Covid19 guidance for multiemployer plans and labor unions webinar

withum.com
Daniel Mayo, JD, LLM,
National Lead, Federal
Tax Policy
2
Scott Price, CPA Partner,
Co-Practice Leader,
Multiemployer Benefit Plans
and Labor Organizations
Brian Garstecki, CPA Partner,
Practice Leader,
Aaron Slaughter, CPA,
Senior Manager

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 Employee Retention Credit (ERC)
 Employer Payroll Tax Deferral
 Paid sick and family leave
 SBA programs – Paycheck Protection Program (PPP) and Economic
Injury Disaster Loan (EIDL)
 Q&A
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 Employee retention credit for employers subject to closure due to COVID-19
 Refundable payroll tax credit for 50% of qualified wages paid from 3/13/2020 through 12/31/2020 (see IRS FAQs, Form 7200 and Instructions,
and IR-2020-62)
 Credits claimed on Form 941 starting in Q2 2020, per IRS
 Applies to employers whose (i) operations were fully or partially suspended due to a COVID-19 related shut-down order, or (ii) gross receipts
declined by more than 50% when compared to the same quarter in the prior year (and ends when back over 80%)
 Applies regardless of the size of the business, or number of employees
 Amount of qualified wages: if more than 100 FTEs – then applies only to wages of EEs not working; if 100 or fewer employees – then applies to
all wages
 The credit is capped at the first $10K of wages per employee (including health benefits) (so max credit is $5K per employee)
 Credit not available if taxpayer obtains a covered loan under the PPP (i.e., the forgivable loan program)
 Credit not available if based on sick/family leave that is reimbursed under FFCRA (no doubling up on the credits)
 Employers may reduce their employment tax and income tax deposits for the amount of anticipated credits without penalty (Notice 2020-22)
 U.S. Senate Finance Committee FAQs address nonprofits
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 Employer payroll tax deferral
 Employers can defer payment of the employer’s share (6.2% of wages up to $137,700) of the SS payroll tax, and 50% of self-
employment taxes (see IRS FAQs)
 Covers taxes due from 3/27/2020 through 12/31/2020 – no special election is required to claim the credit
 Claimed on Form 941 starting in Q2 2020, per FAQs
 Deferred amount must be repaid in equal installments by 12/31/2021 and 12/31/2022
 Applies regardless of the size of the business, or number of employees, and the statute imposes no interest charge on the
deferred amounts
 Taxpayers can claim this deferral on top of the ERC and qualified paid sick/family leave – they can layer the benefits
 Not available if the taxpayer has debt forgiven on a covered loan under the PPP, but taxpayers can defer up to the date
forgiveness is granted by the lender, and even then the deferred amounts up to that point can be further deferred until the
end of 2021 and 2022, as above
 Tax deduction may be deferred depending on when payroll tax is eventually paid
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 Paid Sick and Family Leave Provisions
• Allows employers to keep their workers on their payrolls and to ensure that workers are not forced to choose between their paychecks and
the public health measures needed to combat the virus
• See IRS FAQs & US Labor Department issued Q&As, Employer Fact Sheet, Employee Fact Sheet, and Workplace poster
 Who is impacted by the law?
• It applies to certain public employers, and private employers with fewer than 500 employees. The law is designed to put small- and
medium-size employers on the same footing as large employers who already provide similar paid leave to their employees
• Definition of employee is broad, including FTEs, PTEs, EEs on leave, day laborers, temporary EEs who are jointly employed, but excluding independent
contractors
• Employees of joint employers under the Fair Labor Standards Act are combined for this purpose, and two or more entities are combined if they meet the
“integrated employer test” under the Family and Medical Leave Act of 1993
• Labor Department can exempt from the child-care leave requirement employers with fewer than 50 employees if the law would jeopardize
the viability of its business
• IRS promised “simple and clear criteria” for this exemption
• Labor Department will require documentation, but rules will be addressed in future regulations
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 What does the law require?
• Paid Sick Leave. It requires covered employers to provide up to 2 weeks of paid sick leave for employees who are unable to work or telework because they
meet one of 6 conditions:
(i) they are subject to a federal, state, or local quarantine or isolation order relating to COVID-19;
(ii) they have been advised by a health care provider to self-quarantine due to COVID-19;
(iii) they are experiencing symptoms of COVID-19 and seeking a medical diagnosis;
(iv) they have a bona fide need to care for an individual who is quarantined or subject to an isolation order;
(v) they are caring for a child under age 18 whose school or place of care has been closed, or the child care provider of such child son or daughter is
unavailable, due to COVID-19; or
(vi) they are experiencing any other substantially similar condition as determined by the Secretary of HHS
• What is not covered? Employee cannot work or telework due to a workplace closure or non-COVID-19 issue
• Paid Family Leave. It requires covered employers to provide up to 10 weeks of paid family leave for employees who were employed for at least 30 days and
who are unable to work or telework because of a bona fide need to care for a minor child if the school or place of care for such child has been closed, or
the child care provider is unavailable, due to a public health emergency like COVID-19
• Must be employed 30 days immediately prior to the leave; days as a temporary employee before FTE status count ((Q&A #14)
• Paid Sick Leave and Paid Family Leave. Employers are prohibited from (i) requiring employees to find replacement workers to cover their time off and (ii)
discharging or discriminating against employees for requesting paid leave or for filing a complaint against the employer
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How much is required to be paid to covered employees?
