Compliance January 12, 2021

Latest Relief Package Extends Provisions for Small Business Employers

A Buckingham Advisors webinar shared details of the second round of Paycheck Protection Program loans and tax credits implemented with the new legislation.

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A Buckingham Advisors webinar reviewed the provisions in the latest COVID-19 relief package and explained what the legislation offers small businesses.

Jessica A. Distel, director of tax and business services at the firm, discussed details of the Paycheck Protection Program (PPP), the Employee Retention Tax Credit, the Families First Coronavirus Response Act of 2020 (FFCRA),and the deductibility of business meal expenses for 2021.

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One of the most anticipated provisions included in the new measure is the ability to reapply for a PPP loan, a program that was first introduced with the Coronavirus Aid, Relief and Economic Security (CARES) Act in late March. Small business employers hoping for a higher loan amount may also apply for an increase, Distel said.

When PPP loans were first made available to small businesses, some employers thought their calculations would be based on net payroll and not gross payroll. Employers that expected to receive more money, or believed they should, should speak to their plan lender, Distel added. “Find out the status of your current loan and see if you can potentially apply for additional funds from the first PPP loan,” she suggested.

The U.S. Small Business Administration (SBA) reopened PPP First Draw Loans on January 11 to certain community financial institutions (CFIs), allowing employers to apply for help to fund payroll costs, including benefits. These loans may also be applied to “mortgage interest, rent, utilities, worker protection costs related to COVID-19, uninsured property damage costs caused by looting or vandalism during 2020, and certain supplier costs and expenses for operations,” according to the SBA.

Employers that have fewer than 500 employees and did not initially receive funds in the first draw may be eligible to apply by March 31.

PPP Second Draw Loans will also be available to CFIs beginning January 13. The SBA indicated that First and Second Draw PPP loans will be open to all participating lenders “shortly thereafter.”

Those employers that previously received a First Draw PPP loan, employ fewer than 300 workers and demonstrate at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020 can apply for a Second Draw Loan.

For example, if an employer compares gross receipts from the second quarter of 2020 to the second quarter of 2019 and finds their business earned at least 25% less than the previous year, they may apply for a second draw. Employers would need to compare quarters with the same ones from the previous year (e.g., compare the second quarter of 2020 to the second quarter of 2019, third of 2020 to third to 2019, etc.).

Distell advised employers to work with their accountants to organize their finances if they’re interested in applying. “If your accounting is not up to date, now is a great time to do that so you can potentially apply,” she recommended.

These applications may be submitted through March 31, and the maximum loan amount will be $2 million, according to Distell. The maximum loan amount is calculated at 2.5 times the average monthly payroll costs. This amount increases to 3.5 times for borrowers who are in the accommodation and food sector, she noted.

Distell also spoke about updates to the Employee Retention Tax Credit passed as part of the relief measures with the Consolidated Appropriations Act, 2021 (CAA). Per the CAA, employee wages may be eligible for both the Employee Retention Tax Credit and PPP loans; employers can claim credits on any eligible wages not used to support PPP loan forgiveness; and group health plan expenses that are not included in gross income may be included in qualified wages. The credit is an extension of the original provision under the CARES Act and is extended until June 30. Furthermore, the tax credit has increased to 70% of up to $10,000 of qualified wages per employee each quarter, for a maximum of $14,000 per employee in 2021.

Employers may also apply for payroll credits for paid sick and family leave under the FFCRA. Small business employers with fewer than 500 employees can provide paid sick leave and family leave for certain situations, including if an employee is diagnosed with COVID-19, Distell said.

The CCA has also temporarily allowed for 100% deductibility of certain business meal expenses for 2021 and 2022, which is intended to help increase revenue in the restaurant industry. Entertainment expenses, however, will still be non-deductible.

Client Service January 12, 2021

15th Anniversary of RPAY: Capital Strategies Investment Group

The practice’s leaders say all decisions made for a plan must improve participants’ retirement readiness, which they describe as a top priority.

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Alison Bettonville

What sets Capital Strategies Investment Group—which was named the 2013 PLANSPONSOR Retirement Plan Adviser Team of the Year—apart from its competitors is that it is “really unique to other firms in truly taking a teams-based approach,” says Alison Bettonville, principal, director of investment strategy and research at the firm.

Since winning the award eight years ago, Capital Strategies Investment Group, which is based in Oakbrook Terrace, Illinois, has reassigned its staff in order to “deliver more expertise to clients in a timely manner” and embraced more technology and automation, particularly for day-to-day processes, Bettonville says. “This has dramatically freed up team members to work more closely with clients,” she adds.

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Will Woodall

Capital Strategies Investment Group has also expanded its focus from “investments and governance to really think hard and deliver on plan design and outcomes,” says Will Woodall, managing principal.

Bettonville agrees. “We no longer focus just on investment analytics. We cover plan design, participant behavior and fees—and deliver consistently on every point in order to successfully oversee each client’s retirement plan,” she says.

What is also notable about how the practice has evolved since 2013 is that assets have grown nearly four-fold, from $4 billion to $15 billion, Woodall notes. That growth is particularly noteworthy as Capital Strategies Investment Group is very selective about the clients it partners with, choosing only those that indicate they are truly interested in the best possible outcomes for participants, he says.

Bettonville adds: “The other thing we focus on, from a client perspective, is that many of the issues our clients are grappling with are complex, such as helping them with plan integration as they go through mergers or acquisitions.”

Yet another challenge that Capital Strategies Investment Group is willing to take on, she continues, is that each client has between 1,000 and 5,000 participants.

As to how the industry has changed in the years since the practice won the PLANSPONSOR award, Bettonville says the “trend of the RIA [registered investment adviser] aggregators has had some impact on what I will call ‘generational turnover.’ The first generation of advisers that were working with DC [defined contribution] plans are now looking toward retiring, and that impacts M&A [mergers and acquisitions] activity. We are now beginning to lose a lot of talent with long-tenured experience—but that is opening up plenty of room for new ideas.”

For his part, Woodall says today’s retirement planning industry is far more competitive than it was in 2013. “There is constant pressure on fees due to fee compression, and it has become more difficult for retirement plan practices to differentiate themselves in a market where plan sponsors are so focused on fees.” Woodall also believes that as pooled employer plans (PEPs) begin to take hold, they will create more competition for retirement plan advisers.

While many other practices are struggling to recruit new talent, particularly diverse talent, Bettonville says, Capital Strategies Investment Group has developed “a comprehensive recruiting process and in-house analyst training process to grow new hires into successful advisers and consultants. We think that is the best way to acquire new talent.”

Bettonville says that because of the service model her firm delivers, she is very optimistic about its future prospects. “We make it a point to partner with companies that value our expertise—not just someone coming in four times a year just to talk about financial markets and investment returns,” she says. “We really are looking for companies committed to being fiduciaries and serve them by keeping them up to speed on emerging trends among retirement plans. That is where we add a lot of value.”

As for what advisers can do to improve DC plans and participants’ outcomes, Bettonville says their role must expand well beyond just being an investment adviser. “From our perspective, we think of plan health in terms of retirement readiness and outcomes—and ensuring there is an alignment between the solutions we bring to a plan and the sponsor’s goals. Plan design is important, as is education for committees—not just fiduciary education but how to help participants successfully retire. Everything needs to be brought back to the all-important question of retirement readiness.”

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