CARES ACT Update

Webinar Series

CARES ACT Update: What Employers Need to Know About the Recently Passed $2 Trillion Coronavirus Stimulus Bill

Webinar Series

CARES ACT Update: What Employers Need to Know About the Recently Passed $2 Trillion Coronavirus Stimulus Bill

In this webinar you will learn about…

  • Easily understand the specifics about the largest financial relief package ever passed in history;
  • Determine how both small and large employers are able to get loans, and which loans can be forgiven;
  • Be aware of additional provisions on tax credits and paid leave requirements including payroll tax deferral;
  • Take away a solid understanding of how the CARES act will impact your employees or recently let-go employees directly.

At $2 trillion, the Coronavirus stimulus bill is the largest financial relief package ever passed in history. The bill has tremendous implications and opportunities for workers and employers across the country, from forgivable loans to tax credits to direct payments to workers. 

DailyPay has created a summary that will enable you to take action to support your business or family. Join us to cover Title I, II, and IV which include the provisions that are most relevant to employers and contain the marquee programs relevant to the private market and Title V which has a coronavirus relief fund, including grants to hospitals, airlines and other types of programs.

Register today to learn about the bill and the major provisions in it, how it will impact your business and employees.

View On-Demand

Guest Speaker

Matt Kopko

Vice President of Public Policy

DailyPay

Webinar Transcript

Duration: 30 minutes

Natalie:

Hello, everyone. I’m Natalie from DailyPay’s event team and I’d like to welcome you to today’s webinar on the CARES Act update that employers need to know about the recently passed $2 trillion coronavirus stimulus bill. Before we get started, I’d like to go over a few items so you know how to participate in today’s event. You will have the opportunity to submit text questions to today’s presenter by typing your questions into the questions pane of the control panel. You may send in your questions at any time during the presentation. We’ll collect them and address them during the Q and A session at the end of today’s presentation. So without further ado, I would now like to introduce Matt Kopko DailyPay’s VP of public policy. Matt, take it away.

Matt Kopko:

Great. Thank you very much, Natalie. Thank you everyone for attending today. Excited here to go over with you DailyPay’s webinar on what employers need to know about the $2 trillion coronavirus analyst’s legislation. I’m Matt Kopko, DailyPay’s vice president of public policy and excited to be here with you today.

Matt Kopko:

So, over the next 30 minutes, our goal here is to get a high level understanding of the largest financial relief package ever passed in American history. When it was originally passed, the CARES Act was the largest ever at $2 trillion. And with the recent half trillion dollar expansion as of last Friday, we’re now talking about $2.5 trillion of economic aid. Specifically, we’ll go over requirements and procedures for the marquee $350 billion small business forgivable loan program, which was recently almost doubled in size. We’ll also be going over the $500 billion loan program for larger employers without forgiveness.

Matt Kopko:

And there’s a mix of additional tax credits and other tax provisions and individual assistance provided in the legislation as well as paid leave requirements and updates, which we’ll be going over later in the presentation as well. Understanding this legislation is important to know how to manage your business during this crisis. And it impacts not just employees that stay on board, but potentially recently let go employees as well.

Matt Kopko:

I’d also like to note that none of the content in this session should be relied upon as legal or tax advice and please consult with your own experts. First, let’s talk about the coronavirus legislation from an overview. It was originally called HR 748 and its ultimate legislative name was called the Coronavirus Aid Relief and Economic Security Act, or the CARES Act. It’s also referred to as phase three of the coronavirus legislation with phases one and two being passed early on in the midst of the coronavirus crisis.

Matt Kopko:

Phase one covered immediate government relief to combat the crisis in phase two, among other things, modified some paid leave rules for employers, which we will be exploring later in the session. And again, there was additional legislation passed as of this past Friday and updates are provided throughout this presentation so that you’ll have the most up to date information regarding congressional legislation.

Matt Kopko:

The CARES Act is a very large piece of legislation, almost 1,000 pages long. This is the table of contents. We’ll be focusing particularly in this session, however, on titles, one, two and four. Title one is the paycheck protection program, the small business forgivable loan program, panel two has individual assistance and a mix of additional tax provisions, and title four is the larger employer non-forgivable loan program.

