COVID-19 Legislative Updates - Consolidated Appropriations Act, 2021 - January 2021 - P&L Accounting ...
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
COVID-19 Legislative Updates – Consolidated Appropriations Act, 2021 January 2021 Copyright © 2021 ADP, Inc. All rights reserved.
Logistics and resources
Copyright © 2021 ADP, Inc. All Rights Reserved.
2
ADP and Wolters Kluwer Partnership ADP has partnered with Wolters Kluwer to provide accountants access to best-in-breed tax information. Today’s program is approved for 1 CPE credit. Manage all of your courses and certificates here: https://www.cchcpelink.com/adp To receive your credit, answer all 4 polling questions presented during the webcast. Copyright © 2021 ADP, Inc. All rights reserved.
Disclaimer
Before taking any actions
This presentation is not:
• Legal advice
Before taking any actions on the
• The final word on today’s topics information contained in this
• A political opinion presentation, employers should
review this material with internal
and/or external counsel.
About today’s speakers
Virginia
Neiswender Joe Nuzzo Stacy Williams
Senior Counsel, ADP, VP, Counsel, Senior Counsel, ADP,
Inc. ADP, Inc. Inc.
Virginia is Senior Counsel supporting Joe is Vice President – Counsel in Stacy is Senior Counsel in ADP’s Global
ADP’s National Account Services ADP’s Global Compliance Compliance organization. Stacy has
business. She has been a practicing organization and provides advice and been a practicing attorney for more
attorney for over 15 years with counsel on the compliance of ADP’s than 20 years, representing employers
experience as counsel at the Federal global HCM product offerings and both at large law firms and as in-house
government, in private practice and as operations. Joe has practiced law at counsel. With a practice focusing on
in-house counsel. Virginia specializes in multinational law firms and as in- employment law and general corporate
compliance issues related to employee house counsel, primarily focusing on compliance, Stacy is a frequent speaker
benefits, including ERISA, leave employment and labor law matters on topics including leave and disability
administration and benefits-related and commercial litigation. issues, absence management, and wage
employment tax. and hour compliance.
Copyright © 2021 ADP, Inc.
Considerations for Employers Under the
Consolidated Appropriations Act, 2021
(CAA 2021)
1 COVID-19 Federal Response – Timeline
CAA 2021 - Impact on PPP
2
Updates to the Families First Coronavirus Response
3 Act (FFCRA)
Employee Retention Tax Credit, Economic Injury
4 Disaster Loans (EIDLs) and Employee Social Security
Tax Deferrals
5 Health and Dependent Care Flexible Spending Account
Relief
Copyright © 2021 ADP, Inc. All rights reserved.
COVID-19 Federal Response: Key Provisions Impacting Employers
Stimulus Stimulus Update Update Stimulus
March 18, 2020 March 27, 2020 April 24, 2020 June 5, 2020 December 27, 2020
H.R. 6201 H.R. 748 H.R. 266 H.R. 7010 H.R. 133
Families First Coronavirus Aid, Paycheck Protection Paycheck Protection Consolidated
Coronavirus Relief, and Economic Program and Health Program Flexibility Act Appropriations Act,
Response Act Security Act (CARES Care Enhancement 2021
(Families First Act) Act
or FFRCA)
Copyright © 2021 ADP, Inc. All rights reserved.
Enacted
December 27,
2020
Consolidated
Appropriations Act, 2021 –
Impact on PPP
Copyright © 2021 ADP, Inc. All rights reserved.
Original Paycheck Protection Program (PPP)
The PPP provides short-term cash flow assistance to qualifying businesses to help you and your employees deal with the immediate economic
impact of the COVID-19 pandemic. Loans are made by lenders certified by the Small Business Administration (SBA) and guaranteed by the federal
government.
Loans were available through August 8, 2020
• Up to 100% forgivable if spent on covered costs and employment and wage levels maintained.
• Borrower must have been in operation, with employees, on February 15, 2020.
Businesses and nonprofit organizations with 500 or fewer employees
• 500-employee exception for Hospitality/Food Service (NAICS code 72) - by physical location
• Certain franchises may also qualify as separate businesses.
