Broker Check

Paycheck Protection Flexibility Act: What You Need To Know

| June 11, 2020

On the afternoon of Wednesday, June 3rd, the Senate passed the Paycheck Protection Flexibility Act of 2020 (PPPFA). This was previously passed by the House last week and has now been signed into law by the President.

The Act amends the wording of the original CARES Act on the following key points:

  1. The forgiveness period on Paycheck Protection Program (PPP) loans is extended from eight weeks to 24 weeks (or Dec. 31, 2020, whichever comes earlier);
  2. The ratio between payroll and non-payroll expenses is changed from 75% payroll and 25% non-payroll to 60% payroll and 40% non-payroll;
  3. In order to not impact forgiveness, employees now must be rehired by Dec. 31, 2020 (instead of June 30, 2020).

This is excellent news for our clients, as the new 24-week forgiveness period not only extends the covered period during which you can expense funds, but also allows for more time to have your practice operating closer to full capacity, which in turn allows you to bring back all full time employees in a manner that is prudent to control overhead. In addition, for those that are not able to rehire all employees until later in 2020, it will not impede forgiveness.

Keep in mind, even if the PPP funds are completely spent during the 24-week period, it does not guarantee max forgiveness. The full time equivalent (FTE) calculation will still need to be done to ensure maximum forgiveness. 

What else is new?

In addition to the above, the act includes two new exceptions to the requirement that you must restore your full time employees to the February 15, 2020 levels.

The first exception is if you cannot find qualified employees for unfilled positions.

This exception could apply if you require your team to have a specific skillset that is in high demand but, more likely, it will apply to situations where you have a difficult time finding employees due to risks associated with COVID-19 and the inability to social distance.

The second exception applies if you cannot restore your operations to comparable levels of business activity due to social distancing, sanitation requirements, or customer safety needs.

What happens if for some reason you don't get forgiveness?

For funds that are not spent by the end of the 24-week forgiveness period, PPPFA changes the maturity on these loans from two years to five years. This is unlikely to impact most our clients other than those that received an EIDL grant.

Some other points to keep in mind:

For those with shell corporations, the $15,385 owner salary cap is still in place. Additionally, the employee salary cap of $100,000 is still in place, not taking into account any health or pension benefits above the salary limit.

To learn more, or to discuss how the PPPFA might impact your operations specifically, click here to set a meeting with me.


Guardian and its subsidiaries do not issue or advice regarding SBA, EIDL or PPP loans. And make no representation as to the completeness, suitability, or quality of information provided thereof. Material discussed is meant for general informational purposes only and is not to be construed as tax, legal, or investment advice. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary. Therefore, the information should be relied upon only when coordinated with individual professional advice.

Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS), 355 Lexington Avenue, 9 Fl., New York, NY 10017, 212-541-8800. Securities products and advisory services offered through PAS, member FINRA, SIPC. Financial Representative, The Guardian Life Insurance Company of America (Guardian), New York, NY. PAS is a wholly owned subsidiary of Guardian. Wealth Advisory Group LLC is not an affiliate or subsidiary of PAS or Guardian. Wealth Advisory Group LLC is not registered in any state or with the U.S. Securities and Exchange Commission as a Registered Investment Advisor. 2020-103136 Exp 06/22