Matt Kopko:

So, first let’s talk about the paycheck protection program. Title one was a $349 billion, originally, small business loan program. It provides loans to companies so they can keep operating and keep employees on board during the crisis. And critical within this program is the fact that you’ll be able to get loan forgiveness to the extent you keep your employees hired or rehire them by June 30th and use your loan proceeds for payroll costs.

Matt Kopko:

So essentially in addition to this being a very favorable government loan, for most companies a large portion of the loan will be able to be forgiven. So that is essentially a grant from the federal government. And unlike most government programs, you actually apply directly to your own financial institution to obtain the loan. This was a tweak to the program provided so that aid could be distributed very quickly as opposed to having a bottleneck and everyone applying to the small business administration.

Matt Kopko:

To the extent you have an existing credit relationship with the financial institutions, it’s recommended that you apply through that institution because it will decrease the time with which you will have to get vetted and increase potentially the chances of you obtaining a loan. And again, while $349 billion was originally appropriated for this program, that money was quickly spoken for in about 12 days. As a result, as of last Friday, Congress appropriated an additional $310 billion to be set aside for this program and that is now open for business.

Matt Kopko:

In terms of who is eligible, the bottom line is that small businesses are eligible for the program, which are generally defined as 500 employees or fewer. There is one very important exception, however, to businesses in the hotel and restaurant industry. If you are assigned to sector code 72 of the NAICS and have no more than 500 employees at a single location, you’ll actually be eligible for one of these loans even though you have more than 500 employees overall. And while last week’s legislation did not change any of the eligibility requirements, Congress did set aside $60 billion of the 310 billion in the additional loan capacity specifically for small and rural lenders and financial institutions to distribute.

Matt Kopko:

In terms of borrower requirements, we covered those on the slide before, but there’s also a certification that is required that the funds will be used for eligible purposes like payroll and office rent, and that you’re not double-dipping or applying for the same loan in another capacity, but critically the loan must be needed because of coronavirus. You may have seen in the news recently where companies like Shake Shack, Ruth’s Chris Steakhouse, Autotrader, and others have had to return federal loans as a result of it being shown that they are large public companies who are taking out PPP loans.

Matt Kopko:

Per additional guidance recently provided by the federal government, the government has pointed out that the good faith certification that there are no adequate other sources of capital available is critical and they will be taking a close eye to making sure that those who take out the loans actually needed them. They also recently announced today that they will be doing an audit or full review of any loan provided that is an excess of $2 million, once forgiveness is being sought.

Matt Kopko:

So, please consult with your own advisors and experts to make your own determination as to whether or not you’re eligible. In terms of the loan size, generally the idea is that the loan amount is up to two and a half times of your average monthly payroll capped in event at $10 million. Average monthly payroll is defined as your average payroll paid on a monthly basis for the year before the loan is made, though there are different time periods for seasonal or more recent businesses.

Matt Kopko:

And in terms of eligible use of proceeds, there are a couple of major categories that loan proceeds may be used for. Primarily above them all is payroll costs. Generally you are allowed to use proceeds to pay compensation to individual employees in cash up to $100,000 on a prorated basis and also can be included are group healthcare benefits like health care and others. Similarly, you’ll be able to include in your loan proceeds, rent or mortgage interest paid on your office facilities, utilities, and interest on other existing debt obligations.

Matt Kopko:

However, per additional recent guidance from the government, at least 75% of the loan proceeds should be used for payroll costs and the payroll related items like benefits. The same categories of expenses are eligible for reimbursement. Generally payroll, interest, rent, and utilities. However, if you fire people, forgiveness falls relative to how many employees you had during the same period before the loan was given so that you can calculate the average reduction in monthly payroll.

Matt Kopko:

Similarly, if you reduce wages into a substantial amount, which is defined as more than 20 or 25%, your forgiveness will also be reduced proportionally. One nice additional feature of this legislation is that borrowers are entitled as of right to a six month full deferral of principal and interest and that may be extended up to 12 months as needed. And again, no more than the forgiveness can be provided for non-payroll costs.

Matt Kopko:

When it comes time to document forgiveness, please ensure that you keep your documentation verifying full time equivalents on your payroll and their pay rates, as well as full pay stubs. You also want to have documentation for other costs like mortgage or rent payments, and a certification from a business representative is required that the documentation provided is true and correct and that the amounts requested for forgiveness were indeed used to retain employees and make other forgiveness eligible payments.

