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-Coronavirus Economic Relief Efforts Ramp Up
-Paycheck Protection Program May Help, Now and after Probable Expansion
-Main Street Business Lending Program Announced
-Employee Retention Tax Credit Focuses on Aid to Businesses with a Significant Decline in Receipts
-Economic Injury Disaster Loans Can Be Used in Conjunction with PPP
-Retirement Savings Issues Included in CARES Act
-Government Will Pay for New Paid Leave Requirements
-New Unemployment Benefits Raise Issues, Questions
-CARES Act Allows for a Payroll Tax Holiday
-Filing, Contribution Deadlines Extended
-Congress May Give More Direct Payments as Public Health Crisis Continues
-Senate Democrats Propose Bonus Pay for Essential Workers
-States Begin Issuing Bridge Licenses for Producers
-House Financial Services Committees Calls for Pandemic Risk Insurance Act
-SEC Decides Not to Extend Reg BI Compliance Date
Coronavirus Economic Relief Efforts Ramp Up
Three new coronavirus relief laws were enacted last month, and Congress is currently at work on a fourth—with more very likely. The focus of these efforts is on saving jobs and providing workers and businesses with income to get them through this time of economic shut-down. Small business relief is currently topping the list of these relief efforts.
Below find summaries of some of the programs enacted and potentially to be extended. They include the Paycheck Protection Program (PPP), an employee retention tax credit, Economic Injury Disaster Loans, paid leave, unemployment benefits, and direct payments to individuals. Included in these summaries are the current status of regulatory guidance on each of these programs, and prospects for the programs’ expansion/extension.
Congress is currently working on yet more economic relief—much needed in light of the virtually shut-down global economy. At the top of the list is $250 billion in additional funding for the PPP. On April 9, Senate Majority Leader Sen. Mitch McConnell (R-KY) attempted to pass a bill by unanimous consent that would have increased the PPP’s funding from $350 billion to $600 billion, but the effort failed. The failure was due to insistence by other Senators (led by Maryland’s two Democratic Senators, Ben Cardin and Chris Van Hollen) that other programs (including, for example, the state and local government stabilization fund, hospital/medical care provider funds, and the Emergency Injury Disaster Loan (EIDL) program) need additional funding at least as urgently as the PPP.
So, more funding for small business relief programs (and other priorities) will lead the effort to enact the next round of coronavirus response legislation. That effort, referred to as “CARES 2” or “Round 4,” is currently in negotiation. Lawmakers intend for that bill to build on other Families First Coronavirus Response Act (FFCRA) and CARES Act programs, likely expanding and/or extending such relief measures as enhanced unemployment, more direct payments to individuals, extended paid sick leave rules, more PPP assistance, and more direct payments to individuals. Also, potentially in play will be a proposal to fund bonuses (dubbed “hero’s payments”) for frontline/essential workers who cannot work from home.
After the “CARES 2” bill is enacted, lawmakers plan to turn their attention to a recovery-focused measure. That bill could include narrower provisions, such as fixing the rules applicable to the tax definition of life insurance and/or characterization of bonds held by insurance companies. Also, on tap for a recovery bill is an infrastructure package and making broadband more widely available, especially in rural areas.
More information on coronavirus relief programs of interest to NAIFA members are available in the COVID-19 Resource Kit.
Prospects: There currently is considerably more bipartisanship among lawmakers, and cooperation with the Administration, than there’s been in years. But partisanship is still ready and waiting to reemerge. The less urgent the mitigation measures, the more likely the divide between Republicans and Democrats and the more unlikely enactment of legislation. Thus, it seems likely that Congress and the President will agree on such urgent issues as increased funding for the PPP, and possibly also for extending/expanding coronavirus-related unemployment benefits, coronavirus-related paid leave, more money for states/localities and health care, and more direct payments to individuals. However, initiatives beyond these face partisan headwinds, particularly as the country emerges from the current public health care crisis.
NAIFA Staff Contacts: Diane Boyle – Senior Vice President – Government Relations at DBoyle@naifa.org; Judi Carsrud – Assistant Vice President – Government Relations at jcarsrud@naifa.org, or Michael Hedge – Director – Government Relations at mhedge@naifa.org.
Paycheck Protection Program May Help, Now and after Probable Expansion
The CARES Act’s Paycheck Protection Program (PPP) holds much promise for small business help that keep their employees on the payroll. Generally, the program allows businesses with fewer than 500 employees to borrow up to two and a half times their payroll, up to $10 million, to meet payroll, rent/mortgage, utilities and preexisting debt obligations. If 75% of the money is used for payroll, the loans will be forgiven (i.e., will not have to be repaid). The money will not be includible in the businesses’ taxable income.