Loan amounts = 250% of average monthly payroll costs from 12-month look-back, up to $10 million
Payroll costs included wages, health, retirement, state/local taxes and other costs, and excluded cash compensation
(pro-rated) over $100,000 per employee, workers compensation premiums, payments to independent contractors, and
employer-paid federal taxes
Copyright © 2021 ADP, Inc. All rights reserved.
Polling question 1
1 Have you already received a PPP loan?
• Yes
• No
• Unsure
Copyright © 2021 ADP, Inc. All rights reserved.Consolidated Appropriations Act, 2021: Impact on PPP • The Consolidated Appropriations Act, 2021 (CAA 2021) allocates $284.5B to new PPP loans and makes significant changes to key provisions of the program. • Loans are available through March 31, 2021, or until allocated funds are exhausted. • Many changes made by CAA 2021 apply retroactively to prior-issued loans, other than for PPP loans that have already been forgiven. • Changes impact: − Eligibility − Eligible costs − Loan amounts − Forgiveness − Second Draw loans Copyright © 2021 ADP, Inc. All rights reserved. 11
Do I qualify for a PPP loan under CAA 2021?
Eligibility for PPP loans
PPP loans are generally still open to any small CAA 2021 adds additional eligible CAA 2021 adds / clarifies the
business concern, 501(c)(3) nonprofits, categories of businesses: following are ineligible:
501(c)(19), veterans’ organizations, tribal • Entities not in operation on Feb. 15,
businesses, self-employed individuals, • 501(c)(6) organizations, other than 2020
farmers, ranchers and independent professional sports leagues or certain
• Publicly-traded entities (for new
contractors with 500 or fewer employees organizations involved in lobbying or
loans)
(for first-time borrowers). participating in political campaigns
• 501(c)(6) entities that are
• Broadcast News Organizations
Existing eligibility limitations and affiliation professional sports leagues and
• Housing Cooperatives (300 EEs or less) involved lobbying or political
rules still generally apply.
• Destination Marketing Organizations campaigns, as noted
• Some businesses over respective
(300 EEs or less) • Entities that receive a “Save Our
employee limits, including franchises and
NAICS 72 businesses (Accommodation • Businesses in Bankruptcy Stages” grant under CAA 2021.
and Food Services), may still qualify • Employers that use the Employee
• Applicants must attest that loan is Retention Tax Credit (but cannot claim
necessary to support ongoing operations. credit on wages paid with forgiven PPP
loan money)
Copyright © 2021 ADP, Inc. All rights reserved.How much can I borrow?
Loan amount calculation
For most first-time PPP borrowers, the calculation of For seasonal businesses, average monthly payroll costs
maximum loan amount is unchanged: can be calculated using any 12-week period from February
15, 2019 through February 16, 2020.
• 2.5 times the average monthly payroll costs for the
12-month period prior to the loan application or for Also clarifies the definition of seasonal employers as an
calendar year 2019. entity that does not operate for more than 7 months in any
calendar year or had gross receipts in any 6-month period in
Maximum Loan Amount for first-time PPP borrowers
the preceding calendar year that were not more than 1/3 of
remains $10 million.
the gross receipts of the remaining 6 months.
Aggregation limits apply for common parents.
Prior PPP borrowers may be able to seek an increase in
the original loan amount to pay for new allowable
expenses (to be discussed) and would not be considered a
Second Draw loan.
Copyright © 2021 ADP, Inc. All rights reserved. 13Polling question 2
2 Have you already applied or do you plan to apply for a second
PPP loan?
• Yes
• No
• Unsure
Copyright © 2021 ADP, Inc. All rights reserved.Special rules for “Second Draw” PPP loans
• Must have previously received a PPP loan. Businesses in the accommodations or food services
• Must fully spend 1st PPP loan prior to disbursement of industries may obtain increased loan amount of 3.5 times
the average monthly payroll costs, up to $2 million cap.
Second Draw
Entities ineligible for Second Draw loans:
• Generally must have 300 or fewer employees.
• Entities ineligible to receive SBA loans.
• Must demonstrate at least a 25 percent reduction in
revenue between corresponding quarters in 2019 and • Entities engaged in lobbying or political activities.
2020. The borrower may select the relevant quarter for • Entities with significant ties to the People’s Republic of
comparison. China or the Special Administrative Region of Hong Kong
◦ Special rules apply to borrowers that were not in (20% or more owned by an entity organized under the
business for all or part of 2019. laws of or with significant operations in China or Hong
Kong or with a Director who is a resident of China).
