Your Coronavirus Headquarters
If you are like many of the employers across the nation – you are likely receiving unique questions around your benefit offerings that stem from COVID-19. We have created this page to use as a living resource to answer the most common questions sliding across our desk.
NEW! H.R. 6201 Mandates Paid Leave
In response to COVID-19, Congress passed H.R. 6201 and the President signed it into law as of March 19th. Known as the “Families First Coronavirus Response Act,” this legislation makes temporary changes that require coverage of COVID-19 testing, paid sick leave, and expanded FMLA coverage. The provisions laid forth in the bill went into effect April 2, 2020 and will sunset December 31, 2020.
Frequently Asked Questions
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CARES ACT Frequently Asked Questions
- Regarding the broad definition of the stay at home order – if you are listed as an essential business, is the employee still able to use the sick bank if they do not want to come in and do not have a doctors note? This is two questions in one. Nobody can use the sick leave without a doctor’s note, or to get diagnosed due to symptoms as described by the CDC (fever, dry cough, or shortness of breath).
On the federal level, there has been guidance from the Department of Homeland Security defining essential business and advising local governments to exempt them from stay at home orders. Localities do not have to follow this guidance at this point, but in the case of Governor Desantis’s order, Florida has done so. All that to say – essential business’s employees still have the ability to take both forms of leave as long as they have a qualifying reason. Only emergency workers and healthcare workers are unable to utilize this leave under exceptions found in number 56 and 57 of the Department of Labor’s Questions and Answers.
- Regarding telework requirements – we have limited laptops available and actually pulled some back from some employees in the event we needed to redeploy them during a quarantine/shutdown. Since we are an essential business that is still working, if an employee could telework are we required to provide them with a laptop if they do not currently have one?
The DOL has encouraged flexibility in this area. If they have a personal computer and are able to use it instead, that is an option. (See the example in the second paragraph of page 15 of the temporary rules promulgated by the Department of Labor.) It is our understanding that if you are operating in a locality that is following the Department of Homeland Security’s guidance (such as the State of Florida) regarding essential businesses, “Workers should be encouraged to work remotely when possible and focus on core business activities. In person, non-mandatory activities should be delayed until the resumption of normal operations.” The guidelines encourage you to make every reasonable effort to allow telework, but it is not a requirement.
- We pay base plus commission. If our average commissions go down during the forgiveness verification period, it will be held against us, even though it’s a function of our projects that are paid out.
This appears to be true. Keep in mind that unless there is a 25% reduction in pay compared to the most recent full quarter, it will not be held against you. It’s only salary reduction in excess of that 25% that will reduce the forgivable portion of your loan. It would be advisable, however, to discuss this with your bank to fully understand how the forgiveness will be handled in this specific instance. As regulations are finalized, this may be addressed more specifically, so stay tuned.
- Have you heard if the bill includes the “pause” of student loans for 6 months? I have heard both yes and no and I have a few employees who have asked me about this.
Under the CARES Act, all payments of principal and interest for certain federal student loans are suspended, and will be treated as if made for the purposes of credit reporting. The bill also allows employers to pay up to $5,250 annually towards an employee’s student loans on a tax free basis for any payments between March 27, 2020 and January 1, 2020. You can find the specific text here, here, and here. I would encourage these individuals to contact their respective lenders.
The sample application specifies average monthly payroll, not mentioning inclusion of rent, debt expense, etc. This is true, but the definition of “payroll” in the bill clearly includes these other expenses. See here. As your SBC approved bank of choice will be able to clarify, and we would advise you to speak with them directly about their specific application. Since that sample went out, banks have gone live with a final version of the application – be sure to consult with them.
- If an employee has to stay home and request paid leave because their spouse can’t stay home with their children, do we pay them, no questions ask?
This depends on the situation. Regardless, they must provide proof that they have lost childcare due to COVID-19. If their spouse is one of the exempt emergency service or medical personnel, they may not be able to take leave. Under the most recent DOL Rules, if another parent is available at home to care for a child who no longer has day care or available school, an employee will not qualify for leave. Keep in mind that there is no metric for enforcement, and you cannot require them to prove their spouse is still working. The best you can do is advise them of the rules, and be sure they realize we don’t know how long this crisis will last, and it would be prudent to take consecutive leave so that they have 24 weeks available for childcare.
- On the PPP application at what point in the year do we record # of jobs?
This will depend on your specific circumstances and your employees. Consult your SBA approved bank of choice for clarification.
- If someone’s child care has closed and they technically can telework, but they’ll need to stay home with two kiddos under the age of 6, are they eligible for sick leave to stay home and not work?
Yes. The loss of child care qualifies them for the sick leave as long as there is no alternative means for the child. IE – Family member to watch your child etc.
