Quarterly Legislative and Regulatory Update

ANNETTE BECHTOLD, CIC, ChHC, REBC

SVP, REGULATORY AFFAIRS & COMPLIANCE

April 12, 2020

ONEDIGITAL GROWTH SUMMIT 2018

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Annette Bechtold

SVP, Regulatory Affairs and Reform Initiatives

Spotlight

The Coronavirus Aid, Relief, and Economic Security (CARES) Act

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“To be good, and to do good, is all we have to do.”

John Adams, 2nd President of the United States

Government Response to COVID-19

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Legislative COVID-19 Action

• $8.3 billion emergency spending package

• March 6, 2020

Action by

Administration

•Declares national emergency

•HHS Secretary creates waivers necessary to respond

•March 13, 2020

Families First Coronavirus Response Act

• Provides relief to businesses and employees affected by COVID-19 events

• March 18, 2020

The CARES Act signed into law

• $2 trillion to stimulate economy and provide support to individuals and businesses

• March 27, 2020

Stimulus Package 4

• Additional funding, as needed, to stimulate the economy and/or respond to the outbreak

• TBD

The CARES Act

1. Title I: Keeping American Workers Paid and Employed Act

2. Title II: Assistance for American Workers, Families, and Businesses

3. Title III: Supporting America’s Health Care System in the Fight Against the Coronavirus

4. Title IV: Economic Stabilization and Assistance to Severely Distressed Sectors of the United States Economy

Discussion

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TITLE I: Keeping Workers Paid and Employed

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Paycheck Protection Program

Description

100% guaranteed covered loans

Available to businesses and self-employed

individuals

During the period of February 15, 2020

through June 30, 2020

Eligibility

Businesses whose principal place of

residence is in the United States

In operation on February 15, 2020

500 or fewer employees for whom you paid

salaries and payroll taxes

Terms of the Loan

Based on average monthly payroll costs

First eight weeks of certain expenditures are

forgivable – no repayment

Remaining balance becomes a 2-year loan subject to 1% interest

Distribution

Available through the Small Business

Association (SBA), credit unions, or banks

Loan program available to small businesses and

sole proprietors on Friday, April 3

Available to independent contractors and self-

employed individuals on Friday, April 10

TITLE I: Keeping Workers Paid and Employed

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Details of the Paycheck Protection Program Loan Amount

Loan Use

Payroll costsContinuation of group health

care benefits while on paid sick medical or family leave

Mortgage interest obligations Rent and utilitiesInterest on other debt

obligations incurred prior to 2/15/20

Maximum loan

is the lesser of: 2.5 x of payroll costs or $10,000,000

Businesses calculate the average monthly payroll costs over previous 12

months or 2019 calendar year

Excludes individual cash compensation over $100,000 not including any non-

cash benefits

Cannot include any paid sick leave or family leave reimbursed under the

Families First Coronavirus Response Act

Payroll costs include:

Salary, wages, commissions, or similar

compensationCash tips or equivalent

Payment for vacation, sick leave, or family or

parental leave

Allowance from dismissal or separation

Payment for provision of group health care and

retirement benefits

Payment of State or local tax assessed on

employee compensation

TITLE I: Keeping Workers Paid and Employed

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Details of the Paycheck Protection Program Loan Forgiveness – pending guidance

Add total amounts used, i.e. amounts paid out during the covered period [Covered period = 8 weeks from the date the lender makes first disbursement]

Reduce if payroll costs paid are <75% [If payroll costs are 60%/non-payroll costs 40%, only 25% of the non-payroll costs forgivable]

Reduce proportionately for reductions in staff [If staff retention is 80%, amount forgivable is 80% unless staff is rehired by 6/30/20]

Reduce for wages reductions >25% [Amount is reduced directly by the amount of wage reduction exceeding 25%]

Staffing Retention Reduction

Avg. # FTEs/mo. in covered period

Avg. # FTEs/mo. for 2/15/19-6/30/19 or 1/1/20-2-29/20

EXAMPLE: Avg. FTE/mo. (2020) = 280

Avg. FTE/mo. (2019) = 35080%

Wage Retention Reduction

EXAMPLE: Employee A has average monthly pre-loan wages of

$6,000 and $3,600 during the loan

• Change in wages is 60% [$3,600 ÷ $6,000] –

allowable is 75%, or $4,500

• Amount paid during loan (2 months) = $7,200

rather than $9,000 → loan reduced by $1,800

TITLE II: Assistance for Workers, Families, and Businesses

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Unemployment Assistance

Pandemic Emergency Unemployment Compensation

Provides additional unemployment compensation up to 13 additional weeks

for those individuals who:

• have exhausted all rights to regular compensation under the State law or under

Federal law with respect to a benefit year (excluding any benefit year that ended

before July1, 2019);