• Maximum Second Draw loan amount is $2 million.
• May only receive 1 Second Draw loan.
Copyright © 2021 ADP, Inc. All rights reserved. 15How can I spend the loan?
Payroll costs
Eligible payroll costs: Payroll costs not eligible :
• Compensation (salary, wage, commission, bonuses, or similar) • The Act clarifies that PPP funds can only be used for any
• Payment for vacation, parental, family, medical, or sick leave individual employee or sole proprietor's pay up to $100,000
as prorated for the period during which the payment is made
• Allowance for dismissal or separation
or incurred.
• Payment for group health care benefits, including insurance
• Employer-portion of federal taxes
premiums
• Compensation of employees whose principal place of
• The Act clarifies that “other employer-provided group
residence is outside of the U.S.
insurance benefits,” such as life, vision, dental and disability
insurance premiums, are included in payroll costs. • Qualified sick and family leave for which a credit is allowed
under sections 7001 and 7003 of the Families First
• Employer-paid retirement benefits, including defined-
Coronavirus Response Act
benefit or defined-contribution retirement plans and
employer 401(k) contributions. • Compensation to independent contractors
• Payment of state or local tax on employee compensation
Copyright © 2021 ADP, Inc. All rights reserved. 16How can I spend the loan?
Non-payroll costs
Eligible non-payroll costs
For Obligations in Effect as of Feb. 15, 2020, expenses paid or order in effect before covered period)
incurred during the Covered Period on: • Covered Worker Protection Expenditures (related to
• Rent COVID measures, such as ventilation systems, physical
• Utilities barriers, drive through facilities)
• Mortgage Interest (no prepayment and no payment of • Covered Property Damage Costs from public
principal) disturbances in 2020 not covered by insurance
Interest on any other debt obligations that were incurred • Covered Operations Expenditures (including costs for
before the covered period processing payroll, sales/billing software)
CAA 2021 Expands for all loans not already forgiven:
• Covered Supplier Costs (made pursuant to contract or
Ineligible non-payroll costs
• Mortgage/Rent/Utilities not in place by Feb. 15, 2020. • Worker Protection Expenditures on residential or
• Lobbying activities intangible property.
Copyright © 2021 ADP, Inc. All rights reserved.PPP loan forgiveness
Forgiveness generally: New safe harbor deadline:
• New non-payroll costs previously discussed are • The PPP penalizes borrowers that reduce wage
eligible for all borrowers who have not already or employment levels during the Covered Period
received forgiveness. but provides a safe harbor that allows borrowers
to exclude certain reductions.
• At least 60% of loan amount must still be
• Reductions occurring between Feb. 15 and April
spent on payroll costs.
26, 2020 are excluded if reversed by December
• Covered Period is slightly modified to be the 8- 31, 2020 for borrowers with loans issued on or
to 24-week period immediately following before August 8, 2020.
disbursement. Borrower can select the • For new borrowers, including Second Draw
duration between 8 and 24 weeks. loans, such reductions must be reversed by the
• Alternative payroll Covered Period likely will end of the Covered Period.
remain. • Also applies to reductions due to compliance
• EIDL advance not excluded. with closure orders and where EE refuses rehire.
Copyright © 2021 ADP, Inc. All rights reserved.Simplified forgiveness application For loans of $150,000 or less The SBA has 24 days to issue a new, 1-page form that borrowers may use, attesting to the following: • The number of employees retained through the loan • Estimated amount spent on payroll costs • Total loan amount Supporting records need not be submitted with the form, but must be retained for 4 years for employment records and 3 years for other records. Available to all new borrowers and prior borrowers who have not already received forgiveness. Copyright © 2021 ADP, Inc. All rights reserved. 19
Clarification of treatment of business expenditures
Deductions not prohibited
• No deduction shall be denied or reduced, no
tax attribute shall be reduced, and no basis
increase shall be denied, on the basis that
such expenses qualify for PPP loan
forgiveness.
• Provision effective only for loans forgiven
under section 1106 of the CARES Act as
amended by this section, after December 27,
2020 (the date of enactment of CAA 2021).
