COVID-19: Recovery and Reopening

COVID-19 Recovery and Reopening

July 8, 2020 / 53:47:00

Spencer Packer

Welcome, everyone, to our webinar today. Just wanted to say thank you all for joining us and happy Cinco de Mayo. Hope everyone’s enjoying their time today. We hope everyone is also staying healthy and safe out there. My name is Spencer Packer, regional vice president of Marketing. And I’ll be your host again today for anyone who’s joined us in our previous webinars. As always, the webinar will be covering relevant information today on the reopening of businesses, as well as what we will have seen with regards to the PPP loan. As always, our goal is to provide quality information to our clients and partners so that you can all be well informed. We will do our best to answer most of the questions as they come in, but if we do not get to any, we’ll try to answer them on an individual basis. As a reminder, the webinar is being recorded today and we will be sharing that recording with all registrants after we end. We will also be publishing that recording to our resources page, which can be found at Vensure dot com slash COVID-19 resources. So a quick look at our agenda. We’ll be going over the PPP loan program, what we have seen, what we’ve had experience with on the client-side, some clarifications. We will also be answering some questions towards the end about that PPP program. Next, we’ll be going over reopening recommendations as it relates to the CDC and OSHA guidelines. And lastly, some reopening messaging and best practices that we’re helping our clients with, and hopefully, you guys can take some value out of that as well. As a reminder, Vensure Employer Services is the leader of 22 plus PEO partners throughout the United States. Our clients are in all 50 states. And just a quick look at all of our partners across the country here. As we go through the webinar today. Please feel free to submit any questions that you might have. Again, if you’re a client, please put “client” in your questions so that we can identify that and get it routed to your Client Relations Manager, if needed. Please note that none of your questions or comments will be seen by anyone else in the webinar except for my team. If you have a question after the webinar, please submit it to HR compliance at Vensure Dotcom and we will get back to you as soon as we can with any answer or relevant information. So next, I would like to introduce my panel. Three returning panelists with one new one, so we have Robin Paggi, Training and Development Specialist, with over 20 years of experience in helping clients train

and develop their workforce; John McFarland, Senior VP of Client Development, 13 years of PEO experience, and over
20 years of experience in HR and leadership: Greg Heiss has 15 years in commercial finance with an emphasis on SBA lending, consulting, and process improvement, as well as a podcast host of our Horizon Podcast, which you can check out the Worklogic HR website; and lastly, Paul Yeager, HR manager from AccessPoint, eight years of experience in HR with a bachelor’s degree in HR and master’s degree in employment law. So as we get started, I’m going to kick it over to John and Greg as they go through the PPP loans and what we have experienced.

