COVID-19

Treasury and SBA Announce Simpler PPP Loan Forgiveness Form

The Treasury Department and the Small Business Administration (SBA) have issued a joint press release and Interim Final Rule announcing a “simpler” version of the form used by recipients of Paycheck Protection Program (PPP) business loans of $50,000 or less to request loan forgiveness.

The PPP is an SBA lending program created by the Coronavirus Aid, Relief, and Economic Security (CARES) Act to help small employers meet payroll and other expenses as businesses and the nation have been dealing with the economic effects of the coronavirus (COVID-19) pandemic.

Importantly, if certain conditions are met, PPP loans can be forgiven and treated as a grant. Payroll expenses can include employer contributions to defined contribution and defined benefit retirement plans, as well as providing group health care coverage, including payment of insurance premiums.

The “simpler” PPP Loan Forgiveness Application Form 3508S and its instructions is intended for borrowers who received a PPP loan of $50,000 or less and did not, together with its affiliates, receive PPP loans totaling $2 million or greater. The standard Loan Forgiveness Application Form 3508 and EZ Loan Forgiveness Application Form 3508 EZ remain available for borrowers to use when applicable.

All of the loan forgiveness application forms are set to expire October 31, 2020.


House Passes Revised Pandemic Relief Bill, Disagreements Remain

The House of Representatives has passed by a vote of 214-207 a revised version of the HEROES Act estimated at $2.2 trillion to provide pandemic relief. As mentioned earlier this week, there are several benefits-related provisions included in the bill.

  • Targeted small business loan relief and other revisions of the Paycheck Protection Program
  • Coverage for COVID-19-related treatment with no cost sharing
  • Amendments to the Emergency Paid Leave Act
  • Relief for struggling union pension plans
  • Relief for single-employer pension plans
  • Extension of the deadline to roll over waived 2019 and 2020 RMDs
  • Clarification of the CARES Act’s application to money purchase pension plans
  • Grants to assist low-income women and victims of domestic abuse in obtaining qualified domestic relations orders
  • Technical corrections to SECURE Act provisions regarding funding for community newspaper pension plans
  • Creation of a union “composite plan” consisting of 401(k) and defined benefit plan provisions

The revised package has been reduced from the approximately $3.4 trillion stimulus bill that was passed by the House in May. Disagreements remain with Senate Republicans on several components of the relief package as well as the overall price tag—which is significantly higher than their proposed “skinny” package that was blocked by Senate Democrats just weeks ago. With elections just over a month away, time is running out on negotiations, as many legislators will be heading back out on the campaign trail.

 


DOL Revises Emergency Leave Rule Following Court Decision

The Department of Labor (DOL) has issued a revision and clarification to the temporary rule it issued April 1, 2020, guidance that implemented emergency paid sick leave and expanded family and medical leave under the Families First Coronavirus Relief Act (FFCRA), also known as the Emergency Leave Rule. As previously communicated, a lawsuit brought by the State of New York in federal court challenged certain parts of the Emergency Leave Rule. On August 3, 2020, the court ruled that the following parts of the Emergency Leave Rule were invalid.

  • Requirement that the employer must have work for the employee as a prerequisite for eligibility for emergency leave
  • Employer approval authority for an employee to take intermittent emergency leave
  • Definition of an employee who is a “healthcare provider”
  • Requirement for employees to provide certain documentation to their employers before taking emergency leave

In light of the court’s decision, on September 11, 2020, the DOL issued a revision and clarification to the Emergency Leave Rule, which does the following.

  1. It reaffirms—in effect, challenging the court ruling—that paid sick leave and expanded family and medical leave may be taken only if the employee has work from which to take leave. This requirement applies to all qualifying reasons to take paid sick leave and expanded family and medical leave.
  2. It reaffirms that where intermittent FFCRA leave is permitted by the DOL’s regulations, an employee must obtain his or her employer’s approval to take paid sick leave or expanded family and medical leave intermittently.
  3. It revises the definition of “healthcare provider” to mean those employees who are healthcare providers under FMLA regulations, and other employees who are employed to provide diagnostic services, preventive services, treatment services, or other services that are integrated with—and necessary to—the provision of patient care.
  4. It revises the FFCRA rule to clarify that the information the employee must give the employer to support the need for his or her emergency paid leave should be provided to the employer as soon as practicable. Also, the notification requirement is revised for expanded family and medical leave to clarify that, similarly, notice from the employee is required as soon as practicable, including before taking the leave if the employee is able.

Based on the foregoing, the original FFCRA rule, as revised by this temporary rule, remains unchanged for workability requirements and intermittent leave. But the definition of “healthcare provider” is revised to limit the extent of employees who can be excluded from emergency leave eligibility and notification timing requirements are eased in accordance with the court’s decision.

In addition to the revised temporary rule and an accompanying news release, the DOL added three new Q&As (101-103) to the Families First Coronavirus Response Act: Questions and Answers addressing the effects of the New York court ruling. Additional court challenges to this revision and clarification rule might be on the horizon.

