President Signs Paycheck Protection Program Extension Legislation
President Trump signed into law Friday, June 5, the Paycheck Protection Program Flexibility Act of 2020, legislation that the Senate approved Wednesday night. The legislation extends elements of and makes certain other adjustments to the Paycheck Protection Program (PPP). This Small Business Administration lending program was created by the Coronavirus Aid, Relief, and Economic Security Act to help small employers meet payroll and other expenses as businesses and the nation deal with the economic effects of the novel coronavirus pandemic.
Importantly, if certain conditions are met, PPP loans can be forgiven and treated as a grant. Payroll expenses can include employer contributions to defined contribution and defined benefit retirement plans, as well as providing group health care coverage, including payment of insurance premiums.
Among its provisions, this legislation will have the following effects.
- Extends from 8 to 24 weeks from the time of loan origination the period in which expenses paid with a PPP loan could be eligible for loan forgiveness (not to extend beyond December 31, 2020)
- Reduces from 75 percent to 60 percent the portion of a loan that must be used for payroll expenses (vs. overhead, etc.) and remain eligible for loan forgiveness
- Extends from 2 to 5 years the period for loan repayment for borrowed amounts not forgiven
- Provides no impediment to loan forgiveness for the documented inability to hire similarly qualified placement employees or to rehire former employees
- Allows a borrower who received a PPP loan before enactment of this legislation to elect that the covered period run for 8 (vs. 24) weeks