• have no rights to regular compensation with respect to a week under such law, any

other State unemployment compensation law, unemployment compensation law of

Canada, or to compensation under any other Federal law; and

• are able to work, available to work, and actively seeking work

Emergency Increase in Unemployment

Compensation Benefits

Provides an additional $600 per week to

otherwise eligible unemployment

compensation recipients and will apply to

weeks of unemployment from the date the

State makes available in agreement with the

DOL and July 31, 2020

Temporary

Funding for First

Week

Federal

government

provides payment

if the state has a

one-week waiting

period

Pandemic Unemployment Compensation

Grants unemployment compensation for January 27, 2020 through December

31, 2020 for individuals not normally eligible for state or federal law or

pandemic emergency unemployment compensation

Temporary Grants for

Short-time

Compensation

Assists states who

don’t allow short-time

compensation to

receive 100%

reimbursement for

provision of benefits

TITLE II: Assistance for Workers, Families, and Businesses

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Recovery Rebates

Check delivery:

• Will arrive direct deposit if account is known to the IRS, otherwise by

mail to last known address

• Online sign-up for all those who do not file or for who there is no

known address or banking information https://www.irs.gov/coronavirus/non-filers-enter-payment-info-here

Taxpayer Amount

Single $1,200

Head of household $1,200

Married filing jointly $2,400

Additional $500 per child who has not

attained age 17

Full Amount Prorated Amount Not Eligible

Up to $75,000 $75,001 - $99,000 Over $99,000

Up to $112,500 $112,501 and $146,000 Over $146,000

Up to $150,000 $150,001 and $198,000 Over $198,000

Amount

Based

on AGI

TITLE II: Assistance for Workers, Families, and Businesses

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Employee Retention Credit

• 50% of first $10,000 of wages per employee in a calendar year

• Based on qualified wagesAmount of Credit

• Include compensation (excludes FFCRA wages) and its qualified health plan expenses

• 100 or fewer FTE* employees in 2019 = wages paid to all employees

• >100 FTE* employees in 2019 = wages paid to only those who did not work

Qualified Wages

• Wages paid from March 12, 2020 through December 31, 2020

• Report on quarterly tax Form 941

Claiming the Credit

Available to non-government employers whose:

1) operations were fully or partially suspended, due

to a COVID-19 related shut-down order; or

2) gross receipts declined by more than 50% (when

compared to the same quarter in the prior year and

ending with the subsequent quarter where gross receipts

are more than 80% for the same calendar quarter)

Not allowed with Paycheck Protection Program

* FTE (full-time equivalent employees as defined

under the ACA’s employer shared responsibility

TITLE II: Assistance for Workers, Families, and Businesses

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Other Tax Relief

• Waives the 10% early withdrawal penalty for distributions and plan loans up to $100,000 from qualified retirement accounts

• For coronavirus-related purposes made on or after January 1, 2020

• Repayment terms over next three years

Retirement Funds

• Beginning in the 2020 tax year

• May claim up to $300, for cash contributions to certain charitable organizations, even if not itemizing deductions

• Includes churches, certain educational organizations, hospitals and medical research organizations, etc.

Partial Deduction for Charitable Contributions

• Employers may provide a student loan repayment benefit to employees on a tax-free basis

• Limited to $5,250 annually

• Excluded from employee’s gross income

• Applies to any loan payments made after March 27, 2020 and before December 31, 2020

Exclusion for Certain Employer Payments on Student Loans

• Employers and self-employed may defer FICA and SECA taxes through 12/31/20

• Payback over two years (50% by 12/31/21 and 50% due by 12/31/22) with no penalty

• Employers receiving Paycheck Protection Program loans are not eligible

Delay of Payment of Employer Payroll Taxes

Title III: Supporting America’s Health Care System

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Various Benefits-Related Provisions

Coverage of Testing and Preventive Services

Adds COVID-19 testing as preventive care

Requires health plan coverage with no cost sharing

Temporary Relief for Student Borrowers

Suspends all payments due for loans through September 30, 2020

No accrual of interest

Telehealth Expansion

Allows telehealth services, prior to the satisfaction of the deductible, for high deductible health plans (HDHPs) with health savings accounts (HSAs)

Applies to plan years on or before December 31, 2021

Over-the-Counter Medical Products

Menstrual care products are qualified medical expenses under flexible spending account (FSA), MSA, and HSA

FSA - Begins with expenses incurred after December 31, 2019

HSA – Begins with expenses paid after December 31, 2019

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OneDigital’s COVID-19 Resources

Your resource for navigating business and workplace challenges arising from the coronavirus pandemic

Gain access to resources to help you monitor and respond to this rapidly evolving situation:• Cutting-Edge Health Plan Cost Impact Tool• On-Demand COVID-19 Employer Advisory

Webinars• Employer FAQ• Benefits, HR and Compliance Guidance tools

onedigital.com/coronavirus/

CORONAVIRUS ADVISORY HUB

Helping Employers Make the Most of a $2 Trillion-Dollar Economic Lifeline

Mitigate risk and position your organization for financial stability and future growth post-pandemic:• CARES Act FAQ• Application materials for SBA’s Paycheck Protection Program• Articles, downloads and other resources to help you

understand and communicate the current economic landscape

onedigital.com/stimulus-guidance/

STIMULUS GUIDANCE HUB