- If we have already submitted our EIDL loan application prior to the passage of the CARES act how do we now modify the application to request the advance of $10k? The application was submitted through the SBA website on 3/23 prior to the site closing to applications.
The current guidance is to resubmit with the new online portal that was opened last night. It’s very similar than the submission portal from last week but there are some additional questions that are required.
- Are PPP and EIDL mutually exclusive? Do I have to apply for PPP first then EIDL?
No they are not, and no you do not.
- Looks like we need to lay off some people for 2 weeks and will also be applying for the Cares Act SBA loan. Is it possible to do that? If so, how?
You may rehire them once your loan gets funded to take advantage of the forgiveness provisions
- How are amounts determined for EIDL?
Our current understanding is six months of gross margin, there is ambiguity around the definition of gross margin per industry.
- Our company uses independent contractors to deliver services. Can we add the payments to them as part of our request for money from this Cares Act?
- Can SBA loans be used for employees that are scheduled to start in April, but have not started yet?
- For individual tax payers who filed extensions on personal returns to 10/15, do those extensions still hold and were due to file by 10/15?
- What happens if you already filed your 2019 personal and don’t qualify, but would have qualified if using 2018?
You will not get a rebate. It is based on the 2019 filing. The only time the 2018 filing is used is if a 2019 return has not been filing.
- Let’s assume you receive 250% of average monthly payroll and as a restaurant, you have already laid most off. Part of your proceeds will be used for rent, mortgage, utilities, group health etc – when and how many employees must you rehire to forgive all of the debt?
You will need to have the same level of employees that you did as of 2/15/2020.
- Does the one-time check apply to all taxpayers or only citizens?
You need to have a social security number. A nonresident alien won’t get a rebate check. If you are a resident alien with a social security number and file single, you will get a check. If you are married to a person that does not have a SSN or have dependents that don’t have a SSN, no check will be issued.
- As a C-corp applying for the PPP relief. If people in the company make more than 100K, does the loan forgiveness on payroll include just the 100k (IE 8,333.000 per month) or if you make more than 100k in a year is that person’s payroll excluded?
It’s the former not the latter, you always get credit for the employee just up to $100K , this is the case on the loan calculation amount and the forgiveness provisions.
- Are bonuses/commissions considered “wages” in the PPP? What about employees who have a base plus commission and their wages fluctuate?
Yes they are. Payroll costs” are broadly defined to include: salary, wages, commissions, and similar compensation (not exceeding $100,000 annualized per employee); payment of cash tips or their equivalent; payment for vacation, parental, family, medical, and sick leave; allowance for dismissal or separation; payment required for group healthcare benefits, including premiums; payment of retirement benefits; payment of state or local tax assessed on compensation to employees; and payments of compensation to or income of a sole proprietor or independent contractor. Regarding the PPP from an employers standpoint, the lookback period is the average pay over the past 12 months.
- Regarding the number of employees, if we have some employees that choose to file with unemployment for a temporary layoff, do those employees lower our employee count?
No they do not. The questions you will be asked for application require you to list the number of employees within your organization in January of 2020. Then you will be asked to reflect on your number of employees as of February 15th, 2020.
- We have a couple contracted employees — from a staff leasing company (Westaff) — are these counted as our payroll costs? We are continuing to use their help, will that be part of our forgivable loan expense?
Yes, our interpretation of the law is that these employees will be factored into your loan forgiveness. The point is to make an employer whole which includes the use of contracted employees within your outgoing expenses.
- If we have done layoffs and pay reductions but do not want to hire any back what amount will we not be forgiven on?
This is dependent on your employee count prior to February 15th. The amount which will not be forgiven will be equal to the total amount of payroll you were paying for those laid off employees. We would suggest putting that additional money aside to immediately pay back to the IRS once given the option.
- Is the only restriction the 500 employee max, or is there any revenue to total value exclusion from this?
Not at this time. Under Title IV of the CARES Act, the Treasury Secretary is broadly authorized to make up to $500 billion in loans, loan guarantees, and other investments in support of “eligible businesses.” An “eligible business” is “a United States business that has not otherwise received adequate economic relief” under other provisions of the CARES Act. The CARES Act does require the Treasury Secretary to ask the Federal Reserve to create a special direct loan program for businesses and nonprofit organizations with between 500 and 10,000 employees. The interest rate on such loans would be capped at 2% per annum, and for the first six (6) months no principal or interest would be due. We expect more details to be forthcoming as regulations are released.
- If we have work, but team members don’t feel comfortable coming to work- will they qualify for unemployment insurance?
No. Not unless they are under specific medical orders to avoid work, or if they have been directed by local, state, or federal officials to quarantine or shelter in place.
- The Disaster Loan and the PPP loan can both be applied for?
That is correct.
- If we have over 500 team members but not all at one location, are we required to follow the FFCRA?