• Paid Sick Leave.
 The employer is required to pay sick leave at the employee’s regular pay up to $511/day for up to 2 weeks ($5,110 max) for each employee
that takes sick leave relating to their own health (the first 3 categories above)
• Covers up to 80 hours over a 2-week period
• PTEs are eligible for leave based on a 6-month average of the average number of hours worked over a 2-week period (Q&A #5)
 The employer is required to pay sick leave at 2/3 of the employee’s regular pay up to $200/day for up to 10 days ($2,000 max) for each
employee that takes sick leave (for the last 3 categories).
• Paid Family Leave. The employer is required to pay family leave for up to 10 weeks of not less than 2/3 of the employee’s regular rate of pay based
on the number of hours they were scheduled to work
 Covers FTEs up to 40 hours/week, and PTEs for the number of hours they are normally scheduled to work over that period
 Amount is capped at $200/day ($10,000 max) and employees are limited to 12 weeks of paid leave in any calendar year
 Family leave can be unpaid for the first 2 weeks, but sick leave may cover this period (or any accrued leave under employer’s policies) (Q&A
#7)
• Employers of employees that are health care providers or emergency responders can elect out of the paid sick leave requirement
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 When is the new law effective and when does it end?
• The law takes effect April 1, 2020
• No sick leave or family leave is required to be paid before that time – the law is not
retroactive (Q&A #13)
• The law expires on December 31, 2020
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 Is there a net cost to employers?
• No. The law is intended to be neutral for employers. Employer pays benefits and recovers the cost of
such leave through a refundable, dollar-for-dollar payroll tax credit (up to certain dollar limits)
• The amount is includible in income (so there is no double benefit – D/NI)
• Paid leave itself is exempt from employment taxes, and if the employer continues the employee’s health
insurance coverage while he/she is out on leave, then the credit is grossed up to cover this additional
expense
• Self-employed individuals receive an equivalent credit
• No double dipping – employers cannot receive the payroll tax credits and credits under the family and
medical leave program established in the 2017 TCJA (§45S)
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 How does the payroll credit mechanism work?
• March 20th – IRS News Release (IR-2020-57)
• Reimbursement will be “quick and easy”
• Immediate dollar for dollar tax offset against payroll taxes
• Including withheld federal income taxes, employee share of SS and Medicare taxes, and employer’s share of SS
and Medicare taxes with respect to all employees
• Where a refund is owed, employers can obtain an expedited advance from the IRS by submitting a streamlined claim
form that should be released this week
• See IRS Form 7200 and Instructions
• Self-employed individuals will claim the credit on their income tax return and reduce estimated tax payments
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SBA has several different financial assistance programs for small
businesses
 SBA Disaster Assistance Loans for businesses impacted by COVID-19
• Economic Injury Disaster Loan (EIDL) Program – may be used to pay fixed debts,
payroll, accounts payable and other bills that can’t be paid because of the disaster’s
impact
• Emergency EIDL grants up to $10,000
 Standard 7(a) loan program with amendments under the CARES Act – PPP
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 Eligible borrowers
 All businesses, including 501(c)(3) nonprofits and veterans organizations and Tribal business
concerns that were in business before 2/15/20
 Small business concerns with 500 or fewer employees (including FTEs and PTEs)
• If more than 500 employees -
 May qualify if it meets the SBA employee based or revenue based size standard corresponding to their
“primary” industry
 If they don’t meet this standard can still qualify if
• They meet the SBA’s “alternative” size standard as of March 27, 2020
• Maximum tangible net worth is not more than $15M AND
• Average net income after federal taxes (excluding carryover NOLs) is not more than $5Mm
for the last two full years
 Includes sole-proprietors, independent contractors and eligible self-employed individuals
 Affiliation rules apply – businesses under common control need to aggregate all entities to
determine the number of employees
• Waived for small business (i) in the NAICS code 72 (hotel and food services) and (ii) that are
franchises in the SBA’s Franchise Directory, and (iii) that receive financial assistance from small
business investment companies licensed by the SBA
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 Loan Terms
 One loan per person
 In general, the maximum loan amount is the lesser of:
• $10,000,000, or
• 250% of the average monthly payroll costs incurred during the 1 year period before the date on which the loan is made
 Either monthly average during 2019, or 12-month rolling average
 Lender will review borrower’s calculation
 No need to prove credit is unavailable elsewhere (i.e., waiver of Credit Elsewhere requirement)
 Interest rate: 1%
 Term: 2 years
 No collateral required – 100% guaranteed by the SBA
 No personal guarantee required
 No prepayment penalties or fees
 Payment deferral for 6 months, but interest will accrue from date of loan
 Borrower can obtain EIDL after 1/31/20 and until 4/3/20 is obtained if used for a purpose other than
payroll costs
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 Payroll Costs
 Employee (covers compensation up to $100,000 annually)
 Wages, salary, commissions, or tips (up to cap of $100K/year/person)
 Vacation, parental, family, medical, or sick leave
 Dismissal or separation payments
 Payments for group health care benefits, including insurance premiums
 Retirement benefits
 Employer state or local taxes on compensation
 DOES NOT INCLUDE PAYMENTS TO INDEPENDENT CONTRACTORS
 Sole proprietor or independent contractor (up to $100,000 annually)
 Wage; commission; income; net earnings from self-employment – From 2019 Schedule C even if not yet
filed with IRS
 Excludes (i) employer’s share of Federal employment taxes and federal income tax withholding, (ii)
compensation to an employee whose principal place of residence is outside the United States, and
(iii) qualified sick and family leave under the FFCRA
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Allowable Uses (during the 2-year term of the loan) Forgivable Expenses (during the 8-week period)
1 Payroll costs (including salary, wages, retirement benefits, group health
care benefits, state and local employment taxes, etc.) for employees
whose principal place of residence is in the U.S.
