The Paycheck Protection Program (PPP) is a federal program, established in the recent CARES Act, that will cover payroll expenses for 8 weeks. It’s distributed in the form of a loan that is forgivable as long as you maintain your employees or quickly rehire them. Since the PPP covers healthcare costs, many are wondering how if it covers Individual Coverage HRA (ICHRA) or Qualified Small Employer HRA (QSEHRA) reimbursements. Here's what we know (so far).
Important update: while the initial funding ran out very quickly for small businesses, Congress has approved additional funding for the Paycheck Protection Program as of April 24th.
Loan applications have overwhelmed banks across the country in the last week or two as small businesses rush to apply for the Paycheck Protection Program, a forgivable loan that covers payroll, healthcare costs, mortgages, and other expenses for small business owners affected by COVID-19.
The Treasury and SBA are asking for $250 billion in additional funding for the PPP and there is support on both sides. If your loan wasn't approved yet, there's still hope.
To learn more about PPP, the Department of Treasury has a dedicated page to the program with FAQs and a sample application (again, apply through your bank). Here’s a great PDF from the Department of Commerce explaining the program that you'll find helpful as well.
ICHRA and Paycheck Protection Program
The rules are clear that ICHRA reimbursements count as a“group benefit” that can be added to your loan request. Although ICHRA is brand new, talk to your accountant about prorating your reimbursements for the rest of the year.
QSEHRA and Paycheck Protection Program
The rules are not as clear on QSEHRA since it’s technically not a group plan. We are not likely to get guidance on this before the loan applications open. We suggest including QSEHRA reimbursements although caution that it may be rejected or not forgiven. In that case, you’d just have an interest-free loan for 2 months and could pay it back.
What you'll need to apply for the Paycheck Protection Program
- Your average payroll spend from 2019 (talk to your payroll provider)
- Your average QSEHRA or ICHRA reimbursements from 2019 (or prorated in 2020)
- If your QSEHRA or ICHRA is brand new, you can pro-rate or “annualize” 2020 data. Talk to your bank or see the instructions .
Other helpful resources for small businesses and COVID-19
We've put together several resources to help our small business community during this pandemic.
- The small business owners roadmap for navigating COVID-19
- What to do if you lose your health insurance because of COVID-19
- How the CARES Act helps small businesses combat Coronavirus
- What the Families First Coronavirus Response Act means for small businesses
As a reminder, we are not tax professionals. Although we highly recommend our clients use the PPP to maintain their payroll and small business health insurance, you’ll want to consult with your accountant and attorney to see if the program is a good fit for your business. Also, please be wary of scams. Only access information from trusted sources.
I wrote this blog because I care about ideas (big and little) that can help fix our healthcare system. I used to work on projects for Kaiser Permanente and the Parkland Health & Hospital System so I've seen the system inside and out. It's so important that consumers keep up with industry shifts and changing health insurance regulations. I'm also Take Command Health's Content Editor and a busy mom. Learn more about me and connect with me on our about us page. Thanks!