Copyright © 2021 ADP, Inc. All rights reserved. 20Updates to the Families
First Coronavirus Response
Act (FFCRA)
Copyright © 2021 ADP, Inc. All rights reserved.Tax credits for paid family leave and paid sick leave
Non-governmental employers with fewer Applies to federal employment taxes
than 500 employees
• Usually due within a few days of each payroll.
• Credit equal to 100(++) percent of the qualified • Can provide funds needed to pay sick and family
sick/family leave wages paid. leave payments.
‒ Subject to those limits. • An employer can request advance payment of the
‒ The credit is increased by specified health credit from the IRS.
expenses (e.g., employer-paid health plan
premiums).
‒ Plus 1.45% (Employer Medicare tax).
Copyright © 2021 ADP, Inc.FFCRA credits extended under CAA 2021 • Paid sick and paid family leave mandates NOT extended • Credits for employer-provided paid sick and paid family leave available through March 31, 2021 • Credits subject to limits in original FFCRA, i.e., 80 hours PSL and 10 weeks PFL Copyright © 2021 ADP, Inc. All rights reserved. 23
FFCRA – Maximum credit amounts
Amount of leave available and rates paid for different types of leave
Emergency FMLA expansion (EFML) Emergency Paid Sick Leave (EPSL)
• Full-time employees entitled to 12 total weeks of leave • Full-time employees (those scheduled to work at
between April 1-December 31, 2020 least 40 hours per week) entitled to 80 hours EPSL
• Prorated amount for part-time employees • Part-time employees entitled to pro-rated amount
• First 2 weeks can be unpaid • Total applies per employee, even if employee
changes employers
• Remaining 10 weeks paid at 2/3 employee’s regular rate of
pay based on hours scheduled to work • Leave for employee’s own health, capped at
$511/day and $5,110 total per employee
• Capped at $200/day and $10,000 total per employee
• Leave to care for another, capped at $200/day and
$2,000 total per employee
Copyright © 2021 ADP, Inc. All rights reserved.Polling question 3
3 Do you plan to offer paid sick or paid family leave to your
employees between now and March 31, 2021?
• Yes
• No
• Unsure
Copyright © 2021 ADP, Inc.Employee Retention Tax Credit,
Economic Injury Disaster Loans
(EIDLs) and Employee Social
Security Tax Deferral
Copyright © 2021 ADP, Inc. All rights reserved.
Copyright © 2020 ADP, Inc.Employee Retention Tax Credit – CARES Act
Eligible employers are allowed a credit against employment • Health plan expenses are eligible for the credit but
taxes equal to 50% of qualified wages (up to $10,000 in are counted toward the maximum.
wages) for each employee ($5,000 maximum per employee).
• This credit is not available to employers that receive a
Available with respect to wages paid 3/13/20 to 12/31/20. loan under the “PPP” program.
An employer is eligible if, during any calendar quarter of • Wages paid under the FFCRA Leave provisions are
2020, it either has (i) operations fully or partially suspended excluded – no double-dipping.
due to a governmental order related to COVID-19 or (ii) a
decline in gross receipts of more than 50% compared to the • Credit cannot be taken for Work Opportunity Tax Credit
same quarter of the prior year. (WOTC) eligible wages.
“Qualified wages” are treated differently for employers • Credit is taken as payroll tax offset with same rules that
based on number of full-time employees. apply to Families First leave credit.
• More than 100 employees: Credit for wages paid to
employees not providing services during shut-down
• 100 or less employees: All wages qualify
Copyright © 2021 ADP, Inc. All rights reserved. 27Employee Retention Tax Credit – Modified/Extended by CAA, 2021
Prospective changes (2021) Retroactive changes
Availability of credit:
• Clarification that group health plan expense may be
• Extended through June 20, 2021 considered even when no other wages are paid
Amount of credit:
• PPP borrowers may be eligible for the credit to the
• Increase from 50% to 70% of qualifying wages extent qualifying wages are not paid using forgiven PPP
• Wage cap increased from $10,000 in the aggregate for all loan proceeds
calendar quarters to $10,000 per calendar quarter for 2021
• Clarified gross receipts for certain tax-exempt
• Large employer for purposes of qualifying wages increased organizations
to 500
Eligible employer:
• Expanded eligibility by decreasing required decline in gross
receipts from 50% to 20% for 2021
• Expanded eligibility to public instrumentalities
Copyright © 2021 ADP, Inc. All rights reserved. 28Economic Injury Disaster Loans (EIDLs)
What is it? Eligibility:
• Businesses with 500 or fewer employees, sole
proprietorships and independent contractors.