Both the Treasury Department and the Small Business Administration (SBA)—the agency administering the PPP—have posted guidance and applications for interested businesses to use.
Treasury Small Business Guidance SBA Guidance
Start-up of the PPP was April 1 for small businesses and April 10 for the self-employed/ independent contractors. To apply for a PPP loan (potentially turned grant), an applicant goes to a participating bank which processes the loan application. The interest has been huge, and start-up issues have been many, but SBA and Treasury sources say the program is smoothing out as it gets up and running. Those interested in applying for a PPP loan are urged to be persistent, and to apply early, despite the start-up issues, because of fears that the program may run out of money before its June expiration date.
On April 14, the Treasury Department, in consultation with the SBA, issued Frequently Asked Questions about the PPP. Most of the questions deal with the process the banks must follow in issuing PPP loans, but there are some that impact borrowers. For example, the Q&As make it clear that the accuracy of an applicant’s payroll information, on which the loans will be based, is the responsibility of the borrower, not the bank.
There also have been reports that commissions paid to advisors will be treated under the self-employed/independent contractor rules, leading some advisors to have to file for PPP loans based on their companies and separately on their commissions. The Q&As also make clear that the program’s rule that while only compensation up to $100,000 will be counted in the forgivable loan amount, that limitation does not apply to non-cash benefits, including employer contributions to retirement plans or health insurance.
The guidance also makes clear that while PPP loans cover all payroll costs—including vacation pay and non-coronavirus-related paid sick/family leave, it does not include the cost of the coronavirus-related paid leave covered under the Families First Coronavirus Response Act (FFCRA). FFCRA paid leave costs are covered by the refundable tax credit provisions included in FFCRA. Also included in the guidance is information about how to account for taxes paid in connection with employees and payroll. In addition, the Q&A guidance specifies that borrowers can rely on the guidance in effect at the time of application, but if a previously submitted loan application has not yet been processed, it can be revised based on new clarifications reflected in the April 8 guidance.
Right now, the program is capped at $349 billion, but Congress is working on adding an additional $250 billion—the amount requested by the Administration—to it. The additional funding, which is widely supported by both parties in both chambers of Congress, could be authorized and appropriated before the end of this month. This is viewed as an urgent need—as of April 9, the day before the PPP opened to the self-employed/independent contractors, the Administration reported that loans totaling $98 billion of the $349 billion allocated by the law are in process.
The PPP’s start-up problems have triggered some political reactions. Some lawmakers say that the SBA simply isn’t set up or staffed to handle the massive number of borrowers the program is drawing (there were more than 400,000 applications for a PPP loan just in the first week of the program’s operation. Last year, the SBA processed $60 billion in loans for the entire year). The agency is overwhelmed by its PPP responsibilities. So, these lawmakers say, instead of loans the PPP should be giving out grants.
On the other side of the debate, some lawmakers are concerned about the potential for fraud. The program, its implementation, and the need it is addressing are all moving so quickly that it is very difficult to build in the safeguards required to prevent fraud, they say. That concern is also part of the debate over how to shore up the program, and/or to expand it.
Prospects: The additional PPP funding may be part of a larger CARES 2 bill that Congress wants to pass prior to the end of the month. It seems very likely that the PPP will get additional funding, as well as more legislative and regulatory clarity, in short order. Watch for debate over whether to move the program from one based on forgivable loans to outright grants, and for modifications to mitigate fraud potential.
NAIFA Staff Contacts: Diane Boyle – Senior Vice President – Government Relations at DBoyle@naifa.org; Judi Carsrud – Assistant Vice President – Government Relations at jcarsrud@naifa.org, or Michael Hedge – Director – Government Relations at mhedge@naifa.org.
Main Street Business Lending Program Announced
The Fed in conjunction with the Treasury Department has established a new loan program aimed at medium sized businesses. The program is in addition to the small business relief measures contained in the CARES Act. The program, using a “special purpose vehicle” established by the Fed and a $75 billion Treasury Department equity investment in that vehicle, will “enable up to $600 billion in new financing” for eligible businesses, according to the announcement by the Treasury Department.
Eligible businesses are those with up to 10,000 employees or $2.5 billion in 2019 annual revenues. Treasury Secretary Mnuchin said the program “complements the robust relief efforts already underway such as the Paycheck Protection Program, Employee Retention Credits, and Economic Impact Payments, while protecting taxpayer funds.”
Treasury also announced new or expanded Fed programs that will assist state and local governments and key lending markets.
