Paycheck Protection Program Loan Forgiveness Application Released
On May 15th, the Small Business Association released the much-anticipated guidance on obtaining loan forgiveness through the Paycheck Protection Program. PPP borrowers can now access the Paycheck Protection Program Loan Forgiveness Application (SBA Form 3508), which needs to be filed with their PPP lender to initiate the forgiveness process. The application has four sections: (1) the PPP Loan Forgiveness Calculation Form; (2) PPP Schedule A; (3) the PPP Schedule A Worksheet; and (4) an (optional) PPP Borrower Demographic Information Form. Borrowers will use section (3) to complete sections (1) and (2) which must be submitted to their lender.
PPP loans are forgivable if used for the following categories during the borrower’s “covered period”: payroll costs; business mortgage interest payments; business rent or lease payments; and business utility payments. In the instructions of the forgiveness applications, the SBA clarifies that the “covered period” is the eight-week period beginning on the date the PPP loan was disbursed.
Payroll costs have some flexibility within the “covered period” as the SBA allows a borrower to deduct payroll costs that are paid or incurred. Under the guidance, payroll costs are considered paid on the day that paychecks are distributed or when a direct deposit transaction is originated. Payroll costs are considered incurred on the day that the employee earned the pay. Payroll costs incurred but not paid during the borrower’s last pay period of the “covered period” are still eligible for forgiveness if the borrower pays them by its next regular payroll date.
Similarly, non-payroll expenses that are eligible for forgiveness must either be paid or incurred during the “covered period” and paid on or before the next regular billing date, even if the billing date is after the end of the “covered period”. The forgiveness application reminds borrowers that eligible non-payroll costs cannot be more than 25% of total forgiveness amount.
Employee Retention Requirements
In order to be eligible for full forgiveness, PPP borrowers are expected to maintain a comparable workforce and compensation during the “covered period”. The forgiveness application provides rules on calculating average full-time equivalency (FTE) as well as several exceptions to the FTE reduction rules. The SBA will not penalize borrowers who have employees that voluntarily resign or are terminated for cause. Additionally, employers who attempt to rehire employees and have their offers rejected will not be penalized.
The SBA recognizes a safe harbor period which exempts some borrowers from losing loan forgiveness in the case that FTE levels are reduced. If a borrower reduced FTE levels between February 15, 2020 and April 26, 2020 but restored FTE levels by June 30th, 2020, the borrower will be exempt from having their forgiveness amount reduced.
The Paycheck Protection Program Loan Forgiveness Application is available HERE.
Additional detail about completing the form can be found HERE.
HHS Adds New FAQs on Provider Relief Program
The Department of Health and Human Services has expanded their list of frequently asked questions on the Provider Relief Fund, adding information on the general and targeted distributions of the fund. HHS has updated the FAQ document to reflect the extension of the attestation deadline to 45 days after payment, and notes that recipients can choose to reject a payment but still be eligible for future distributions. HHS also provides further details on the distribution methodology of the general distribution fund by adding the following:
How did HHS determine the additional payments under the General Distribution? (Added 5/14/2020)
HHS is distributing an additional $20 billion of the General Distribution to providers to augment their initial allocation so that $50 billion is allocated proportional to providers’ share of 2018 net patient revenue. The allocation methodology is designed to provide relief to providers, who bill Medicare fee-for-service, with at least 2% of that provider’s net patient revenue regardless of the provider’s payer mix. Payments are determined based on the lesser of 2% of a provider’s 2018 (or most recent complete tax year) net patient revenue or the sum of incurred losses for March and April. If the initial General Distribution payment you received between April 10 and April 17 was determined to be at least 2% of your annual patient revenue, you will not receive additional General Distribution payments.
Also, since many of our clients are asking about the upcoming reporting requirements, the following is in the FAQ:
What are the reporting requirements for providers attesting to receipt of Provider Relief Fund payments and when will reporting begin? (Added 5/6/2020)
All providers receiving Provider Relief Fund payments will be required to comply with the reporting requirements described in the Terms and Conditions and specified in future directions issued by the Secretary. The specific reporting obligations imposed on providers receiving $150,000 or more from any Act primarily making appropriations for the coronavirus response and related activities, which is a statutory requirement, begins for the calendar quarter ending June 30. The Secretary may request additional reports prior to that date. HHS will provide guidance in the future about the type of documentation we expect recipients to submit. Additional guidance will be posted HERE.
In addition, HHS includes new FAQs on the publication of payment data, rural targeted distributions, and high impact area distributions.
The FAQ document is available HERE.
As always, ADVOCATE will continue to keep you informed on the issues impacting medical groups as they develop.
Manager, Regulatory Affairs