• Low interest loans of up to $2,000,000, with • Suffer substantial economic injury, as a result of a
principal and interest deferment at the SBA’s disaster or emergency (which now includes COVID-
discretion. 19).
• EIDL proceeds can be used to pay for expenses
that could have been met had the disaster not Advances
occurred, including payroll and other operating • Option to obtain an emergency advance of up to
$10,000 within three days of when the SBA
expenses.
receives the EIDL application.
Copyright © 2021 ADP, Inc. 29Targeted EIDL advance grants
• Grants up to $10,000 Eligibility:
• Businesses fewer than 300 employees;
• Amount of grant reduced by any • Located in a low-income community;
EIDL grant previously received • Has suffered an economic loss of at least 30%
• Not an agricultural enterprise (with some exceptions)
• $20 billion appropriated
Other features:
• Grants do not need to be repaid under any circumstance, and may be used to keep
employees on payroll, to pay for sick leave, meet increased production costs due to
supply chain disruptions, or pay business obligations, including debts, rent and
mortgage payments.
• NOT deducted from PPP loan forgiveness
Copyright © 2021 ADP, Inc. All rights reserved. • NOT considered taxable income 30Presidential Memorandum
August 8, 2020
Memorandum on Deferring Payroll Tax Obligations in
Light of the Ongoing COVID-19 Disaster
• https://www.whitehouse.gov/presidential-
actions/memorandum-deferring-payroll-tax-obligations-
light-ongoing-covid-19-disaster
• Allowed employers the option to defer withholding and
payment of SS tax for employees whose wagesRepayment of employee portion of SS taxes
Key takeaways
• Previously, employers were required to withhold the total taxes
deferred ratably for the four-month period from January 1 – April 30,
2021
• Under CAA 2021, repayment period is extended through December
31, 2021
• Employers remain liable to collect and pay full amount of the SS taxes
deferred
• Penalties and interest begin to accrue on January 1, 2022
Copyright © 2021 ADP, Inc. All rights reserved.Health and Dependent Care
Flexible Spending Account Relief
and Student Loan Repayment
Extension
Copyright © 2021 ADP, Inc. All rights reserved.
Copyright © 2020 ADP, Inc.Flexible spending account relief
Current requirements
Health care flexible spending account Dependent care flexible spending account
• Benefits are subject to the use-it-or-lose it rule with some • Generally, similar rules to HC FSA
exceptions including limited carryover and grace period rules
• Qualifying expenses under DC FSA are limited to those
• Elections must be irrevocable once made and can only be of a qualifying individual (i.e. children under age 13 and
changed if the participant experiences a qualifying change in individuals who are physically or mentally incapable of
status AND a change to the election would be consistent self-care
with the change in status
• A plan may permit a former participant to seek
• After termination of employment, unused benefits are only reimbursement for expenses incurred for the remainder
available upon the election of COBRA continuation of the plan year under certain circumstances
Copyright © 2021 ADP, Inc. All rights reserved.Flexible spending account relief
Limited IRS relief – Notice 2020-29
Limited relief to assist employers during pandemic
Relief was provided to plans and participants as follows:
• Permitted changes to elections, including:
− Revocation of an election, make a new election, or increase or decrease an existing election
with respect to both health care and dependent care FSAs
− Employers are permitted to limit mid-year elections under FSAs to amounts no less than amounts
already reimbursed
• Unused amounts in either type of FSA at the end of a grace period occurring in 2020 could be used for
permissible expenses incurred during 2020
Requirements of plan:
• Prospective elections only
• Plan amendment required no later than December 31, 2021 provided plan operated in accordance with
adopted change
• Relief was available only through December 31, 2020
Copyright © 2021 ADP, Inc. All rights reserved. 35Flexible spending account relief
Health care flexible spending account Dependent care flexible spending account
• Carryover remaining balance into following year (2020 and • Carryover remaining balance into following year (2020
2021) and 2021)
• Extend Grace Periods for plan years ending in 2020 and • Extend Grace Periods for plan years ending in 2020
2021 to up to 12 months and 2021 to up to 12 months
• Employees who terminate participation during 2020 or 2021 • Extension of age limit for qualifying children from 13
may spend unspent balances through the end of plan year to 14
• Prospective election changes during 2021 without regard to • Prospective election changes during 2021 without
change of status requirements regard to change of status requirements
Note: Some changes may impact participant's eligibility for HSA
contributions.