 

 

 


More IRS Guidance on Funding Single Employer DB Plans, Distribution Notices

The IRS released two Notices providing additional guidance relative to certain provisions under the Coronavirus Aid, Relief, and Economic Security (CARES) and Setting Every Community Up for Retirement Enhancement (SECURE) Acts.

Notice 2020-61 provides guidance on rules related to funding of single employer defined benefit pensions plans and related benefit limitations. The CARES Act extended the deadline for minimum required contributions otherwise due during calendar year 2020 to January 1, 2021. Notice 2020-61 provides details and a lengthy Q&A.

Notice 2020-62 modifies safe harbor explanations (previously issued in Notice 2018-74) that may be used to satisfy distribution notice requirements under Internal Revenue Code Section 402(f). These changes are necessary relative to recent distribution provisions established under the SECURE Act pertaining to qualified birth or adoption distributions and age 72 required beginning date for required minimum distributions


Senate Releases Details of Next Round of Pandemic Relief

The U.S. Senate yesterday released details of additional relief it is proposing in response to the coronavirus (COVID-19) pandemic. It builds upon the March 2020 enactment of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. This legislative package is formally being described as the Health, Economic Assistance, Liability, and Schools (HEALS) Act. It contains provisions for a second round of direct payments to Americans, a modified version of the CARES Act unemployment compensation subsidy, liability protection for businesses and schools that re-open, and numerous other provisions.

The House of Representatives previously passed its version of more COVID-19 relief, H.R. 6800, the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act. Senate and House approaches and magnitude differ markedly. If the current Senate package is approved it will require significant compromise between the House and Senate for another round of COVID-19 relief to become law.

Among the HEALS Act provisions of note in this multi-bill Senate package are the following.

 

Money Purchase Pension Plan Relief

The CARES Act granted penalty-free early withdrawals from retirement savings arrangements, permitted taxpayers to pay the associated tax over three years, allows taxpayers to recontribute withdrawn funds, and increased to $100,000 the maximum limit on retirement plan loans. The CARES Act excluded money purchase pension plans from this relief. This Senate package retroactively adds these provisions for such plans.

 

Employee Certification of Enhanced Plan Loan Eligibility

The CARES Act allows employer retirement plans to rely on an employee self-certification that he or she qualifies for a coronavirus-related distribution (CRD) from a retirement plan, which provides a distribution trigger to an individual who would otherwise not be eligible for a distribution. The CARES Act did not directly address employee self-certification of eligibility for an enhanced retirement plan loan. The HEALS Act would codify this clarification, which was previously made in regulatory guidance under IRS Notice 2020-50.

 

Payments of Single-Employer DB Pension Plans

The HEALS Act would clarify the due date—delayed for 2020 by the CARES Act—by which certain minimum required contributions to single-employer defined benefit (DB) plans must be made.

 

Paycheck Protection Program

The HEALS Act would make modifications and provide for a second round of loans under the Small Business Administration’s Paycheck Protection Program (PPP), a CARES Act creation designed to help small businesses retain employees during the pandemic with low-interest, potentially forgivable loans. Loan proceeds may be used for such payroll-related expenses as retirement and health benefit costs.

The HEALS Act would allow businesses with 300 or fewer employees to receive a second PPP loan if their first or second quarter 2020 revenue declined by 50 percent or more compared to the same time period in 2019. The HEALS Act would also permit certain nonprofits—including chambers of commerce and trade associations—to receive PPP loans.

 

FSA Carryover

The HEALS Act would allow up to $2,750 in unused health and dependent care flexible spending arrangement (FSA) benefits in 2020 because of the pandemic to be rolled over and used in 2021. Unused health FSA balances above $500 generally cannot be carried over and are forfeited; dependent care FSA balances of any amount have heretofore not been eligible for carryover. Both could be carried over from 2020 to 2021 under HEALS Act provisions.

The timeline for negotiation and enactment of further COVID-19 pandemic relief is short, as both the House and Senate are expected—barring a deviation from their schedules—to leave for a month-long district work period in early August.


House Bill Would Extend, Expand Tax Benefits for CRDs

Rep. Sean Maloney (D-NY) has introduced H.R. 7645, legislation that would extend the time period for taxpayers to withdraw coronavirus-related distributions (CRDs) from retirement savings arrangements and receive the special tax benefits that CRDs provide. Certain withdrawals could be tax-free under the legislation.

CRDs, as defined in the Coronavirus Aid, Relief and Economic Security (CARES) Act, are eligible for the following tax benefits for withdrawn amounts up to $100,000 (currently, only for withdrawals in 2020).

  • Three-year taxation on amounts withdrawn
  • Exemption from the 10 percent excise tax for early (pre-59½) distributions
  • The option to repay such withdrawn amounts within three years

Included in the bill is expected to be a provision that would make CRDs tax-free if the taxpayer qualifies as a first-time home buyer. “Expected,” because neither bill text nor a summary is available at this time. Details of legislative intent are being inferred from the bill’s description at the official congressional web site:

To extend the time period for making coronavirus-related distributions from retirement plans and to provide an exclusion from gross income of coronavirus-related distributions which are first-time homebuyer distributions.”

H.R. 7645 has been referred to the House Ways and Means Committee.