CARES Act Webinar - Q & A

Q & A Webinar Originally Hosted on March 30, 2020

Q: Employees Paid Over $100,000

In the computation for average monthly payroll, are employees greater than $100,000 a year excluded entirely, or just the excess over $100,000?

Answer: I updated my slides and table to show that it excludes the EXCESS over $100,000 per employee. (Note: I was originally incorrect. GASP! But I have flogged myself, and made the appropriate corrections.) In my defense, the wording in the bill just sucks, but the SBA PPP Application made it much clearer. It is the EXCESS over $100,000, not the entire compensation of the employee.

Q: $100,000 When?

How do they determine employees greater than $100,000? Is it annual salary? Is it the total salary over the months looked at for the average monthly payroll?

Answer: I don’t know. The bill is not particularly clear. My assumption it will be $100,000 for last 12 months, or if looking at a smaller window for seasonal employers or employers not in business last year, $8,333 a month.

Q: What’s Gross Payroll?

What constitutes “gross payroll”? Does it include payroll taxes or not?

Answer: Gross payroll refers only to the employee’s compensation, not any employer’s payroll taxes.

Q: Mandatory Leave Apply to Part-Time?

Does the mandatory leave under The Families First Act include part-time or hourly employees who are not offered or are not eligible for any benefits?

Answer: Yes, part-time employees are covered by the Emergency Paid Sick Leave Act and the FLMA Expansion Act. Their paid leave is limited to their average hours over a two week period versus the full 80-hour paid leave.

Q: Employers Under 50 Exempt From Mandatory Leave?

Are small employers under 50 exempt from the Families First Act (mandating emergency leave and FMLA)? How do you apply for exemption?

Answer: No, employers under 50 are not exempt. The Families First Act applies to all employers under 500 employees.

Under the Emergency Leave Act, an employer under 50 employees can exclude employees who are requesting leave to care for a child under 18 due to closure of day care of school because of COVID-19 with permission of the Secretary of Labor if it would jeopardize the viability of the business as a going concern. How you would obtain that permission is beyond my pay grade.

Under the FMLA expansion, an employer under 25 employees do not have to restore an employee’s position if economic conditions eliminated the position or employer makes reasonable efforts to restore employee to equivalent compensation and benefits.

Q: What If You Don’t Spend It All?

Is there a certain amount of runway for payroll, etc. Let’s say you use the payroll, rent and eligible expenses and still have cash left over. How do you differentiate and how will forgiveness be computed?

Answer: If you do not spend the full loan amount on payroll, rent and utilities between 2/15 and 6/30, the unspent amount would not be forgiven. Amounts not forgiven will be converted into a traditional 7(a) loan. Longest maturity is 10 years. SBA 100% guarantee still applies.

Q: Proof Can’t Obtain Credit Elsewhere?

What is required to prove that you couldn’t receive loans anywhere else?

Answer: Not required on any of these loans through 12/31/2020.

Q: Is There a Government Calculator?

Did the government provide a calculator to compute your average monthly payroll.

Answer: I haven’t seen one yet. If you had consistent payroll over the last year, you would be pretty close to your last payroll times 2.5

Q: Multi-corporations?

If we have two corporations operating under the same business, will we need to file for one loan or two?

Answer: I think you can apply for two loans if necessary because you have two Employer Identification Numbers. As long as the two companies have fewer than 500 employee as a combined entity, I don’t see why you couldn’t get a PPP loan under each one. If only one entity has payroll, then only one company would need the PPP loan.

Q: Benefits and Reduction of Wages?

If you reduced employee’s hours by 25% would that affect their health benefits?

Answer: It depends. Under a Shared Work Program arrangement with the state, it requires the employer to maintain the employee’s benefits, so that would override any restrictions that a health carrier had about a minimum number of hours per week. (But the health carriers let you override those restrictions when employees are on FMLA leave, so when I think about that,  it really isn’t that much of an exception.)

However, if you don’t participate in a program such as shared work, I don’t know that you are required to provide health coverage, though many employers do, particularly if it is a temporary change in employment.

Q: Definition of An Impacted Business?

What defined an impacted business? Are there guidelines?

Answer: No. The PPP loan requires only that the borrower sign a certification that you believe your business has been impacted by the virus.

Q: What Documentation Is Required?

Other than payroll records, do you know the type of information the lender will need for the PPP loan?

Answer: My prediction is it may be as limited 3 years of business returns plus the payroll records. Your bank will know more by the end of this week. But it most likely won’t include all the personal information normally required of a 7(a) loan since it is not personally guaranteed

Q: Any Downside?

Is there any downside to this program?

Answer: I don’t see one. Unless it slows you down from seeking additional loans because the forgiveness doesn’t come through quickly. The SBA application indicates they will have 60 days from application to determine forgiveness.