PPP Flexibility Act: Key Points and Guidance

On Wednesday evening, the Senate unanimously passed the much-anticipated Payroll Protection Plan Flexibility Act and sent it to the White House for President Trump’s signature. The primary purpose of the bill is to give business owners more time and flexibility to use loan money obtained through the original PPP and still qualify for loan forgiveness. Here is a summary of the items included in the new bill:

8-week period extended to 24 weeks
Companies may extend the 8-week covered period to 24 weeks or December 31, 2020, whichever is earlier. This provides an opportunity to include additional eligible costs in the forgiveness calculation, but also may add difficulty to keep a full workforce in order to qualify for full loan forgiveness.

75% payroll threshold reduced to 60%
The existing requirement that 75% of the loan be spent on payroll costs has been reduced to 60%. If a borrower uses less than 60% of the loan amount for payroll costs during the forgiveness covered period, the borrower will continue to be eligible for partial loan forgiveness, subject to at least 60% of the loan forgiveness amount having been used for payroll costs.

FTE calculation terms modified
The date to measure Full Time Equivalent Employees (FTE) for purposes of calculating a reduction of forgiveness based on any reduction in the company’s workforce has been moved from June 30, 2020 to December 31, 2020.

Additional exceptions to the FTE calculation were added:

  • The inability to rehire individuals who were employees on February 15, 2020
  • The inability to hire similarly qualified employees for unfilled positions on or before December 31, 2020
  • The inability to return to the same level of business activity that the company was operating at before February 15, 2020, due to compliance with requirements established or guidance issued during the period beginning on March 1, 2020, and ending December 31, 2020, related to the maintenance of standards for sanitation, social distancing, or any other worker or customer safety requirement related to COVID–19 from government agencies listed below:
  • Secretary of Health and Human Services
  • Director of the Centers for Disease Control and Prevention
  • Occupational Safety and Health Administration

Loan repayment term extended to 5 years
The repayment duration for loan amounts that don’t qualify for forgiveness has been extended from 2 years to 5 years. There is no change to the 1% interest rate.

Eligibility for employer payroll tax deferral extended
Companies that have chosen to defer the employer paid social security portion of payroll taxes may now do so regardless of loan forgiveness. The deferral may continue through December 31, 2020, with payments required in 2021 and 2022.

While the new bill has been enthusiastically received in all quarters, it is just the latest development in the ongoing recovery effort that began with the passage of the CARES Act in March and is sure to continue for many months to come. Of course we will continue to monitor the news and offer guidance and analysis when appropriate. In the meantime, if you have any questions about the PPP Flexibility Act and how it affects your specific situation, please feel free to contact your Weiss professional.

For timely updates and advice about pandemic-related developments, visit the COVID-19 News and Information Center on our website.


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