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What You need to know about the "CARES ACT" and the Recent Amendments to the Pennsylvania Unemployment Compensation Law
THE "CARES ACT"
On Friday, March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which includes a Paycheck Protection Program (“PPP”) that significantly expands the 7(a) Loan Program administered by the US Small Business Administration (“SBA”). While the CARES Act is quite long and includes many “if’s” and “or’s,” below summary of the high points.
The PPP is available to small businesses (500 or fewer employees), sole proprietors, independent contractors and the self-employed. Also included are businesses with NAICS numbers beginning with “72” with 500 or fewer employees per physical location. The applicable period for the loans is February 15, 2020, through June 30, 2020. Loans obtained from January 31, 2020, through February 14, 2020, may be refinanced using the PPP.
In most instances, the maximum loan amount is 2.5x the average total monthly payments by the applicant for “payroll costs” (as described in more detail below) incurred during the one-year period before the date on which the loan is made. The PPP provides loans to cover payroll expenses (including the prorated portion of salaries up to $100,000 per year per employee). The PPP loan proceeds may also be used for group health care benefits, mortgage interest, rent, utilities and interest on other debt obligations incurred before the applicable period of February 15-June 30, 2020. PPP loan proceeds, however, cannot be used to cover sick paid leave required by legislation enacted earlier last week.
The SBA will approve additional lenders to make and service PPP loans. Interest on PPP loans cannot exceed 4%, and no personal guarantee or collateral will be required. PPP loans have an automatic payment deferral for at least six (6) months but no more than twelve (12) months. The maturity of a PPP loan is no more than ten (10) years.
Forgiveness is available for PPP loans for the 8-week period beginning with the origination of the PPP loan. The eligible forgiveness amount is the amount for costs incurred and payments made for: (1) payroll costs; (2) mortgage interest on a covered mortgage obligation; (3) covered rent obligations; and (4) covered utility payments. Forgiveness amounts may, however, be reduced if the business reduces its number of full-time employees or if the business reduces the compensation to any employees by more than 25%. Any forgiven amount will not be treated as taxable income.
A borrower seeking loan forgiveness with respect to a covered loan is required to submit to the lender that is servicing the loan an application that provides certain documents and makes certain certifications. A borrower is not permitted to receive forgiveness without submitting to the lender the documentation required. These required documents and certifications include:
(a) documentation verifying the number of full-time equivalent employees on payroll and pay rates for the relevant pay periods, including:
(i) payroll tax filings reported to the Internal Revenue Service
(ii) state income, payroll and unemployment insurance filings.
(b) documentation verifying payments on covered mortgage obligations, payments on covered lease obligations, and covered utility payments, including cancelled checks, payment receipts, transcripts of accounts, or other documents.
(c) a certification from a representative of the borrower authorized to make such certifications that:
(i) the documentation presented is true and correct; and
(ii) the amount for which forgiveness is requested was used to retain employees, make interest payments on a covered mortgage obligation, make payments on a covered rent obligation, or make covered utility payments; and
(iii) any other documentation SBA determines necessary.
Amendments to Pennsylvania Unemployment Compensation Act
Also on Friday, March 27, 2020, Governor Wolf signed into law amendments to the Unemployment Compensation Law (the “Law”). Here is some information to assist you in understanding your obligations during this difficult time.
The following are provisions specifically related to COVID–19 and employees whose unemployment is related to the COVID – 19 outbreak:
(a) The one week waiting period is waived for the duration of the disaster emergency declared by Governor Wolf.
(b) The job search and registration requirements are waived.
(c) If the Department of Labor & Industry (“L&I”) determines that an employee’s unemployment is related to the COVID–19 outbreak or the efforts to contain and prevent the spread of COVID–19, employers will automatically be given relief from charges for the weeks of unemployment occurring during the duration of the disaster emergency
(d) If L&I determines that an employee’s unemployment IS NOT related to the COVID–19 outbreak or the efforts to contain and prevent the spread of COVID–19, employers will have to file for relief from charges.
Certain employers, including non-profits or political subdivisions, are considered “reimbursable employers,” and their relief from charges is handled differently. Please don’t hesitate to contact us for additional information if you are a reimbursable employer.
Further, the Law provides for new notification requirements for separated employees regardless of whether you may be liable for UC contributions. At separation of any employee, you must provide the following information:
(1) Availability of UC benefits to workers who are unemployed and who meet the requirements of the Law;
(2) Ability of an employee to file UC claim in the first week that employment stops or work hours are reduced;
(3) Availability of assistance or information about an UC claim on L&I’s website or by calling (888) 313-7284; and
(4) That the employee will need certain information in order to file a claim, including:
(i) the employee's full legal name;
(ii) the employee's Social Security number; and
(iii) if not a citizen or resident of the United States, authorization to work in the United States.
Finally, employers now have twenty-one (21) days (instead of the usual 15 days) after the date of the earliest notice issued by the L&I that the employee is eligible for UC, or is claiming benefits subsequent to the separation, to request relief from charges.
If you have any questions or concerns, please reach out to us. Additionally, please check out our updated website through the link below, which contains additional updates regarding COVID-19's impact on your business. We are truly grateful for your trust and confidence over the last 20 years. We all will get through this situation together. Rest assured that we are here to assist you in any way we can, as we share our best wishes for the health and safety of those close to you.
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