The Small Business Administration has promised additional guidance on loan forgiveness (as a whole) as it relates to the Paycheck Protection Program (PPP). While we await that guidance, the SBA – in conjunction with the U.S. Treasury – continues to release partial guidance on certain issues in the form of Frequently Asked Questions (FAQs), which you can access here.
We want to highlight FAQ #40 as it addresses a question many clients have asked:
Will my PPP loan forgiveness amount be reduced if I laid off an employee, offered to rehire the same employee, but the employee declined the offer?
The answer is “No,” and states the following: “SBA and Treasury intend to issue an interim final rule excluding laid-off employees whom the borrower offered to rehire (for the same salary/wages and same number of hours) from the CARES Act’s loan forgiveness reduction calculation.” The interim final rule mentioned here is the promised guidance the SBA intends to issue. It goes on to say “The interim final rule will specify that, to qualify for this exception, the borrower must have made a good faith, written offer of rehire, and the employee’s rejection of that offer must be documented by the borrower.” Although it is not specifically stated, the fact that “same salary/wages” is mentioned makes it our belief that this would apply to both the full-time equivalent calculation as well as the reduction in wages when compared to the previous quarter, but we do need clarification on that point.
In conjunction with an employee declining the offer, the PA Department of Labor has issued a process for notifying the PA DOL of an employee’s refusal to accept suitable work. The employer must complete Form UC-1921W and return it to the PA Department of Labor within SEVEN days of the offer. Click here to download the form and instructions on how to complete and submit it.
Finally, as it pertains to the Employee Retention Credit, the CARES Act stated that health insurance premiums can be included as part of eligible payroll costs. The IRS has now issued guidance to clarify that the costs of health insurance premiums, incurred after March 12, 2020 and before January 1, 2021, paid on behalf of employees who have been furloughed count as eligible wages for purposes of this credit. This means that employers who are continuing to pay employee health insurance premiums while their employees are NOT working, and therefore not receiving wages, are allowed to treat the payment of these premiums as “qualified wages” for purposes of this credit. The stipulation still applies that if you have applied for or have a PPP loan then you are NOT eligible for this retention credit.
As always we are here to help! If you have any questions please contact your DunlapSLK team member. Continue to stay safe!