POLICY BRIEFINGS

Hart Health Strategies provides a comprehensive policy briefing on a weekly basis. This in-depth health policy briefing is sent out at the beginning of each week. The health policy briefing recaps the previous week and previews the week ahead. It alerts clients to upcoming congressional hearings, newly introduced bills, regulatory announcements, and implementation activity related to the Patient Protection and Affordable Care Act (PPACA) and other health laws.


THIS WEEK'S BRIEFING - MAY 26, 2020

Ongoing Discussions Continue on the Next Large Coronavirus Package


Lawmakers remain at odds about when the next coronavirus relief package should be taken up, and what provisions the bill should contain. Senate Majority Leader Mitch McConnell (R-Ky.) recently stated that he will not include an extension for enhanced unemployment benefits, as was contained in the $3 trillion House-passed measure that the GOP has rejected. While administration officials have acknowledged that more stimulus legislation will likely be necessary for the U.S. economy, Republicans have indicated that they are not in a hurry to pass more relief and instead are in favor of gauging the impact of previously passed stimulus packages before considering additional legislation.


House to Consider PPP Changes This Week


The House of Representatives plans to consider the Paycheck Protection Program Flexibility Act of 2020 (H.R. 6886) under suspension of the rules this week. The bipartisan bill introduced by Reps. Dean Phillips (D-Minn.) and Chip Roy (R-Texas) will make changes to the Paycheck Protection Program (PPP) to make it more accessible and provide more flexibility to PPP loans. Although there is no such requirement in the statute, the SBA created a requirement that 75% of loan proceeds must be spent on payroll, which means there is a cap of 25% of non-payroll allowed uses. H.R. 6886 would repeal the 75/25 rule. The bill would extend the loan period eligible for forgiveness from 8 weeks to 24 weeks. Current statute also creates a reduction in forgiveness for employers who have reduced their employee headcount. However, if an employer rehires its employees by June 30, this reduction in forgiveness can be eliminated. This legislation would extend the rehire period to December 31. Administration officials and Senate Republicans, including Small Business Committee Chair Marco Rubio (R-Fla.), have expressed support for such changes to the program. It remains unclear whether the chamber will approve the bipartisan proposal during a pro forma session or wait until the Senate returns on June 1.


Treasury and SBA Issue Rule on PPP Loan Forgiveness


On May 22, the Small Business Administration (SBA), in consultation with the Department of the Treasury, issued an interim final rule (IFR) related to loan forgiveness for the Paycheck Protection Program (PPP). The IFR retains the requirement that 75% of loan proceeds be used for payroll costs to receive full loan repayment, which has been a point of contention for the business community and may be repealed by Congress in the Paycheck Protection Program Flexibility Act. However, the SBA provides several other key clarifications to assist small business owners.

Since payroll cycles may not align neatly with the eight-week period eligible for forgiveness, the IFR provides flexibility to borrowers with bi-weekly or more frequent payroll cycles, by allowing them to use an alternative payroll covered period. Similarly, SBA clarifies that certain nonpayroll costs incurred during the eight weeks but paid by the next regular billing date will still be eligible for forgiveness even if that billing date falls outside the covered period.

SBA also provides several key clarifications related to reductions in loan forgiveness amounts. The IFR allows for full loan forgiveness if employees are rehired or salary levels are reestablished on or before June 30. Additionally, there will be no “double penalty” in that any loan forgiveness reductions due to changes in number of employees will not be not counted toward any reductions related to changes in salary. The SBA establishes the exact process a borrower must follow to avoid a reduction in forgiveness for employees who reject rehiring offers and provides leniency for employers related to employees who are fired for cause, or voluntarily resign or request a reduced schedule.

SBA clarifies that, for purposes of the PPP, a “full-time equivalent employee” means an employee who works 40 hours or more on average each week and provides two options for how to calculate employees who were paid for less than 40 hours per week.

In addition, the IFR reaffirms the 60 days for the lender to review the loan forgiveness application and 90 days for the SBA to respond, clarifies that payroll costs are broadly defined as well as denoting payroll compensation for owner-employees and self-employed individuals, and provides additional information on loan forgiveness documentation.

In addition to this IFR, SBA and the Department of Treasury also released Interim Final Rule on SBA Loan Review Procedures and Related Borrower and Lender Responsibilities, information on the Lender Processing Fee Payment and 1502 Reporting Process, an Interim Final Rule on Second Extension of Limited Safe Harbor with Respect to Certification Concerning Need for PPP Loan and Lender Reporting, and updated its FAQs.



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