Webinar Date: Wednesday, May 27, 2020

Shepard & Walton Employee Benefits thanks you for joining vcfo’s financial experts to discuss managing your PPP loan, calculating debt forgiveness, and the latest updates. vcfo’s Russell Naisbitt, Houston Practice Manager; Chris Hysinger, Consulting CFO; and Jennifer Lennarz, Consulting CFO; provided detailed information on forecasting forgiveness, necessary documentation, reconciliation of expenses, and other considerations.

Click here to download a copy of the presentation.

Webinar Follow Up Questions

Below are our responses to the questions asked during the webinar:

I have two employees who were on unpaid FMLA for the entire covered period. They received wages during the reference period (Q1 2020). Can I treat them for FTE calculation as 'voluntarily reduced hours'? And, is there a way to not get a hit for the associated reduction in wages?

FMLA is a voluntary reduction in hours at the request of an employee. Per the SBA PPP Loan Forgiveness Application, there is an FTE Reduction Exception for employees who voluntarily requested and received a reduction in hours. If there is a reduction in wages below a 25% reduction threshold, then there is a reduction in loan forgiveness. However, there is a safe harbor if the wages were reduced during the period from February 15, 2020 to April 26, 2020 and are restored to the level on February 15, 2020 by June 30, 2020.

As a home builder, do you think the non-payroll costs associated with model home operations and construction trailers should be included?

If the non-payroll costs fall into the categories of mortgage interest, business rent or lease payments or utilities, then they would be included. Utilities are defined as: service for the distribution of electricity, gas, water, transportation and internet access. For all of allowable non-payroll costs the agreement had to be in force or had an in service date prior to February 15, 2020.

I've heard advice that we should open a new account to deposit PPP funds into so it's easier to track expenditures. What are your thoughts on this? Necessary?

Yes, this is a good idea to open a new account. Some banks are requiring that their customers receiving PPP loans setup new accounts to receive approved funds. Banks will ultimately be required to work with each PPP borrower to confirm and determine the portion of each PPP loan eligible for forgiveness. Placing PPP funds in separate bank accounts will facilitate the review of your disbursements to provide an audit trail related to eligible spending and amounts that will ultimately be forgiven and amounts that will be need to be repaid by PPP borrower as a loan.

Does internet access include communication tools like Zoom, etc.?

There is currently no guidance available on what is and is not included in internet access.

Can we pay bonuses and include in forgiveness request as long as we don't exceed the $100,000 cap?

Yes. Per SBA Interim Final Ruling posted on May 22, 2020, bonuses are allowed as long as the individuals gross pay does not exceed $100,000 on an annualized basis over the covered or alternate covered period. The certification to be included with the Loan Forgiveness Application states that payroll cost are to retain employees therefore it should be documented that any bonuses included are for the purpose or retaining employees

In addition to our health care insurance policy, we provide a Physician's Assistant on site for our employees to help offset out-of-pocket costs. Is there a way to include these costs?

Unless the PA is an employee of the company and therefore is listed in both the gross wage and FTE calculations, we do not believe the cost would be covered.

What specifically is a mortgage? We have debt for infrastructure, but not our office building.

Per the SBA PPP Loan Forgiveness Application, covered mortgage obligations are for payments of interest on any business mortgage obligation on real or personal property incurred before February 15, 2020 (“business mortgage interest payments”). There is currently no further guidance than this.

Does VOIP phones like RingCentral count as “phones” under utilities?

There is currently no guidance available as to what is included as telephones.

To be clear, fuel is not part of the transportation forgivable expense?

There is currently no guidance on what is included as transportation. We would expect fuel to be allowable but are hoping for more guidance from the SBA.

With the 'paid or incurred' language surrounding payroll that can be included, do you interpret this to allow for forgiveness of more than 8 weeks of payroll? For example, if the loan funds on April 15th and the employer has a normal paydate of April 16th (on a 1 week lag), will the employer be able to include all of that payroll as well as all of the paid or earned payrolls through the end of the 8 week period?

Yes. Based on current guidance, we believe that there are circumstances where a borrower will be able to include more than 8 weeks of payroll. Please note however, that the 8 week cap of $100,000 in gross wages on an annualized basis would still be applicable. In other words, no employee can be paid more that $15,385 over the covered period or alternate covered period.

Can you please elaborate on the measurement periods, particularly for the base? What interval options are available?

The reference periods at the borrower’s election are, either (i) February 15, 2019 to June 30, 2019; (ii) January 1, 2020 to February 29, 2020; or (iii) in the case of seasonal employers, either of the preceding periods or a consecutive twelve-week period between May 1, 2019 and September 15, 2019. The covered period begins on the loan disbursement date and is 8-weeks (56 days). There is the option of an alternated covered period if your payroll is bi-weekly or more frequent. The alternated covered period is the eight-week (56 day) period beginning on the first day of the first payroll period following the loan disbursement date.

For payroll do we use the time incurred on the front end as well? For example: Payroll is twice monthly and P1 is from 4/1/20 - 4/15/20. PPP proceeds were received on 4/15/20. Can we use whole amount or just one work day?

Per the SBA PPP Loan Forgiveness Application, you can use payroll cost paid and payroll cost incurred during the covered period or alternate covered period. Incurred cost must be paid on or before the next regularly scheduled payroll after the end of the covered period or alternate covered period. If your loan disbursement date was April 15, 2020 and you paid payroll on April 15, 2020 you can include the entire amount paid.

If we have temporary employees (summer interns) in our calculation for the loan total, can we rehire those temporary employees now and use them in the FTE calculation?

All employees employed during the elected reference period and during the covered period or alternate covered period are to be used in FTE calculations for the respective period. In addition, all employees employed on February 15, 2020, employed during the period from February 15, 2020 to April 26,2020 and employed on June 30, 2020 are used in the FTE Reduction Safe Harbor calculation.

How would you calculate the annual bonus that are in the totals in the prior year 941 report to be part of the part of the 8 week payroll?

Bonuses are to be included in gross wage amounts and are thus used as a component of the gross wage calculations for the elected reference period and covered period or alternate covered period as well as Salary/Hourly Wage Reduction Safe Harbor calculation.

We pay our Texas Worker's Comp payments on a monthly basis based on payroll. Would that be a qualifying expense?

As Workers’ Compensation is considered an insurance premium and insurance premium are not specifically allowable cost we do not believe it is a qualifying expense currently.

Can my fax/copier machine, telephone equipment, and lease be excused?

Business rent and or lease payments on real or personal property are allowable costs.

You said to use average of 2019 salary for owners for forgiveness request. Is that even if it's above $100,000?

Salary for all individuals is capped at $100,000 on an annualized basis. For owner-employees the cap is $15,385 (eight week equivalent of $100,000 per year) or the eight-week equivalent of their applicable compensation in 2019, whichever is lower.

Because we moved to shift work, we had some employees that physically could only work 35 hours each week, but we paid them a bonus to compensate the 5 hours missing. Is that going to impact us?

Employees moving from 40 or more hours per week to less than 40 hours per week will impact the FTE calculation under either the regular method or the simplified method and may reduce the amount of the loan eligible for forgiveness. We recommend doing the calculation using both methods to determine which has the least impact.

What is the amount allowable on employee's benefits (employers only)?

Under the current guidance, there are not any caps related to employer contributions to health insurance and retirement plans.

Additional Resources

 

For additional resources regarding the COVID-19 crisis, please visit our resources page.

 

Updated as of May 28, 2020

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