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House Approves Expanded Paycheck Protection Program [UPDATED]

Legislation

Update: President Trump signed the Paycheck Protection Program and Health Care Enhancement Act (H.R. 266) into law on April 24, 2020.

The House of Representatives on April 23 approved a $484 billion COVID-19 stimulus bill which includes funding that can be used to help pay retirement benefits. The legislation is now cleared for President Trump’s signature, which is expected to occur later today.

In a sight perhaps never seen before in the House of Representatives, most members voted wearing masks to protect themselves. The vote was 388-5, with one member voting present and 35 not voting. The Senate had approved the bill by voice vote on April 21.

As the fourth in a series of bills to address the health and economic hardships resulting from the COVID-19 pandemic, the Paycheck Protection Program and Health Care Enhancement Act (H.R. 266, as amended) provides an additional $320 billion ($10 billion of which is allocated for administrative expenses) to restore funding for the Paycheck Protection Program (PPP). The bill also provides funding for hospital and provider recovery and testing. 

Funds disbursed under the PPP loan program are primarily intended to help businesses stay afloat, but they can used to help pay for retirement benefits as well. The legislation allocates $30 billion of the $310 billion for community-based lenders, small banks and credit unions, and an additional $30 billion for mid-sized banks and credit unions. Beyond the PPP, the bill allocates an additional $50 billion for SBA emergency disaster lending and $10 billion in SBA emergency disaster grants. 

The PPP was created under the $2.2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act enacted March 27 to help small businesses affected by the COVID-19 crisis by covering their near-term operating expenses and providing incentives to retain employees. PPP loans will be fully forgiven when used for certain expenses, including payroll costs. Among the things payroll costs include is “payment of any retirement benefit.”

While questions remain about how retirement plan costs will be counted for the loan forgiveness, the Treasury Department has indicated that employer contributions to both DC plans and DB plans are included in the definition of payroll costs when calculating the maximum amount of a PPP loan. 

Stakeholders interested in applying for this loan program should act quickly, since it’s likely that, as was the case under the first round, the replenishment funding will be exhausted soon. The CARES Act originally allocated $349 billion for the program, but that funding ran out in less than two weeks. A report by the Small Business Administration shows that more than 1.6 million small businesses were approved before the funding ran out, with an average loan size of $206,000. 

Members of Congress are already discussing the possibility of a fifth stimulus bill to address the COVID-19 pandemic, with House Speaker Nancy Pelosi (D-CA) calling for relief for state and local governments and other priorities, but there’s been pushback from Senate Majority Leader Mitch McConnell (R-KY). Either way, it likely won’t be until the first full week of May that those discussions resume in earnest.