Matt Kopko:

Separate from the PPP program, Congress also expanded another SBA loan program called the Disaster Loan Program. This program includes ability to claim for economic injury as a result of the disaster by coronavirus and $50 billion was also allocated for this program. So, please feel free to look into the disaster loan program as well. But for that program, you do have to apply directly through the government.

Matt Kopko:

Now let’s talk about title two. Subsection A and B of title two, while they don’t relate to employer rules, you may have already heard of. Subsection A is the unemployment insurance top-up, which allows people who are recently laid off to get an additional $600 per week on top of the state unemployment benefits they are otherwise eligible for. And critically, this section expands the eligibility, not just from laid off workers, but from gig workers and independent contractors as well.

Matt Kopko:

Subsection B is the famous stimulus checks provision that you’ve heard about where individuals earning up to $75,000 per year will get a direct check from the government for $1,200 per person. That amount is phased out down to $0 once you’re making 100,000 so that people who make $100,000 or more will not get any check.

Matt Kopko:

Well, let’s focus on subsection C, the employer section. First is the payroll tax credit included within title two of the CARES Act. Businesses and tax exempt organizations that are fully or partially suspended operations due to a government order of quarantine or who have gross quarterly receipts down over 50% year over year are eligible for a payroll tax credit. The credit is for the employer portion of the payroll tax and it’s the employer’s 50% portion for the first $10,000 of wages per employee per quarter.

Matt Kopko:

So, it’s essentially $40,000 of wages for employee for what you can claim this credit. If you have 100 or less employees, all employees will be eligible. But for most employers, those with a hundred full time employees or more, only those that are being paid, but unable to work because of coronavirus are eligible. And for those claiming this credit, if you’re taking out a loan under the title one paycheck protection program, you will not be eligible to take this credit as well.

Matt Kopko:

There’s also a payroll tax referral for the year 2020, to the extent that you haven’t been able to claim the payroll tax credit. Essentially you will not have to pay the payroll tax in the year 2020, though you will have to pay it back in the two years following. 50% in 2021 and 50% in 2022.

Matt Kopko:

Title two also has a smattering of other tax provisions related to cleanups and other changes to the Tax Cut and Jobs Act of 2017. One critical change is the suspension of the 80% taxable income limit on net operating loss carryovers for the tax year is 2018, 2019, and 2020.

Matt Kopko:

Additionally, this legislation has re-instituted a special five-year carryback of net operating losses for years, 2018, 2019, and 2020. And while it’s not relevant for most businesses, there are additional suspension of limitations on things like excess farm losses and pass through losses for non business income.

Matt Kopko:

Additionally, the corporate AMT, which is repealed under the Tax Cut and Jobs Act, has provisions in the CARES Act relating to the refundable credits. These credits, to the extent you are entitled to them, have now been accelerated and you may be able to access all of them so long as you file by the end of the year 2020. There are also additional technical changes to the bill. One important one for example, is a fix to the retail and depreciation rules that are accidentally omitted in the Tax Cut and Jobs Act. Retail establishments will now be able to take advantage of the 15 year depreciation rules as opposed to the 39 year schedule that was originally part of the 2017 legislation. And because businesses are likely to experience lower taxable income in 2019 and 2020, the limitation of 30% on business interest expense has now been increased from 30% to 50%.

Matt Kopko:

Now let’s talk about Title Four, the large employer loan program. Congress set aside $500 billion for larger employers to be able to access loan funds during the coronavirus. 50 billion of that has been set aside for special industries like airlines, cargo carriers, and national security providers, and those in their supply chain. $450 billion of the loans however, are going to be allocated for larger employers to be able to access. Unlike the PPP, this is being administered directly by the treasury in coordination with the federal reserve, as opposed to through financial institutions. And unlike the PPP, there is no loan forgiveness.

Matt Kopko:

Then there’s also the loan program that you may have heard about in the media where there’s a special inspector general and congressional oversight commission provided. So now let’s talk about who is eligible for the $500 billion facility. Eligible borrowers are US domiciled firms with employees principally in the United States who have to attest that they are not receiving sufficient relief under other provisions of the act. The duration of the loans are for five years or less and the rate shall be at prevailing interest rates, which are supremely low as of now.

Matt Kopko:

For medium-size employers, those who have 500 to 10,000 employees, including tax exempt organizations may be able to borrow at an even reduced rate of 2%. for those who want to take advantage of the special industry loans like airlines and national security, you must also provide an equity warrant as a condition of obtaining the loan. And the federal reserve has provided the ability to leverage the loans capacity that was appropriated by Congress so that over $4 trillion of lending capacity is technically capable under this program.

