CARES Act Update—SBA Publishes PPP Loan Forgiveness Application Form; Regulations Expected Soonhttps://extranet.wespath.org/express/ob/20200519.html
On Friday, May 15 (after business hours), the Treasury Department (Treasury) and Small Business Administration (SBA) published a loan forgiveness application under the SBA’s Paycheck Protection Program (PPP). The forgiveness application includes step-by-step instructions that clarify some questions borrowers have had about forgivable costs. Treasury has also issued a press release, in which they promise additional regulatory guidance soon to help borrowers complete this application. Treasury’s press release states: “SBA will also soon issue regulations and guidance to further assist borrowers as they complete their applications, and to provide lenders with guidance on their responsibilities.” Borrowers may want to await these forthcoming regulations before completing applications for PPP loan forgiveness.
PPP loan forgiveness is based on the borrower maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease. The loan forgiveness form and instructions include several provisions to ease the process for borrowers, including:
- Allowing borrowers to calculate payroll costs using an “alternative payroll covered period” that aligns with borrowers’ regular payroll cycles (page 1 of the application). However, this flexibility appears only to be available to borrowers with payroll periods at least as frequent as bi-weekly (every other week/14–day intervals); so it appears to not be available for borrowers with semi-monthly (twice per month/13–16-day intervals) payroll periods.
- Providing borrowers some limited flexibility to determine payroll costs using an accrual method, but only if the incurred costs are paid by the end of the next pay period after the forgiveness period ends (application page 2).
- Offering borrower-friendly exemptions from loan forgiveness reduction based on (1) rehiring by June 30, or (2) for borrowers who have made a good-faith, written offer to rehire that was declined by the workers (application page 8).
In addition, borrowers will need to supply the lender and SBA a list of employees (page 9) and an array of other substantiating documentation (page 10). It appears that documents to be submitted must include “[p]ayment receipts, cancelled checks, or account statements documenting the amount of any employer contributions to employee health insurance and retirement plans that the borrower included in the forgiveness amount.” The mention of account statements might suggest that the SBA is focused mainly on individual retirement accounts (defined contribution plans) and not necessarily thinking about how this might apply to defined benefit plan expenses.
The forthcoming forgiveness regulations may offer some additional guidance on some of the open questions and observations noted above.
Questions from Plan Sponsors
Wespath staff is receiving questions from plan sponsors, who are PPP borrowers, about payment of retirement plan and health plan costs during their forgiveness periods, and requests for related documentation. Although we await the forthcoming forgiveness regulations, Wespath is determining how we can provide plan sponsors with flexibility, support and necessary documentation for their PPP loan forgiveness applications.
PPP Resources for UMC Employers
Wespath continues to partner with the General Council on Finance and Administration (GCFA) to analyze CARES Act guidance and provide relevant information for local churches, annual conferences and other UMC employers. These resources are available:
We expect additional guidance soon from Treasury and SBA about PPP loan forgiveness, and will update documents as needed. Please direct any questions you may have about the CARES Act (including PPP loans, the Employee Retention Credit, etc.) to Tony Prestipino, Andy Hendren, Steve Clark or Jim O’Connell.
Jamion Wolford, CPA, MBA
West Virginia Annual Conference Treasurer and Pension Officer