Broker Check

CARES Act Waives Required Minimum Distributions From Retirement Accounts for 2020

April 03, 2020

It has been a busy week with updates and news pouring in regarding business protocols and government assistance programs. To keep you informed we have put together a summary of 3 prominent tools that you may want to research and use as appropriate. Keep in mind that the SBA is using financial institutions including banks and credit unions to establish the Paycheck Protection Program (PPP) loans. You will need to contact your current financial institution for an application. The Economic Injury Disaster Loan (EIDL) program is a direct SBA loan application. Go to their website to apply at

1) Economic Injury Disaster Loan (EIDL)

The Small Business Administration’s (SBA) disaster loans are the primary form of Federal assistance for the repair and rebuilding of non-farm, private sector disaster losses. The disaster loan program is the only form of SBA assistance not limited to small businesses.

The Economic Injury Disaster Loan Program (EIDL) can provide up to $2 million of financial assistance (actual loan amounts are based on amount of economic injury) to small businesses or private, non-profit organizations that suffer substantial economic injury as a result of the declared disaster, regardless of whether the applicant sustained physical damage.

An EIDL can help you meet necessary financial obligations that your business or private, non-profit organization could have met had the disaster not occurred. It provides relief from economic injury caused directly by the disaster and permits you to maintain a reasonable working capital position during the period affected by the disaster. EIDL’s do not replace lost sales or revenue.

To be eligible for EIDL assistance, small businesses or private non-profit organizations must have sustained economic injury and be located in a disaster declared county or contiguous county.

Loan Terms- The SBA can provide up to $2 million in disaster assistance to a business. The $2 million loan cap includes both physical disaster loans and EIDL’s. There are no upfront fees or early payment penalties charged by SBA. The repayment term will be determined by your ability to repay the loan.


EIDL Emergency Advance

This loan advance will provide up to $10,000 of economic relief to businesses that are currently experiencing temporary difficulties.
In response to the Coronavirus (COVID-19) pandemic, small business owners in all U.S. states, Washington D.C., and territories are eligible to apply for an Economic Injury Disaster Loan advance of up to $10,000. This advance will provide economic relief to businesses that are currently experiencing a temporary loss of revenue. Funds will be made available following a successful application. This loan advance will not have to be repaid.

The SBA’s Economic Injury Disaster Loan provides vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing as a result of the COVID-19 pandemic. This program is for any small business with less than 500 employees (including sole proprietorships, independent contractors and self-employed persons), private non-profit organization or 501(c)(19) veterans organizations affected by COVID-19. The Economic Injury Disaster Loan advance funds will be made available within days of a successful application, and this loan advance will not have to be repaid.


2) CARES Act Paycheck Protection Program Summary (PPP)

The Paycheck Protection Program is a federal loan program aimed at helping businesses who have been impacted by COVID-19 retain their workforce. The loan is an SBA 7(a) loan with the following terms, with more details still to be provided by the Small Business Administration.

Availability: Available for businesses “substantially affected by COVID-19,” interpreted as:
supply chain disruptions
staffing challenges
a decrease in sales or customers; or shuttered businesses
Eligibility: Any businesses, nonprofit organizations, veterans’ organizations or tribal businesses in operation on February 15, 2020 with up to 500 employees, for whom the borrower paid salaries and payroll taxes. Some sole-proprietors, independent contractors, and other self-employed individuals may be eligible for loans as well.
Loan Maximums: Maximum loan amount is $10,000,000 under the Loan Terms below.
Funds Usage: Funds may be used for:
Payroll and related cost (administrative, sick leave, group health premiums)
Mortgage payments
Interest on debt obligations incurred before February 15, 2020
Loan Payment Deferral: Loan payments can be deferred for up to 6 months.
Loan Terms: Loan amounts can be up to the equivalent of two months of the business’ average 2019 monthly payroll costs, plus an additional 25% of this same amount, not to exceed $10 million. Payroll costs will be capped at $100,000 annualized for each employee. For seasonal or new business borrowers, loan application time periods will vary.
EIDL Loans and Paycheck Protection Program: Businesses that have received or will receive EIDL (Economic Injury Disaster Loans) between February 15, 2020 and June 30, 2020, have the option to refinance these loans under the parameters of the Paycheck Protection Program, with outstanding amount of the EIDL loan being added to the payroll sum within the Paycheck Protection Program loan.
Eligibility for Loan Forgiveness: Loan forgiveness amounts are predicated upon maintaining payroll continuity and other allowable costs during the covered periods (8 weeks from loan origination). Calculation of amount forgiven is based on total payroll cost and payments made on debt during covered period, less the percentage of layoffs during the covered period as well as any salary reduction that exceeds 25% of the individual’s salary. Documentation for loan forgiveness will include Federal and State tax filings, financial statements verifying payment of debt obligation and other documentation.
What documents will my lender want to see for the PPP loan?