Matt Kopko:

General restrictions on borrowers under the larger loan program is that you may not have any dividends, stock buy backs, or capital distributions for the duration of the loan or 12 months thereafter. Additionally, the general rule is you must maintain at least 90% of your employment in order to continue to be eligible for the loan further. Further, you must agree to not transfer any proceeds to any offshore affiliate and there are additional limitations on compensation for highly compensated individuals, namely those making over $425,000 a year or those who are making over $3 million a year.

Matt Kopko:

If you’re able to take advantage of the 2% interest loan, not only must you retain 90% of your workforce, but you must agree to not outsource for the term of the loan plus two years thereafter and he has also agreed to maintain neutrality in any labor disputes for the term of the loan and two years thereafter. For airlines, you must also commit to maintaining certain critical airline services and there are an additional variety of rules for financial institutions.

Matt Kopko:

While these don’t directly affect employers, there are also a variety of additional consumer rules embedded within title four. Critically, bank customers who receive loan modification or forbearance shall not be reported negatively on their credit reports. And there is also a foreclosure moratorium for individuals and a forbearance on individual and multifamily mortgages. Lastly, for federally back landlord mortgages, there is a 120 day moratorium on evictions.

Matt Kopko:

Those are the major portions of the CARES Act that we wanted to cover. However, there are important paid leave requirements that were instituted in phase two of the coronavirus legislation. These were passed, as noted, in an earlier piece of legislation called the Family’s First Coronavirus Response Act and it’s effective as of April 1st of this year. The two major programs that we are noting on this webinar are the emergency paid sick leave requirement and an expansion of the family medical leave act for the coronavirus emergency.

Matt Kopko:

We’ll also be taking you through an example of New York law because New York is one of the few states who has also acted to provide additional pay to leave obligations on employers as a result of the coronavirus.

Matt Kopko:

In terms of the emergency paid sick leave requirement passed during phase two of the coronavirus legislation, this obligation covers smaller employers, namely those with fewer than 500 employees, who have employees who are not able to work and meet at least one of six coronavirus related criteria included, chiefly among them, having to make sure you take care of childcare during school closings. There’s also a general 80 hour paid sick leave requirement for full time employees that meet this criteria and for part-timers, an equivalent amount based on their recent work schedule.

Matt Kopko:

For those who are directly quarantined by coronavirus, the paid sick leave requirement is their full pay up to $511 per day and if they’re only partially eligible, it’s two thirds of the regular rate of pay capped at $200 a day.

Matt Kopko:

Congress also expanded the Family Medical Leave Act to include for the first time a paid leave requirement. This is limited to coronavirus, and it covers employers with fewer than 500 employees generally. Employees who are not able to work and who now qualify for FMLA leave due to having to care for children who are out of school or daycare closures are covered. Employees generally can be eligible for up to 10 weeks of FMLA following the first 10 day leave period covered on the previous slide. And it is the two thirds of the regular rate of pay capped at $200 a day. We also include a link here to the required poster that employers must post to ensure that their employees are informed of their rights.

Matt Kopko:

New York is one of a few jurisdictions who have passed orders or legislation in response to the coronavirus pandemic. While governors across the country have acted substantially, only a few states have actually passed legislation as a result of the coronavirus. New York has a new law that’s effective as of March 18th that does apply to almost all New York employers, but it only covers employees who are subject to a mandatory or precautionary order of quarantine and who cannot work.

Matt Kopko:

Generally, employers with more than 99 employees must pay 14 days of paid leave to covered workers and smaller employers only have to cover five days. Generally as you canvas these new laws, if you find yourself in a position, which you ultimately will, where there’s a conflict between state and federal laws, the general rule is that the more employee friendly rule shall prevail. So, if a state policy is more protective of employees than a federal policy, you typically have to follow the state guidelines. If the federal guideline is more protective, you must at least meet the federal threshold.

Matt Kopko:

Hopefully you’ve been able to cover during this webinar a understanding of which small and which not so small businesses can get multimillion dollar loans that are substantially forgiven by the federal government and also for larger companies, they can get loans as well, but without forgiveness. There are also tax credits, tax deferrals, and other beneficial tax provisions that impact employers to the extent they don’t want to take out loans. For example, the 2020 Employer Side Payroll Tax Deferral, which is not forgiveness.