Prospects: Details on how this new lending program will work have yet to be released, but it is expected that it will include low-interest loans made on an expedited basis.
NAIFA Staff Contacts: Diane Boyle – Senior Vice President – Government Relations at DBoyle@naifa.org; Judi Carsrud – Assistant Vice President – Government Relations at jcarsrud@naifa.org, or Michael Hedge – Director – Government Relations at mhedge@naifa.org.
Employee Retention Tax Credit Focuses on Aid to Businesses with a Significant Decline in Receipts
The CARES Act created a refundable payroll tax credit for businesses fully or partially shut down or that experience a significant decline in gross receipts. The tax credit, which is capped at $5,000/employee, is equal to 50 percent of qualified wages paid in connection with each of the employer’s employees.
The Internal Revenue Service (IRS) issued Tax Credit Frequently Asked Questions (FAQs).
The FAQs clarify that qualified wages include allocable health insurance costs. The tax credit is calculated by looking at the average number of full-time employees employed during 2019 and is limited to $10,000 for each employee during all calendar quarters during 2020. (That creates the $5,000/employee tax credit cap.) The tax credit is refundable—it can be claimed as an offset to payroll taxes payable by the employer, or by requesting a refund to the extent the tax credit exceeds the amount of payroll tax the employer must remit to Treasury.
The tax credit applies to qualifying wages paid after March 12, 2020 and before January 1, 2021. This tax credit is not available to employers that receive a Paycheck Protection Program loan. And, this tax credit is not available for self-employment earnings.
The FAQs define a full or partial suspension of operations due to government orders to limit commerce, travel or group meetings due to COVID-19 such that the business cannot continue at its normal capacity. They further state that a “significant decline in gross receipts” means gross receipts in a calendar quarter in 2020 that are less than 50 percent of the gross receipts in the same calendar quarter in 2020. Qualified wages are wages as defined by Social Security tax rules that are paid between March 12, 2020 and December 31, 2020. Qualified wages also include the amount of qualified health plan expenses that are allocable to the wages paid between 3/12/20 and 12/31/20. Employers may not claim an employee retention tax credit for paid sick/family leave covered by the tax credits provided by the Families First Coronavirus Response Act (FFCRA) paid leave rules.
Also clarified in the FAQs are questions about how to calculate the average number of full-time employees, and the proper allocation of qualified health plan expenses. Employer aggregation rules are also covered in the FAQs.
Prospects: More guidance on this new tax credit is expected.
NAIFA Staff Contacts: Diane Boyle – Senior Vice President – Government Relations at DBoyle@naifa.org; or Judi Carsrud – Assistant Vice President – Government Relations at jcarsrud@naifa.org.
Economic Injury Disaster Loans Can Be Used in Conjunction with PPP
Economic Injury Disaster Loans (EIDLs) are an existing Small Business Administration (SBA) program, but the CARES Act added an enhancement that could net borrowers an advance of up to $10,000 that need not be repaid. And, an EIDL loan can be combined with a Paycheck Protection Program (PPP) loan-turned-grant, although the EIDL grant will count against the maximum PPP loan the borrower can get. The CARES Act allows small business owners to apply for an EIDL advance of up to $10,000.
An EIDL is a low-interest fixed rate loan that can provide up to $2 million to a small business to use to pay immediate expenses during an emergency. The loans are available to businesses with 500 or fewer employees, independent contractors, self-employed individuals, and sole proprietors. Loan proceeds can be used to meet expenses connected to substantial economic injury as a result of a declared disaster. The amount of the loan is determined by the amount of economic injury sustained.
Applicants for this money apply for an EIDL loan and at that time request up to $10,000 be immediately distributed. The advance payment will not have to be repaid. An EIDL borrower may also apply for a PPP loan (which, if used to maintain payroll, will not have to be repaid), but the EIDL grant will count against the PPP forgiven loan amount. The grant money can be used for any allowable purpose under the existing EIDL program, to provide sick leave, maintain payroll, meet borrowing costs, make rent/mortgage payments, and/or repay interest on existing debt.
The CARES Act requires the SBA to disburse the EIDL grant amount within three days of receiving a qualifying application. EIDL grants will be available for the time between January 31 and December 31, 2020, both to new applicants and to borrowers who have previously applied for an EIDL. The SBA has detailed information on the Economic Injury Disaster Loan and loan advance online.
Prospects: The EIDL program and its CARES Act-added grants are among the measures that Congress may extend if the current economic emergency is not resolved prior to the end of the year. It is unlikely the amount of the grant will be increased, but that is not impossible, depending on how the economic impact of this public health crisis plays out.