Ultimately, this will be determined by the SBA’s size standards for small business. You can go here and get more details – some industries have a different size standard. It would be advisable to consult either an attorney or a tax professional who specializes, if you are near this line of delineation.
- What about bonuses paid to employees are they included for total payroll costs? What if the bonus makes employee wages exceed $100k?
The maximum covered amount is $100k per individual. Any amount over that does not qualify.
- If a business has already laid off and/or had a salary reduction, in order to have the loan forgivable they would need to make an attempt to hire back those employees and make the salary adjustments? To restore pay by the end of June does not mean to pay back all missed wages?
Reductions in employment or wages that occur during the period beginning on February 15, 2020, and ending 30 days after enactment of the CARES Act, (as compared to February 15, 2020) shall not reduce the amount of loan forgiveness IF by June 30, 2020 the borrower eliminates the reduction in employees or reduction in wages. The employer will not be responsible for paying back wages.
- If you laid off employees and hired them back. You have to pay their back payroll? What if they filed for unemployment?
You are not responsible for back wages if you laid off an employee. If you do lay off employees, you won’t be forgiven for any wages you don’t actually pay, but your remaining employees’ wages will still be forgiven.
- Is it relief or deferral?
There are two different programs. Employee Retention Credits under the CARES Act, employers may be eligible for a refundable tax credit for the employer’s share of the 6.2% Social Security tax (the “SSI Tax Credit”). The potential SSI Tax Credit is for 50% of the first $10,000 in qualified wages (including health plan expenses) paid to each employee commencing on March 13, 2020. To be eligible, an employer must (i) have had operations fully or partially suspended because of a shut-down order from a governmental authority related to COVID-19, or (ii) have had gross receipts decline by more than 50% in a calendar quarter when compared to the same quarter in 2019 (and will remain eligible until the earlier of (i) gross receipts exceeding 80% relative to the same quarter in the prior year, or (ii) December 31, 2020). For employers with more than 100 employees (based on 2019 employment levels), qualified wages are limited to wages paid to employees who were not providing services due to the COVID-19 crisis. Note, however, that the SSI Tax Credit is not available if the employer receives a covered loan from the SBA, as discussed above under Forgivable SBA Loan Program.
- Regarding deferrals, in addition to potentially receiving the SSI Tax Credit, the CARES Act allows employers to defer the payment of the employer’s share of the 6.2% Social Security tax on wages paid beginning on March 27, 2020 and ending on December 31, 2020. A corresponding deferral is also permitted for the equivalent portion of self-employment taxes. The deferred amounts are payable in two installments, with 50% of such taxes being due on December 31, 2021, and the remainder due on December 31, 2022. This deferral of Social Security taxes is not, however, allowed where the employer has had a covered loan forgiven, as discussed above under Forgivable SBA Loan Program.
Can we elect to request less loan amount than our 2.5 x monthly average amounts to?
This information has not yet been disclosed and we expect more information next week.
- What about companies who are essential business – employees are coming to work – but there is not enough work to keep them productive. Can we send them home and use the PPP to cover their wages?
Yes, you can use PPP to cover their wages. The purpose of this relief is to help you keep employees on the books for the duration of this virus outbreak.
- For 1099 employees, the company can not include those “wages” as lost pay? Does the 1099 have to file for the loan, or would it be the company that they partner with that does this?
The 1099 will have to file for the loan. If you work as an independent contractor, you are by default considered to be a sole proprietor in the eyes of the IRS. This means your freelance income gets reported annually on a Schedule C within your personal tax return. You will have a Schedule C even if you pick up odd jobs or do freelance work, and this Schedule is based on the 1099-MISC forms you collect from the companies or individuals who have hired you as a contractor.
Your salary is most easily determined by looking at the net profit listed on your Schedule C. If you have already filed your 2019 taxes, or prepared a 2019 return, this will be reported on line 31 of the Schedule C. If you have not filed your 2019 taxes but have accurate bookkeeping completed for all of 2019, this will be the Net Profit line on your Income Statement.
If you have neither of those things, your best estimation would come from adding all of your 1099-MISC income together. To find your monthly average, simply divide this amount by 12. If your annual net profit is over $100,000, you may only claim up to $100,000 divided by 12.
- Do you know how the unemployment claims during covid 19 will affect the employer’s rate?
We have not seen any guidance to suggest that this will be the case.
- Can you apply for both an SBA Grant and the SBA PPP portion or is it just one or the other?
You may apply for both.
Do you offer a STD Policy?
If you offer an STD policy to employees it is important to confirm if your policy has a quarantine benefit. Some policies will exclude paying the insured a benefit during a quarantine while others will offer the benefit in full.
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The content provided has been prepared from various sources and is for informational purposes only and does not constitute legal advice. We hope you find the information useful. The information should not be used to act upon without first seeking appropriate legal counsel.