Retirement Plan Contributions Allowed Under Paycheck Protection Program

As additional guidance to address borrower and lender questions concerning the implementation of the Paycheck Protection Program (PPP)—established by Section 1102 of the Coronavirus Aid, Relief and Economic Security (CARES) Act—the Treasury Department has issued a set of frequently asked questions (FAQs).

Of interest to retirement plan sponsors is Question 7: “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?”

In its response, the Treasury Department says the $100,000 annual limit on compensation applies only to cash compensation. It says the limit does not include employer contributions to defined benefit (DC) or defined contribution (DC) retirement plans; employers’ payments for group health care coverage, including insurance premiums; and employers’ portion of state and local taxes assessed on employee compensation.

With this answer, the Treasury Department makes clear that the PPP offers help with employer contributions to retirement plans and toward health benefits for employees. Initial surveys indicate very few plan sponsors are considering cutting back or eliminating their DC plan matching contributions right now. With this help in the CARES Act, perhaps the industry will not see match changes to the extent seen in past financial crises.