Matt Kopko:

This bill also includes direct checks for individuals and the unemployment top-ups and has a host of other rules for special industries like airlines, hospitals, and the like. Also important to note is that the recent expansion of the CARES Act signed into law last week by the president includes, among other things, $75 billion in aid to hospitals for coronavirus virus related expense reimbursement. We hope this has been very helpful, but before we take questions I’d like to mention briefly about DailyPay. DailyPay is the leading provider of the pay experience and the DailyPay benefit, a fantastic way to preserve employee financial health and wellness in the short and long term.

Matt Kopko:

Employers across the country are joining the DailyPay nation to provide their employees access to a DailyPay benefit, which has been proven helpful to save them substantial money every year and increase their financial wellness. Our partners are very excited about being able to provide those benefits to their employees and we’d also like to note that in response to the coronavirus, we’ve waived our next day transfer fees so that now your employees can access their pay for free without any daily pay fees if they use the next day transfer option. If you’d like to bring your employees into the pay experience and join the DailyPay nation, please reach out to our team. You can do so by emailing us at joinus@dailypay.com.

Matt Kopko:

But now we’d like to take some questions. Please let me look through the questions that have been provided so far and we’ll start answering them.

Matt Kopko:

One question that’s been asked is can private companies participate in the title four $455 billion lending facility? Yes. Private companies and public companies can participate. The idea of this loan facility is that those employers who are too large for the paycheck protection program should be able to have the ability to cap favorable interest rate and government loan program as an alternative source of capital.

Matt Kopko:

Another question that’s been asked is: For the paycheck protection program, when can the loans be forgiven? Starting after June 30th, you’ll be able to submit documentation to your lender to begin the forgiveness process. As noted, please ensure to maintain all of your employment documentation and pay stubs. For those providing an on demand pay benefit, it’s important to note that clients of DailyPay, For example, will see undisturbed pay stubs, so that it’s very clear to be able to show to the government the total amount of payroll costs that an employer has incurred to maximize their forgiveness.

Matt Kopko:

One new question that has come in is can healthcare companies with more than 500 employees, but fewer than 500 at each location, be eligible for the small business loans? Unfortunately from our read of the provision, you have to be part of NAICS sector 72, which is generally the hospitality and restaurant industry. To the extent your business as classified under sector 72, you are eligible to trip the 500 overall employee limit. However, you must be part of sector 72.

Matt Kopko:

One other question we’re getting is, “Are we seeing many daily pay clients using some or part of these services and what types of industries?” DailyPay has been offering the on-demand pay benefit to employees across the economy. But we are very proud to be serving a lot of clients who have employees in the frontline industries of grocery, food supply, home care, and healthcare. These employers have been critical more than ever to make sure that their employees have access to the on demand pay benefit. And we’ve also been tracking daily employment rates and working numbers as part of our daily workforce index online at dailypay.com. It’s very interesting data to show, on a daily basis, which industries are seeing massive increases in employment, which ones are seeing temporary drops and rebounds, and which ones are seeing other types of trends as well.

Matt Kopko:

We also have one other question on whether partially suspended operations as a result of the large loan program include things like office closures, where most States are issuing work from home orders. Partially suspended operations is a very substantial definition. It essentially includes a severe disruption to your business so that you have substantial disruption in gross receipts. Generally it appears that an ability of a business to continue operating while employees work from home otherwise, without material impact to the bottom line of the business, would not qualify as a partially suspended set of operations. Those are all the questions we have so far. I’ll turn it back over to Natalie. Natalie, take it away.

Speaker 1:

Awesome. Thanks for those wonderful insights, Matt. And there appears to be a few questions still rolling in. So if we weren’t able to get to your question, somebody from DailyPay will be reaching out to you and addressing those questions so you can get those answers.

Speaker 1:

Before we sign off for today, I would like to share some exciting news that DailyPay has joined forces with many of the country’s leading supermarkets to support their heroic workers on the front lines of the global crisis. So, now one in eight supermarket employees in the US now has access to money as they earn it. But DailyPay serves all industries and so if you’re interested or if you’re in the QSR and lodging industry, be sure to not miss our webinar next week and we will be talking with some DailyPay partners about how they’re preparing for success beyond COVID-19. So, thanks for joining us today and we hope to see you next week and have a great rest of your day.

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