Originally published June 4, 2020.


On June 3, 2020, Congress passed the Paycheck Protection Program Flexibility Act of 2020, which includes a number of important changes.

It still needs to be signed into law and then we all get to wait for guidance on the questions that come with it, but here’s what you need to know right now.

Option to extend “covered period” from 8 weeks to 24 weeks

Companies will be able to change their covered period to run for 24 weeks instead of 8, which is a huge relief to those employers that haven’t been able to open up their business yet.

This is an option, so you can keep your 8 week period if you don’t need the extension.  For example, if you know you’ll use all of the funds in 8 weeks and have maintained an average FTE count at or above one of the look back periods, then it may be better to keep the 8 week period and be done with it.

Safe Harbor FTE changes

Employers now have until December 31, 2020 to demonstrate that they have brought back the same number of full-time equivalent (FTE) employees they had during the period including February 15, 2020.

Two new FTE exemptions have been added based on employee availability if they can document:

  1. That they weren’t able to rehire employees that were employed on February 15, 2020 and couldn’t “hire similarly qualified employees for unfilled positions on or before December 31, 2020; or
  2. That they couldn’t return to the same level of business activity they were operating at or before February 15, 2020 due to compliance with requirements established or guidance issued by the Secretary of Health and Human Services, the CDC, or the Occupational Safety and Health Administration between March 1, 2020 and December 31, 2020.

75/25 cost ratio is now 60/40

Companies can now spend up to 40 percent on non-payroll costs, such as mortgage interest, rent, and utilities.

Loan duration increased to 5 years for future borrowers

For future borrowers, the due date for loan funds that aren’t forgiven will be extended from 2 years to 5 years at 1%.  There is still some question about whether existing loans could be re-amortized over a 5 year period or whether it will only apply to new loans.  More guidance will be necessary to clarify.

Extension of time to apply for forgiveness

Companies will have 10 months from the last day of the covered period to apply for forgiveness before interest and principle payments are due.

CARES Act Tax Deferral

Under the CARES Act, employers can elect to defer the employer portion of Social Security tax until December 31, 2020.  One-half of the amount deferred is due by December 31, 2021, and the remainder is due by December 31, 2022.

Previously, employers that elected this option were required to cease deferment when they received forgiveness of their PPP Loan.  However, this new bill allows employers to continue deferring taxes regardless of PPP forgiveness.

How CheckWise can help

We have designed a customized PPP report to help our clients monitor their FTE counts and payroll costs during the Covered Period.

Legal Disclaimer: CheckWise Payroll LLC is not engaged in the practice of law. The content in this article should not be construed as legal advice, and does not create an attorney-client relationship. If you have legal questions concerning your situation or the information you have obtained, you should consult with a licensed attorney. CheckWise Payroll LLC cannot be held legally accountable for actions related to its receipt.

©2020 CheckWise Payroll LLC