can show:

  • Written job offers to former employees who were employed as of February 15, 2020 (and subsequently not accepted), or
  • Documentation that the company is unable to hire similarly qualified employees for unfulfilled positions by December 31, 2020.
  • Documentation that the company cannot operate at the same pre-February 15, 2020 levels due to compliance with COVID-19 requirements from Health and Human Services, CDC, and/or OSHA from March 1, 2020 to December 31, 2020.
  • Additional clarification and technical corrections are already in progress and will be introduced in the upcoming weeks.

We understand that you may have additional questions. Please contact us if you would like further assistance with COVID-19-related business challenges or any other employee administration and compliance responsibilities: Info@EmployerAdvantage.com | 800.467.3909

We are hosting a free webinar on Loan Leniency: The Paycheck Protection Program Flexibility Act | Thursday, June 11, 2020 at 11 a.m. CST. Click HERE to register to watch live, or after June 11th on demand.

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