John McFarland

Great, thank you so much, Spencer. So to start off, you know, there’s quite a few clients that have received their loans.
So the focus in today’s webinar is going to be what to do thereafter. It’s not to discount any of the clients that have not received a PPP loan. We are still available for those questions and assistance in that arena. So with respect to PPP loan utilization, so the assumption is, is for those that have received that PPP loan, there’s been a lot of questions on what
can the loan be used for. So first off, it has to be used to pay off any contribution that you may have received from the economic injury disaster loans, then the most important aspect to utilize it for is payroll costs. The SBA came through with a 75/25, meaning that 75% of the proceeds need to be utilized for payroll costs. And again, those are defined as your cash compensation. So salary, wages, commissions, tips, it is capped at $100,000 per employee. Meaning if you have an employee that earns $120,000, you can certainly still pay them based on that. But your forgiveness is not going to be based on that. It’s going to be based on the hundred. If that same employee happens to have benefits or 401(k), you can include that on top of the cash compensation portion. The other items that are eligible under the payroll costs are payment of vacation, parental, family, medical or sick leave. You cannot count the emergency paid sick leave and the paid leave that you may put under the Emergency Family Medical Leave Act expansion. The idea behind that is, as you should be receiving tax credits on those and should be considered double-dipping if you also get forgiveness. Insurance premiums, specific, large group type items, health, dental, vision, it excludes worker’s comp are getting a lot of questions regarding is worker’s comp included? No. Is additional fees included? No, our federal taxes included? No. But state and local taxes are. And then the 25% rule that’s focused on the business continuity specific to mortgages on a business property. We’re getting a lot of questions on can the owner utilize it for their home mortgage? No, but you use it for the property. The idea is, is it’s a continuance of business rental agreement for an item that you have a lease agreement for or utilities and all these have to be in place prior to February 15th. So it’s advisable that you put those lease agreements and notes and proof of utilities and a file that you’re going to use later on when you want to request the forgiveness. Now, employers have until June 30th to restore full-time employment and salary levels if they have made any changes to salary levels. Those are two components that could impact the forgivable amount. And there really is no clarification or guidance if the salary reduction will affect a single employee who was laid off, meaning we laid them off. We call them back. They’re getting a lot more on unemployment. They don’t want to come back. There’s not clear definition that indicates you have that has to be the same person as it reads. It appears as though it is, if you replace that person, then you’re OK. The idea is that you want to replace them in order to maintain your FTE counts. And we are still waiting for final guidance from the SBA on the final rule, which was supposed to drop, I believe it was April 26 and it hasn’t as of yet. So we’re still looking for that and we’re hoping that there’s going to be some clarification as it pertains to the forgiveness piece in that. It’s not a guarantee that it will, but that’s what we’re looking for.

Greg Heiss

All right. Thanks, John. So a couple of things. As we now have many clients with PPP loan approvals and proceeds dispersed, what are some of the best practices we should think about as we begin utilizing these funds? And of course, there’s lots and lots of ideas about best practices, but we’re recommending that in order to maintain a sources and uses accounting or reconciliation of PPP proceeds, that we set up a separate bank account. Now, that might not be practical for you, and certainly it might not be, but that’s one of the things that’s been suggested to us through our banking channel partners, is that these accounts be set up separately. We want to make sure that going back to sources and uses, we keep just impeccable records of what those funds are used for payroll eligible utilities, rent and mortgage expense, all of those types of things. And I think importantly, the interim final rule that we’re operating under, specifies that interest and utilities need to be in place prior to 2/15, so when you apply for forgiveness from the loan, I would

take your utility bills with you that showed that those utilities were, in fact, in place prior to 2/15. Utilities could be water, sewer, garbage, power, gas, Internet, telephone, all of those. So make sure that you’ve got all those handy when you apply for forgiveness and then maintain all of the records impeccably closely on the expenses that you’ve had in those categories. Maintain specific and separate payroll reports and payments made with the loan proceeds and of course, back up all your files. It goes without saying we want to make sure that we don’t have a trip in the middle of the covered period, and you lose your data. And because you’ve lost your data, you can’t obtain forgiveness. We wouldn’t want that to happen at all. So that’s that. John, back to you.