Same (note: salary cap is $15,385 for the 8-week period)
2 Interest on business mortgage obligations (but not prepayments or
principal payments) on real or personal property
Interest on business mortgage obligations (but not prepayments or principal
payments) on real or personal property, if the loan was incurred before
2/15/2020
3 Business rent for real and personal property Business rent for real and personal property, if the lease was in effect before
2/15/2020
4 Business utilities (including electricity, gas, water, transportation,
telephone and internet)
Business utilities (including electricity, gas, water, transportation, telephone and
internet), if the service was in effect before 2/15/2020
5 Interest in any other debt obligations incurred before 2/15/2020 None
6 Costs related to the continuation of group health care benefits during
periods of paid leave, and insurance premiums
None

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 Certifications of borrower made under penalties of perjury
 Current economic uncertainty makes the loan necessary to support your ongoing operations
• FAQ issued yesterday
• Question: Do businesses owned by large companies with adequate sources of liquidity to support the business’s
ongoing operations qualify for a PPP loan?
• Answer . . . . all borrowers must assess their economic need for a PPP loan under the standard established by the
CARES Act and the PPP regulations at the time of the loan application. . . . Borrowers still must certify in good
faith that their PPP loan request is necessary. . . . Borrowers must make this certification in good faith, taking into
account their current business activity and their ability to access other sources of liquidity sufficient to support
their ongoing operations in a manner that is not significantly detrimental to the business. For example, it is
unlikely that a public company with substantial market value and access to capital markets will be able to make
the required certification in good faith, and such a company should be prepared to demonstrate to SBA, upon
request, the basis for its certification.
 Funds will be used to retain workers and maintain payroll or to make mortgage, lease, and utility
payments
 You have not and will not receive another loan under this program
 To the extent feasible, you will purchase only American-made equipment and products
 And others . . .
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• Loan Forgiveness
• Includes all eligible expenses paid during the 8-week period after the loan is made
• Eligible expenses:
• Payroll costs (up to $100K/year/employee – presumably same rules as loan use rules apply)
• Interest on mortgages incurred before 2/15/2020
• Rent under a lease in force before 2/15/2020
• Utilities for which service began before 2/15/2020 (e.g., electric, gas, water, transportation,
telephone, and internet)
 Cannot exceed the principal amount of the loan
 Anticipated that no more than 25% of amount forgiven can be for non-payroll costs
 Amount is tax-free to the borrower
 Amount of forgiveness is reduced if there are certain headcount or wage reductions
 Borrower will need to document the number of FTEs and pay rates, as well as the use of
funds for all purposes
 Lender has 60 days to made a decision after it receives a completed application for
forgiveness
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 Reduction based on headcount reduction
 Multiply total eligible expenses paid during 8-week period after loan is made (covered period) by the
following fraction:
• Average number of FTEs per month during 8-week period after the loan is made, divided by
• At the election of borrower:
 Average number of FTEs per month during 2/15/19 to 6/30/19, or
 Average number of FTEs per month during 1/1/20 to 2/29/20
 Reduction based on wage reduction
 Reduction amount per employee is equal to:
• the amount by which total salary and wages paid during the covered period is less than 25% of total wages
paid during most recent full quarter before the covered period
 Reduction applies only to employees making less than $100K/year
 Can restore headcount and wages by 6/30/2020 to account for any reductions made
between 2/15/2020 and 4/26/2020
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Scott Price, CPA Partner,
Co-Practice Leader, Multiemployer
Benefit Plans and Labor Organizations
sprice@withum.com
Brian Garstecki, CPA Partner, Practice
Leader,
Multiemployer Benefit Plans and
Labor Organizations
bgarstecki@withum.com

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