Here is a list that came from a lender today. We’d encourage you to begin gathering the following documents to help expedite your application process:

You will need ONE of the following tax documents:

Form 941 for 2019: Employer’s QUARTERLY Federal Tax Return, for all four quarters of 2019, or…
Form 944 for 2019: Employer’s ANNUAL Federal Tax Return, or…
2019 Complete 1040 Tax Returns, if filed, (or) 2018 Complete 1040 Tax Returns if 2019 1040 is not yet filed.
You will also need:

Summary of borrower’s payroll registry on or around February 15th, 2020
For businesses in operation in 2019: Average monthly payroll costs for each full-time or part-time employee (excluding costs over $100,000) on an annualized basis for each employee.
For seasonal business: Average monthly payroll costs per employee from February 15, 2019 to June 30, 2019, (excluding costs over $100,000) for each employee.
For businesses beginning operations in 2020: Average monthly payroll costs for each full-time or part-time employee (excluding costs over $100,000) between January 1, 2020 to February 29, 2020.
Source for PPP Plan: Umpqua Bank

As an employer, if you do not qualify or take out the PPP or EIDL loan you will qualify to use the…

3) Employee Retention Credit

The Treasury Department and the Internal Revenue Service on 03/31/2020 launched the Employee Retention Credit, designed to encourage businesses to keep employees on their payroll. The refundable tax credit is 50% of up to $10,000 in wages paid by an eligible employer whose business has been financially impacted by COVID-19.

Does my business qualify to receive the Employee Retention Credit?

The credit is available to all employers regardless of size, including tax-exempt organizations. There are only two exceptions: State and local governments and their instrumentalities and small businesses who take small business loans.

Qualifying employers must fall into one of two categories:

The employer’s business is fully or partially suspended by government order due to COVID-19 during the calendar quarter.
The employer’s gross receipts are below 50% of the comparable quarter in 2019. Once the employer’s gross receipts go above 80% of a comparable quarter in 2019, they no longer qualify after the end of that quarter.
These measures are calculated each calendar quarter.

How is the credit calculated?

The amount of the credit is 50% of qualifying wages paid up to $10,000 in total. Wages paid after March 12, 2020, and before Jan. 1, 2021, are eligible for the credit. Wages are taken into account and are not limited to cash payments, but also include a portion of the cost of employer-provided health care.

How do I know which wages qualify?

Qualifying wages are based on the average number of a business’s employees in 2019.

Employers with less than 100 employees: If the employer had 100 or fewer employees on average in 2019, the credit is based on wages paid to all employees, regardless if they worked or not. If the employees worked full time and were paid for full-time work, the employer still receives the credit.

Employers with more than 100 employees: If the employer had more than 100 employees on average in 2019, then the credit is allowed only for wages paid to employees who did not work during the calendar quarter.

I am an eligible employer. How do I receive my credit?

Employers can be immediately reimbursed for the credit by reducing their required deposits of payroll taxes that have been withheld from employees’ wages by the amount of the credit.

Eligible employers will report their total qualified wages and the related health insurance costs for each quarter on their quarterly employment tax returns or Form 941 beginning with the second quarter. If the employer’s employment tax deposits are not sufficient to cover the credit, the employer may receive an advance payment from the IRS by submitting Form 7200, Advance Payment of Employer Credits Due to COVID-19.

Eligible employers can also request an advance of the Employee Retention Credit by submitting Form 7200.

Source: IRS news release IR-2020-62

Keep in mind that the Employee Retention Credit is under the CARE Act and is completely separate from the new Sick Leave and Family Leave provisions passed in the Families First Coronavirus Response Act. Both acts provide relief to employers.

As you begin the process of examining all 3 programs please call us with any questions you may have. We will help to guide you toward the most appropriate plan for your needs.

We are all in this together.

Your Merit Team,

Rod, Tiffany, Angie, Teresa, Rebekah and Jessica