By Bryan Prescott, PharmD, MBA, PCCA Director of Management Coaching Services

On June 3, 2020, Congress passed an amendment to the popular Paycheck Protection Program (PPP), which was originally put in place so that the Small Business Administration (SBA) could help businesses keep their employees on payroll during the COVID-19 pandemic. This amendment, the Paycheck Protection Program Flexibility Act of 2020 (PPPFA), should provide some additional benefits and ease some of the restrictions from the original PPP.

Extension of the Covered Period

The PPPFA expands the covered period (the period during which a borrower may use funds for potentially forgivable expenses) from eight weeks to 24 weeks. Borrowers who received a loan before June 5, 2020, may elect to keep the eight-week covered period if they desire. These loan recipients may have already spent the loan proceeds based on their original covered period and may wish to maintain the eight-week time frame for the sake of expense tracking and acceleration of the forgiveness process.

Maximum Wage Compensation per Employee

Expansion of the covered period will presumably increase the maximum wage compensation that can be paid to any employee from $15,385 ($100,000 annual salary, prorated for eight weeks) to $46,154 ($100,000, prorated for 24 weeks). As of this writing, however, there is no word on when clarification about this may be forthcoming.

New Payroll Expense Threshold

The original PPP conditions included a requirement that at least 75% of each loan must be used for payroll expenses in order for the loan to be forgiven. The remaining 25% could then be used to cover specific expenses, including rent, mortgage payments, utilities and interest on loans. Under the original PPP, the loan forgiveness amount would be proportionately reduced if payroll costs did not meet the 75% threshold.

Under the new PPPFA, the borrower only has to use 60% of the loan for payroll. A proportional reduction for borrowers who fail to meet the 60% threshold was not included in the new PPPFA, which could make the 60% payroll expense threshold an all-or-nothing “cliff” proposition. In other words, if at least 60% of the loan proceeds are not used for payroll expenses, no portion of the loan will be forgiven. While many believe that Congress did not intend for this to be the case, a technical fix may be forthcoming to address this issue. The new PPPFA does not change the list of expenses eligible for forgiveness (rent, mortgage payments, utilities and interest on loans).

New Loan Maturity

The original PPP required repayment of any unforgiven portion of the loan within two years at a 1% interest rate. The new PPPFA extends the maturity of any loans granted after June 5, 2020, to five years, with the interest rate remaining at 1%. For PPP loans made before June 5, 2020, the PPPFA allows lenders and borrowers to mutually agree to extend the loan term from two years to five years.

Repayment Timeline

The timeline to apply for loan forgiveness was unclear under the original PPP conditions. The new PPPFA includes a provision that suggests borrowers must apply for forgiveness within 10 months after the last day of the covered period. This provision states that eligible recipients “shall make payments of principal, interest, and fees on [PPP loans] beginning on the day that is not earlier than the date that is 10 months after the last day of such covered period.”

New Rehire Date to Maintain FTEs

The original PPP provisions reduce a borrower’s loan forgiveness proportionately based on how reduced their full-time equivalent (FTE) levels were during the covered period versus the borrower’s historical FTE levels. However, the original PPP provisions allowed full forgiveness if the borrower restored their FTE employee levels before June 30, 2020. The PPPFA extends this restoration deadline to December 31, 2020.

New Standards Based on Employee Availability or Business Activity

The PPPFA also allows borrowers to avoid the forgiveness reduction due to a reduction in FTE levels if the borrower can document either:

1. An inability to rehire individuals who were previously employed and/or an inability to hire similarly qualified employees for unfilled positions on or before December 31, 2020, or

2. “An inability to return to the same level of business activity as such business was operating at before February 15, 2020, due to compliance with requirements established or guidance issued by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration during the period beginning on March 1, 2020, and ending December 31, 2020, related to the maintenance of standards for sanitation, social distancing, or any other worker or customer safety requirement related to COVID–19.”

The SBA will likely clarify what documentation is required to satisfy these conditions.

Payroll Tax Deferral Conditions

The Coronavirus Aid, Relief and Economic Security (CARES) Act, which included the PPP, permitted employers to defer deposit and payment of the 6.2% employer's portion of Social Security payroll tax for the period of March 27, 2020, through December 31, 2020. Fifty percent of the deferred amount would then be paid by December 31, 2021, and the remaining 50% would be paid by December 31, 2022. However, The CARES Act prevented an employer who received a PPP loan from seeking deferments if the lender forgives the PPP loan. The PPPFA eliminates this restriction.

You can view the entire PPPFA online. PCCA also has many resources to help you navigate your pharmacy through the pandemic. You can listen to my recent episode on PCCA’s The Mortar & Pestle podcast, where I talked about using the PPP. It’s available on Apple Podcasts , Spotify and Stitcher , among other podcast providers. PCCA published a blog post based on that as well, titled 4 Steps to Maintain Revenue & Manage Expenses during COVID-19 . I also recently co-hosted a PCCA webinar with Cindy Moon of Hart Health Strategies titled Leveraging the CARES Act & FFCRA to Support your Practice . We have many additional resources on the PCCA Coronavirus (COVID-19) Resource Center as well.

Bryan Prescott, PharmD, MBA, PCCA Director of Management Coaching Services, currently provides business coaching for compounding pharmacies, including financial analysis, marketing and human resources expertise. Before joining the staff of PCCA in 2012, he worked at Pharmcare in Pearland, Texas, for 10 years, where he was the PIC and operations manager for the long-term care department. He has been a featured speaker at many PCCA and A4M seminars focusing on pain, palliative care, wound, scar, ENT and marketing. Bryan obtained his Doctor of Pharmacy from the University of Houston in 2001 and Master of Business Administration from Texas A&M University in 2019. He is a member of the Rho Chi Society and a lifetime member of Phi Delta Chi.