The coronavirus pandemic has created uncertainty and stress for many agents and advisors.
The state of Pennsylvania has just banned in-person sales of insurance products during that state’s stay-at-home period, which will surely have an impact on commissions and business practices.
Other state departments of insurance will most likely follow this course.
Everyone is looking for ways to be of service to their clients and help people protect their family while also adapting for ways to preserve their business.
The Coronavirus Aid, Relief, and Economics Security Act, (CARES) that was just passed and signed by the president offers some relief.
Here are some of the provisions of the CARES Act.
Sick leave requirements
This provision provides 80 hours (two weeks) of sick leave for full-time employees. It’s available for immediate use if a full-time employee:
- Is sick or quarantined (paid at 100% of employer rate, and capped at $511 per day, and $5,110 total); or
- Is caring for someone who is sick and quarantined, or is caring for a child and has lost child care due to the public health emergency (paid at 66.7% of the employee rate and capped at $200 per day, and $2,000 total)
A related Family and Medical Leave Act (FMLA) expansion provision provides up to 12 weeks of FMLA leave, unpaid during the first 10 days, and then paid at 66.7% of the employee rate (capped at $200 per day, and $10,000/total). The extra FMLA leave is available after 30 days of employment.
Sick leave requirement resources
The CARES Act provides employer tax credits to help cover the cost of the employee leave benefits, computed quarterly.
There are three relevant periods to compute the amount of the credit:
- First two weeks: This credit relates to qualified sick leave wages paid. The credit amount depends on whether the employee is sick, caring for a sick family member, or providing childcare to the employee’s child.
- Employee sick: The credit is the lesser of the daily wage or $511 per employee, per day, for 10 days.
- Providing care for family member, or childcare for a child: The credit is the lesser of the daily wage or $200 per employee, per day, with the credit capped at $10,000 per employee for a given calendar quarter.
Through one loan program, the Small Business Loan Relief program, the Small Business Administration (SBA) will pay all principal, interest, and fees on all preexisting SBA 7(a) loan products for six months, to provide economic relief.
The CARES Act also provides a Paycheck Protection Program (PPP) and Economic Injury Disaster Loans (EIDL)
A small business may receive both PPP and EIDL loans; however, the funds must be used for different purposes.
SBA Paycheck Protection Program
This program is designed for small businesses, to preserve the employees’ salaries.
In can provide up to $10 million, payable over 10 years, at an interest rate of 4 percent.
Loans could equal up to 250% of the average monthly total payroll costs incurred during the year prior to the loan date. Payroll costs exclude any compensation made in excess of $100,000 for any employee, sole proprietor, independent contractor, and self-employed individual.
The PPP loan can function much like a grant, given that it can be fully or partially forgivable.
The employers eligible for this program are employers that have fewer than 500 employees, or that fit into certain special categories, such as 501(c)(3) organizations, sole proprietorships and independent contractors.
Small business loans: Emergency
These loans are designed to provide economic relief due to and emergency or catastrophe. They can be used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid due to the epidemic’s economic impact.
This program could help up to 2 million; payable over 30 years, with an interest rate of 3.7% or 2.75%.
The program provides a $10,000 advance. The advance need not be repaid.
The borrowers eligible for these loans are small businesses, as defined by NAICS industry codes, based on revenue or employees, and nonprofits, including Section (c)(6) organizations of any size.
Employee retention credit
This CARES Act tax credit program provides a refundable payroll tax credit for 50% of wages paid by employers to employees during the COVID-19 crisis.
The credit is available to employers whose:
- Operations were fully or partially suspended, due to the COVID-19-related shut-down order, or
- Whose gross receipts declined by more than 50% when compared to the same quarter in the prior year
Employers taking certain SBA loans, such as a Paycheck Protection Program loan, cannot use this provision.
Your own business could qualify, and some of your clients’ businesses could qualify.
More information is available from the Coronavirus (COVID-19): Small Business Guidance & Loan guidance, which is available on this SBA website