Thank you, Greg. So, again, PPP loan forgiveness, you want to stick with the 75/25 rule that was posted by SBA and again that concept is is 75% of those processes that are being utilized are being utilized for payroll costs and 25% or less is being utilized for the business items, your rent, your mortgage interest, utilities. And that whole spirit behind that is this loan was really designed to keep employees working. So if you keep in spirit with that, that’s the reasoning behind it. And again, the forgiving amounts are based on your eight-week cover period. Getting a lot of questions on when does that start? That starts when you get the funds. So if you received an approval from your bank, but you haven’t received the funds yet, your eight- week period has not started. Once you get those funds, it will. There has been a notice that banks have 10 days in which to disburse those funds after an approval. The only thing that I’ve been able to see that indicates that it could extend beyond that is one of the items they pointed to pretty often is the promissory note. Some clients are not feeling that up and turning that in timely back to their lenders, and that can cause it to extend out past that 10 days. But the banks have 10 days to finish their underwriting and get funds disbursed and that starting that eight-week cover period and again, those are payroll costs during that time, as I previously indicated, your cash compensation and benefits, so on and so forth. Again, that is maxed out at $100,000 cash compensation per employee. If you have benefits for them, yes, you can go above that hundred, but not the cash compensation portion. Interest on the mortgage of a business, property, rent, utilities: what’s important here in the eight-week covered period is there’s been a lot of discussion regarding what if like for instance, what if I got my money on April 21st and I had a payroll on April 30th, that I count that payroll even though that pay period was prior to my funding? As
it stands now, I would say, yes, I would just mark that in the file and have that discussion with your bank lender, because on the back end, you’re most likely going to have a pay date that falls outside of that pay period. But you had a pay period that’s within that eight weeks. There just isn’t clarity, yet. And we’re hoping that’s going to be clarified in the interim final rule. And if it’s not, I think the best practice is, whatever naturally happens within that eight-week period. Go ahead and put it in that file and count it and then have a discussion with your lender when you ask for the forgiveness regarding that first payroll and that eight week period and possibly that last one, that maybe the pay period fell out on paper in, but the date itself fell out, at least have that discussion, let them look that over. But based on what we’re looking at, anything that naturally occurs in that eight week, go ahead and count that. Back to you, Greg.

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All right. Thank you, John. So what is forgivable? We’ve probably talked about this in excess. And then again, not to belabor the point that we do not have a final rule. Here’s how we understand it: we want to get our payrolls back to 75% minimum of what they were prior to the COVID-19 crisis. That’s the objective of PPP. If we can’t get there, then there’s some discounting that will happen on the forgivable piece. We want to reserve the 25% if it’s available to us to pay for those other eligible expenses. The formula for how the forgiveness will be calculated is still in its interim state. But the idea, I think, as we move forward with what we know today is to return your payrolls to their pre-crisis level, both in terms of actual payroll dollars per EE (employee) not overall, and the FTE, which is full-time equivalent. I had some questions earlier about what do we do for a full-time equivalent calculation? Do we use the ACA standard of 30? Do we use 32?

Do we use 40? And I think the answer to that question is it really doesn’t matter. Believe it or not, so long as if we use
the 40 hour FTE when we calculated for the program, use a 40 hour FTE when you calculate for your forgiveness. Again, we’re waiting for clarity on what that FTE amount of hours is going to be. “Just be consistent,” is our advice at this point. Payroll costs are capped, as you guys all know, at $100,000. So that’s cash compensation. Doesn’t include non-cash compensation in the form of benefits or retirement plans or what have you. But if you’ve got somebody that’s highly compensated, the federal government is only going to support that salary to $100,000 and stop. So and then again, the interest expense on your covered business, mortgage expense, not principle, just interest, and if you have a need to calculate the interest component, call your bank or give me a holler, and I could probably help you with that. So what could reduce the forgiveness amount? If you’ve got FTEs that are lower than they were pre-crisis, as I mentioned earlier, for your average payroll dollars for the eight-week covered period is less than it was prior to the crisis. Again, keep impeccably tight records. We want to make sure that we have no reductions in salaries per EE, that’s per headcount, not the overall payroll burden during the eight-week period. So, again, just keep really, really good records. We’ve got the $100,000 cap, we’ve talked about that. So let’s say a maximum eligible forgiveness is $100,000, any reduction in pay if it exceeds 25% or more of the most recent full quarter prior to the covered period, in excess of 25% the previous year, for instance, if the previous salary was 40 and the amount of in excess of 25% is 15%. So it would be a 40 minus 25 or 15, 15% of 40 is $6,000, then that would be the reduction in the forgiveness. That’s probably a little cryptic. And again, we don’t have the final rule on how to calculate that, but that’s where we are now. All right, John, back to you.

Spencer Packer

And before John gets started, we’ll have that calculation in the notes when we send that back out.

