PPP and PSP: Does Changing Your Payroll Service Provider Impact Your PPP Loan? The 3 Things You Must Do When Switching PSPs During PPP
After 30 years in the payroll industry – 29 of them working for a payroll service provider (PSP) – I thought I had heard it all. I thought that three decades had given me the opportunity to wear every hat possible: customer service advocate, tax deposit accountant, penalty abatement petitioner, employee handbook author, benefits consultant, unemployment claims arbitrator, ACA seminar and webinar presenter . . . you get the idea.
Well, I thought I had worn every hat possible.
Enter COVID-19 and the SBA’s Paycheck Protection Program – and a new hat for me and the entire Viventium team: loan application and forgiveness payroll data extractors.
We all know that the amount of your PPP loan as well as how much of it will “be forgiven” – meaning turned into a grant – hinges on your payroll details. Questions like the following determine how much money you receive – and get to keep:
- How much did I pay my employees during 2.5 months of 2019?
- How much state unemployment tax did I pay during those same 2.5 months?
- How do my full-time equivalents (FTEs) during my PPP covered period compare to my FTEs during my lookback period?
- Did I reduce employees’ salaries by more than 25% during my covered period compared to my lookback period? And if so, did any of those employees earn an annualized equivalent of $100,000 in 2019?
That last question in particular underscores the centrality of current and historical payroll data to this whole PPP thing.
Which leads to other questions that I’ve heard often: What if I’m considering switching my PSP – my outsourced payroll service provider? Is that allowed once I’ve taken a loan? Will I still be able to access data for all of these lookback comparisons? Shouldn’t I wait till after I get my PPP forgiveness to switch PSPs?
If you are identifying with any of these, I’m going to don my PPP hat and go on record with three important insights:
- It’s perfectly acceptable to the SBA for an employer to switch PSPs before, during, and after a PPP loan. What the SBA is interested in is accurate data, not which outsourcer is providing it. It doesn’t even ask who your PSP is. You may choose to attach a report with the logo of your PSP, but the SBA will ignore the logo and focus on the numbers.
- The SBA won’t accept forgiveness applications until August 10 at the earliest. It may push that even later to allow itself time to issue guidance or to incorporate the PPP expansions that Congress is now debating. From the time you submit your forgiveness application, your lender has 60 days to issue a preliminary determination. Then, the SBA has an additional 90 days to agree to pay off your loan to your bank – thus turning your loan into a grant. So, the process can take up to 5 months from the time that you submit your application – and we don’t even know for certain yet when the SBA will open its forgiveness application season. If you have reasons that you’d like to switch to a new PSP, waiting is not the wise choice, especially if your new PSP knows PPP inside and out (as Viventium does!) and exactly which data to transfer over – more about that below.
- To meet the SBA’s “accurate data” standards, follow 3 best practices when switching PSPs during PPP. Here we go:
The 3 Best Practices You’ll Want to Follow When Switching PSPs During PPP
- Make Sure Your New PSP Loves the Details:
Historical payroll data can be crucial in determining both your loan amount and your forgiveness amount. When you talk to your new PSP, make sure you discuss what data you will need to provide to be able to accurately calculate your loan forgiveness amount.
- Make Sure Your New PSP Includes PPP in Its Scope:
Since the forgiveness process involves lookback periods and annualization calculations that reach back to 2019 and weeks of 2020 when you were still with your old provider, ask your potential new PSP if it will take responsibility for providing ALL the PPP payroll data that you’ll need to complete your forgiveness application. And listen for a clear, unequivocal yes.
- Make Sure Your New PSP Has the Subject Matter Experts Who Really Know How to Take PPP Apart and Put It Back Together Again:
As a recognized leader in COVID-19 payroll compliance and an active member in the American Payroll Associations’ Government Affairs Task Force, Viventium has offered 12 COVID-19 webinars to date, 7 infographics and countless email updates about COVID-19 relief, and a regularly updated VCUC (that stands for Viventium Coronavirus Update Center) to make sure our clients understand how to access the funds they need to stay afloat during these uncertain times.
Yet we don’t lose the personal touch. Our SMEs – myself included – are readily available via direct email to provide clients with insight into the impact of COVID-19 relief provisions on their business.
PPP is not a reason to avoid switching to a PSP that is a better match for your business. In fact, PPP may just be the most important reason to make that switch as quickly as possible.
I’ll take off my hat to that.