The Treasury department released overnight an updated FAQ for Borrowers and Lenders on the PPP.

The biggest news is they defined in question #7 the $100,000 limit of payroll cost to be on CASH compensation, and not non-cash benefits of retirement plan contributions and group health care coverage, including insurance premiums.. Here are a couple of quick examples the way we see it:

Example #1
Annual cash wages to an employee   95,000
Retirement plan contribution                  5,000
Employer paid health benefit                12,000

Total to include for employee payroll cost 112,000

Example #2
Annual cash wages to an employee 145,000
Excess cash comp                                       <45,000>
Retirement plan contribution                  8,000
Employer paid health benefit                18,000

Total to include for employee payroll cost 126,000

Up to this point the guidance we were receiving capped the $100,000 in aggregate, which would have looked like this:

Old Example
Annual cash wages to an employee  145,000
Retirement plan contribution at 5%      8,000
Employer paid health benefit                 18,000
Subtotal                                                            171,000
Excess over max                                          <71,000>

Total to include for employee payroll cost 100,000

The new FAQ goes on to say in question #17 that if an application was filed and approved, nothing needs to be done by the borrower or lender as they can rely on the “laws, rules and guidance available at the time of the relevant application” HOWEVER, BORROWERS WHOSE PREVIOUSLY SUBMITTED LOAN APPLICATIONS HAVE NOT YET BEEN PROCESSED MAY REVISE THEIR APPLICATIONS BASED ON CLARIFICATIONS REFLECTED IN THE FAQs. Therefore, if clients could gain a substantial higher loan amount based on the new guidance and their loan has not been processed yet, they may want to consider changing their application.

The FAQ also answers the question of what time period to use to determine the number of employees and payroll cost. See question 14, which says you can use either calendar year 2019 or the previous 12 months.

Finally, the FAQ lays out in question #16 the proper treatment on payroll taxes and what is and what is not included in payroll cost. Use gross payroll, meaning no reduction for employee FICA or withholding, but do not add employer FICA.

The Task Force will continue to look at this new FAQ and any other guidance to keep you as up to date as possible.