John McFarland

So that a lot of questions regarding what’s it going to look like when I request loan forgiveness. So the loan was made by a particular bank and that bank had that loan, 100% guaranteed by SBA. The funds don’t actually come from SBA. That guarantee does. The funds are coming from your lender. So your lender is the one who you’re going to put in that request for forgiveness to. Now, again, because there is no interim final rule, we don’t know that a form. Is that an email? How is that going to look? But the idea is, as you submit a request to your lender who’s servicing that loan. What the employer, a borrower, is going to have to do is they’re going to have to certify that all documents are true. And the forgiveness amount was used to keep employees and make payments to eligible mortgage interest or rent utilities. And again, it goes back to the spirit of the PPP. It’s to keep the business going and, more importantly, is to keep the employees employed and keep it going, from an economy perspective. Payroll reports obviously are going to be needed. That covers that eight-week period. And again, that period is from the date of funding and then eight-weeks thereafter. Documents that verify the number of your FTEs as well as their pay rates, so they can do those two calculations to see if there’s any reduction in the forgiveness and the proof of payments on eligible mortgage or lease, rent, utility obligations, so on and so forth. So you want to keep all that in a separate file so it’s ready to go. The lenders have been advised that they have 60 days in which to make a decision. So once you turn that request in and all your documentation to back it up, the lenders have 60 days in which to provide a decision. And then again, the final rules: we’re still looking for that final interim, and we’re hoping there’s some more clarity when it comes to the forgiveness in there. If not, that’s where it stands at this point. Back to you, Greg.

Greg Heiss

Okay. Thank you, John. What we have seen as we work through PPP was a number of clients as a couple of noteworthy things. If your bank is not a PLP or an SBA lender and doesn’t do that as a normal course of their business, using the systems that the SBA has provided for the boarding of these loans, it’s a system called ETRAN, lack of familiarity there with that, the process. This has tended to increase the loan approval time or some delay. So we’ve coached a number
of banks through the PPP process and the application itself, talked about self-certification of the information that’s been provided, some of the PEO difficulties we’ve run across with the lack of 941s for PEO clients has caused some angst. But we’ve got most of that squared away. Most clients who didn’t get approved during the initial tranche of money because
of the appropriations lapse have been funded with the subsequent approval of the additional money. If you had a PPP application in place prior to 4/16 and still haven’t heard from your bank, I’d recommend that you reach out to the bank
and check on the status of that loan. Like I said earlier in the broadcast, we had some difficulties with PEO and banks accepting payroll validation, reports from a PEO that we’re not a 941 or some other D-9, for instance, some other bonafied means of validating payroll. So that’s the kind of some of the kinds of things we’ve seen were still available to take questions. Clients can call their CRM and route questions through to either John or me, and we’ll do our dead-level best to get you squared away. As soon as we have the final rule from SBA and or Treasury will make that available to you as well. Most clients have been approved for 2 1/2 their eligible payroll costs using one of two lookback periods. We’ve had some banks counteroffer to a lower amount, and for the life of me, I can’t imagine why that’s happened, but it has and we’ve cured some of those, but not all of them. And again, there’s a lot of confusion surrounding forgiveness. We’re going to operate now under our current understanding of the calculation as published in the interim final rule. As soon as we have the final rule, I suspect that will change somewhat. If you haven’t received an idle loan, and I don’t know of anybody that has in our group, we’ve seen a couple of idle grants or EIDGs, which we suspect are different than idle loans, but the PPP proceeds need to pay off that idle loan if there is, in fact, a loan in place. Again, if we have a reduction in EEs, there’s going to be a reduction in the forgiveness. And of course, when it goes out saying that the amount of forgiveness cannot exceed the principal balance of the loan. On the second tranche, our average loan size went from $250,000 down to $79,000, which suggests to me that we are being much more focused on small business entities rather than the larger companies that many of which you’ve heard probably weren’t eligible for it to begin with. So that’s kind of that. Thanks for listening. And if you have additional questions, see your CRM and we’ll get you squared away.