Business Solutions

Paycheck Protection ProgramFlexibility Act of 2020

Associated HCM has been closely monitoring the progress of the Paycheck Protection Program Flexibility Act of 2020.  Under the Coronavirus Aid, Relief and Economic Security (CARES) Act passed in March 2020, Congress allocated funds to the PPP to help small businesses keep workers on their payrolls. Many businesses across the country applied for PPP loans, forgivable loans to small businesses who have faced a steep economic impact from the COVID-19 pandemic.  As the program nears the end of the covered period on June 30, however, it has become clear that borrowers are facing unintended complications due to the program’s lack of flexibility.

The Paycheck Protection Program Flexibility Act of 2020 was passed by the US Senate on Wednesday, June 3rd, 2020 to address some of these problems and provide relief for struggling recipients.  It has been sent to the president’s desk to be signed.

Highlights of the bill are:

  • Extends the 8-week covered period, in which employers must use the funds in order to qualify for loan forgiveness, to the earlier of 24 weeks or December 31, 2020.
  • Replaces the 75/25 rule with a 60/40 rule. This reduces the amount of forgiveness costs required to be payroll-related to at least 60% and the remaining 40% can be used on eligible non-payroll costs.
  • Increases maturity from 2 years to 5 years for all new PPP loans (existing loans remain at a 2-year maturity).
  • The Wage and FTE Reduction Exemption date is moved from June 30, 2020 to December 31, 2020.
  • The Act expands the rehire exemption for the FTE Reduction.
  • Allows businesses that receive loan forgiveness to also receive payroll tax deferment.
  • Ensures small businesses won’t be penalized by high unemployment benefits.
  • Creates a safe harbor for businesses that are required to open at only 50 percent capacity.

Click here to read the full text. The bill amends the original CARES Act and the Small Business Act.  As guidance and updates are released, we will be sending more communication. We urge you to reach out to your CPA or attorney to discuss how these changes will affect your business.

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