Eligible Employers Have More Time to Apply for PPP Loans

Employers that need help covering payroll costs during the pandemic will have an additional 60 days to file a Paycheck Protection Program (PPP) application under a bill President Joe Biden signed into law on March 30.

The application period was set to close on March 31, but the PPP Extension Act of 2021 gives eligible employers until May 31 to apply.

The PPP is designed to help struggling businesses with 500 or fewer employees keep workers employed during the COVID-19 crisis by providing loans that are forgivable if certain criteria are met. The program aims to "provide a direct incentive for small businesses to keep their workers on payroll," according to the U.S. Small Business Administration (SBA), which oversees the program.

Employers should note that the American Rescue Plan Act (ARPA), which was signed into law on March 11, added $7.25 billion to the PPP and expanded the program to cover more nonprofits and digital media companies.

Michael Mahoney, an attorney with Ogletree Deakins in Morristown, N.J., said the intent behind ARPA is to expand eligibility and enable access to loans for businesses that continue to be severely impacted by the COVID-19 pandemic.

ARPA "also affords some recipients of Shuttered Venue Operator [SVO] grants eligibility for PPP loans, and on a more technical note, makes changes to payroll cost exclusions," explained William Eck and Stanley Jutkowitz, attorneys with Seyfarth Shaw in Washington, D.C.

Expanded Coverage

"The American Rescue Plan Act expands the types of tax-exempt organizations eligible for PPP loans," Eck and Jutkowitz noted. Under the act, all types of tax-exempt organizations are eligible for PPP loans, except certain social-welfare organizations, such as homeowners' associations. Tax-exempt organizations are subject to size and lobbying limitations. Depending on the organization type, the size limit is 300 or 500 employees per physical location. ARPA also extended eligibility for PPP loans to certain internet news publishers.

The act revised prior legislation to allow businesses that receive a PPP loan after Dec. 27, 2020, to apply for an SVO grant if conditions are met. SVO grants are also administered by the SBA and apply to small theaters, museums, live venue operators and some additional businesses.

"Specifically, if a PPP borrower receives a first draw or second draw PPP loan after Dec. 27, 2020, the amount of any subsequently approved SVO grant will be reduced by the amount of the first draw or second draw PPP loan," Eck and Jutkowitz said. "If a borrower receives both a first draw and second draw PPP loan after Dec. 27, 2020, the amount of any subsequently approved SVO grant will be reduced by the combined amount of both PPP loans."

Mahoney noted that ARPA focused on providing funding to smaller businesses that had not previously received relief. "This includes the lifting of an eligibility bar on small-business owners convicted of non-fraud felonies."

Loan Eligibility

Most businesses are eligible for a first loan if they employ 500 or fewer employees. However, businesses that employ more than 500 workers may be eligible if they meet the SBA's size standards for their industry.

Employers may be eligible for a second draw if they: 

Have no more than 300 employees.

Received a first draw PPP loan and used the full amount only for authorized uses.

Can show at least a 25 percent reduction in gross receipts between comparable quarters in 2019 and 2020.

Patrick Dennison, an attorney with Fisher Phillips in Pittsburgh, noted that the latest FAQs make clear that applicants may not use the SBA's established size standards or the alternative size standard to qualify for a second draw PPP loan, though there are a few, narrow exceptions for specific business types. 

"In general, the size eligibility requirement for Second Draw PPP Loans are narrower than the size eligibility requirement for First Draw PPP Loans," the SBA said. "With some exceptions, an applicant is eligible for a Second Draw PPP Loan only if it, together with its affiliates (if applicable), employs no more than 300 employees."

Loan Forgiveness

The covered period for loan forgiveness begins on the date the loan was originally disbursed and ends on a date selected by the borrower that is at least eight weeks—and not more than 24 weeks—after the date of loan disbursement, he explained.

Employers can apply for loan forgiveness if the following criteria are met during the covered period:

Employee headcount and pay levels are maintained.

Loan funds are spent on payroll costs and other eligible expenses.

At least 60 percent of the funds are spent on payroll costs.

For the second draw, employee headcount and compensation levels must be maintained in the same manner as required for the first draw.