Copyright © 2021 ADP, Inc. All rights reserved.Employer student loan repayment - Extended
Qualified Educational The CARES Act CAA 2021
Assistance
• Added repayment, directly or • Extended inclusion of student
• Under Section 127 of the IRC indirectly, of student loan by loan repayments through
the employer as an excludable December 31, 2025
• Qualified educational benefit provided:
expenses related to the
− Amount was limited to
employee, including:
$5,250/year for all Section
− Tuition 127 expenses
− Fees − Addition expired December
− Books 31, 2020
But not a student loan
Copyright © 2021 ADP, Inc. All rights reserved.Polling question 4
4 Are you a CPA needing Continuing Professional Education (CPE)
credit?
• Yes
• No
Copyright © 2021 ADP, Inc.Coordination of CARES Act & FFCRA provisions*
Paid Sick/Family Leave Paycheck Protection Employee Retention Tax Employer Payroll Tax
Credit (FFCRA credits) Program (PPP) Credit (ERTC) Deferral
PPP Can take FFCRA credits, but
cannot include qualified leave
wages in amounts for PPP
loan or loan forgiveness
purposes.
ERTC Cannot use same wages for May claim both, but cannot
both credits. claim credits for wages paid
with forgiven PPP funds.*
Employer Payroll Tax Can take FFCRA credits and Can elect to defer until date Can take ERTC and elect to
Deferral elect to defer. of notification of loan defer.
forgiveness.
Economic Injury Disaster Can take FFCRA credits and Can apply/receive both, but Can apply/receive loan/grant Can elect to defer and apply
Loans and Grants (EIDL) apply for loan/grant. cannot use funds for same and take ERTC. for loan/grant.
expenses; amount of forgiven
EIDL grant no longer
deducted from amount of
forgivable PPP loan.
*This chart has been updated to reflect the latest guidance from the government, including changes made
Copyright © 2021 ADP, Inc. All rights reserved. by the COVID-19 legislation enacted on December 27, 2020. 39What to do now • If you would like to apply for a first or second PPP loan, run the PPP loan application reports in your ADP system • Make sure you’re only spending PPP loan funds on covered expenses, and at least 60% on payroll costs • During your Covered Period, monitor your wage and FTEE comparisons • Determine the length of your covered period – between 8 and 24 weeks • If you have FTEE or wage reductions, restore them before the end of your Covered Period (8 to 24 weeks) Copyright © 2021 ADP, Inc. All rights reserved. 40
What to do now • Determine whether you’d like to voluntarily offer paid sick and/or paid family leave • Consider whether to take the employee retention tax credit, given increased threshold • Look into whether EIDLs and EIDL grants may be right for your organization • Consider updating your benefit plan documents to take advantage of FSA changes • Remember that you now have until December 31, 2025 to directly or indirectly pay certain student loan costs on a tax free basis Copyright © 2021 ADP, Inc. All rights reserved. 41
Thank you for attending!
Subscribe to our Eye on Washington email alerts at www.adp.com/eyeonwashington
For more workforce trends and insights, check out www.adp.com/blogs
Register for future events at www.adp.com/compliancespotlight
The information provided in this document is for informational purposes only and not for the purpose of providing legal, accounting, or tax
advice. The information and services ADP provides should not be deemed a substitute for the advice of any such professional. Such
information is by nature subject to revision and may not be the most current information available.
ADP and the ADP logo are registered trademarks of ADP, Inc. ADP A more human resource. is a service mark of ADP, Inc.
All other marks are the property of their respective owners.
Copyright © 2021 ADP, Inc. 42Thank you for attending
today’s CPE program!
Be sure you completed all four of the poll questions
• This will trigger your CPE Certificate to post to your
CPELink account
Sign in (or create) your account at: cchcpelink.com/adp
• Use the “Forgot Password” link to have a password
reset link sent to your email
Typically, the certificate will be ready in 48 hours
• CPELink will notify you via email when your
certificate is available
43You can also read
