Are employer retirement plan contributions included in the “retirement plan contributions” when calculating loan amount under Paycheck Protection Program (PPP)?
Yes, they were specifically included in the latest guidance from the Treasury on 4/7/2020. Q& A # 7.
Question: The CARES Act excludes from the definition of payroll costs any employee
compensation in excess of an annual salary of $100,000. Does that exclusion apply to all
employee benefits of monetary value?
Answer: No. The exclusion of compensation in excess of $100,000 annually applies
only to cash compensation, not to non-cash benefits, including:
- employer contributions to defined-benefit or defined-contribution retirement
- payment for the provision of employee benefits consisting of group health care
coverage, including insurance premiums; and
- payment of state and local taxes assessed on compensation of employees.
NOTE: With respect to eligibility for forgiveness of PPP loan amounts, the following rules apply for contributions made on behalf of owner employees:
Compensation limit is the lesser of 2.5 month equivalent of 2019 compensation for a maximum of $20,833 for the 24-week covered period (If electing 8-week covered period: 8/52 of 2019 net profit with a maximum of $15,385 for the covered period) and excluding any qualified sick or family leave equivalent amount for which a credit was claimed under FFCRA or 2020 compensation paid during the covered period
Compensation limit is applied in total across all businesses.
Retrieved on April 15, 2020 from https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Frequently-Asked-Questions.pdf
Also, see PPP Loan Forgiveness Application, Instructions p.3 and EZ PPP Loan Forgiveness Application, Instructions p.2.
Cetera Retirement Plan Specialists is a third-party administrator and may not offer tax, legal or investment advice. Plan sponsors should consult their own tax, legal or investment professionals.