First draw and second draw PPP loans "can be used to help fund payroll costs, including benefits, and may also be used to pay for mortgage interest, rent, utilities, worker protection costs related to COVID-19, uninsured property damage costs caused by looting or vandalism during 2020, and certain supplier costs and expenses for operations," according to the SBA. Some payroll expenses are excluded, such as federal employment taxes and payments to independent contractors.

Mahoney recommended that businesses start compiling the information needed to submit a loan forgiveness application during the covered period. "This will streamline loan forgiveness and ensure that the business is able to make informed business decisions over the course of its loan."

Employers should carefully review information on the SBA and Treasury Department websites. "The most common mistake employers make concerning PPP loans is failing to keep up with the changes in rules or guidance," Dennison noted.

Excerpt for SHRM article dates 3-31-21

New Covid Legislation to provide COBRA subsidies

One of the more pertinent provisions in ARPA is the impact it has on COBRA subsidies moving forward. The legislation offers federal subsidies for COBRA premiums at 100 percent coverage. These subsidies apply from April 1 to September 30, but they are not retroactive.

Organizations will be required to cover the monthly premium expense but will be able to reimburse these expenses through a quarterly credit against payroll taxes. If the overall amount an employer pays for subsidized coverage is greater than its quarterly tax liability, it may claim a refund. One major component of this subsidization that sets it apart from a normal COBRA-election period is that it allows qualified individuals to make a prospective COBRA election for the period beginning April 1 without requiring payment of premiums retroactive to the original loss of coverage.

In regards to eligibility, any employee who lost health coverage for qualifying reasons between November 1, 2019, and September 31, 2021, could take advantage of COBRA subsidies. More specifically, these subsidies will be available to any previously covered employee or family member who may have lost coverage due to involuntary termination or reduction of hours and are still within their 18-month eligibility period. Any individual who loses their job from now until September will be able to instantly elect to stay on their employer’s health plan. However, as previously mentioned, an individual is only eligible if their termination was involuntary. It is also available to those who did not elect COBRA when initially eligible, or anyone who elected but subsequently dropped coverage. 

Subsidized coverage will terminate if the qualified individual exhausts the 18-month COBRA period prior to September 30. It could also end if the individual becomes eligible for coverage under another group health plan during the subsidy period or becomes eligible for Medicare. Additionally, since COBRA-election deadlines were already extended as a result of the pandemic, many individuals are still within their original COBRA-election periods. 

Those who are eligible under these parameters can sign up during a 60-day SEP beginning April 1. Plan administrators will be required to amend existing COBRA notices and share a separate document with forms necessary for the employee to establish eligibility, but they must act quickly due to the relatively short timeframe. For efficacy’s sake, organizations should begin identifying potentially eligible employees as soon as possible.

Several details of the rollout of this will be decided in regulatory guidance from the relevant federal agencies. We anticipate this federal guidance to include precisely how to set up these provisions, likely prior to the implementation date of April 1. Specifically, the Treasury Department may permit an advance credit for employers, while the Department of Labor is expected to issue model COBRA notices addressing the subsidy.  

Excerpt from NAHU Article dated March 12, 2021

Sign-ups for Biden's Obamacare special enrollment period nearly triple

 More than 206,000 people signed up for Affordable Care Act policies on the federal exchange in the first two weeks of the special enrollment period ordered by President Joe Biden, federal data released Wednesday shows.

Uninsured Americans who want to buy 2021 coverage on healthcare.gov could start doing so on February 15, thanks to an executive order Biden signed in January. Special enrollment runs until May 15. Most states that operate their own marketplaces are also extending their enrollment seasons.

"These numbers are an encouraging sign — but we can't slow down until every American has the security and peace of mind that quality, affordable health coverage provides," Biden said.

Typically, signing up for coverage outside of the traditional enrollment period in the fall is restricted to those who lose their job-based policies or have a change in status, such as a divorce. Last year, only 76,000 people picked Obamacare plans during the second half of February, according to the Centers for Medicare and Medicaid Services, which runs the federal exchange.

Excerpt from article By Tami Luhby / CNN