NAIFA Staff Contacts: Diane Boyle – Senior Vice President – Government Relations at DBoyle@naifa.org; or Judi Carsrud – Assistant Vice President – Government Relations at jcarsrud@naifa.org.
Retirement Savings Issues Included in CARES Act
The CARES Act includes retirement savings relief measures, and more are being discussed during the current crafting of the next coronavirus response bill.
Already enacted into law are:
More retirement savings measures are in the mix for inclusion in the upcoming “CARES 2” bill. They include a possible solution/relief for already- and near-bankrupt labor union pension plans (the multiemployer pension issue), and further DB plan funding relief.
Timing for CARES 2 is a bit uncertain, but House leaders have said they want the bill to be ready to be voted on by the end of April. Whether they can meet that target date remains unclear.
Prospects: While there is a real effort to include these additional retirement savings plan provisions in CARES 2, most Hill insiders think these provisions will likely wait for the bill that comes after CARES 2. CARES 2, currently, appears to be restricted to fixing and expanding/extending the programs created in the CARES Act. The bill that comes after CARES 2 is the more likely home for additional retirement savings plan provisions, they say.
NAIFA Staff Contact: Judi Carsrud – Assistant Vice President – Government Relations at jcarsrud@naifa.org
Government Will Pay for New Paid Leave Requirements
Whether by way of reduced payroll tax payments or via an application for an advance payment, the federal government will provide the funds needed to pay employees for coronavirus-related sick and Family and Medical Leave Act (FMLA) paid leave.
The Families First Coronavirus Response Act (FFCRA), enacted into law last month, requires businesses with fewer than 500 employees to provide two weeks (80 hours) of paid sick leave, at 100 percent of the worker’s regular rate of pay, and up to 10 weeks of paid FMLA time (at 2/3 salary) to their workers who cannot work or telework for a specified coronavirus-related reason. Employers with fewer than 50 employees can apply for an exemption if paying for the leave would jeopardize the business’ ability to keep going. Large businesses (over 500 employees) are not impacted by this rule.
The paid leave rules include provisions that result in the government paying for this leave. Generally, employers subject to these rules may deduct the amount of any of this leave that they pay from the amount of payroll tax they must remit to the government. Or, if their payroll tax obligation is less than the paid leave amount they must pay, the government will provide an advance payment. The advance payment is requested through new Form 7200. Form 7200 is available on the IRS website.
Implementing rules, both on the paid leave requirement and on the tax credits that are designed to result in federal payment of these benefits, are now available from the Department of Labor (DOL) and the Internal Revenue Service (IRS).
Paid leave is a subject of ongoing legislative efforts. Some in Congress want to expand and/or extend the paid leave rules—currently they are in effect only through the end of the year, and only for coronavirus-related leave. Others are resisting efforts to broaden the rules.
The issues to watch for include:
Of particular interest is the pending proposal by Rep. Rosa DeLauro (D-CT) and Sen. Patty Murray (D-WA) that would require all employers to provide seven days/year of paid sick leave (not restricted to coronavirus-related reasons for the leave). Rep. DeLauro fought hard, but unsuccessfully, to have this requirement included in the CARES Act, and she vows to renew her push for it in the next round(s) of coronavirus-related legislation.
Prospects: It is virtually certain that Congress will enact more coronavirus related legislation. Prospects for the DeLauro-Murray paid leave proposal are 50-50 at best—it’s quite likely that Senate Republicans will quash any such measure, based on the grounds that it is not related to the current public health crisis. Paid leave issues are likely in CARES 2, the bill that Congressional Republicans, Democrats and the Administration are currently negotiating.
NAIFA Staff Contacts: Diane Boyle – Senior Vice President – Government Relations at DBoyle@naifa.org; Judi Carsrud – Assistant Vice President – Government Relations at jcarsrud@naifa.org, or Michael Hedge – Director – Government Relations at mhedge@naifa.org.
New Unemployment Benefits Raise Issues, Questions
The new unemployment benefits created in the CARES Act have raised sensitive issues about when and whether some lower-paid workers can do better on unemployment than by continuing to work. Congress is likely to address these issues in the next coronavirus response bill. The new unemployment benefits provide federal payments for an extended period of time (from the usual 26 weeks to 39 weeks) and extra money (a $600/week federal payment on top of the state-set regular benefit, which usually amounts to about 40 percent of pay). The new benefits are also available to self-employed individuals.,
Individuals qualify for these new unemployment benefits if they’re unemployed for coronavirus-related reasons—including having to stay home due to their children’s schools/daycare closures due to the coronavirus crisis. Usual unemployment rules do not allow a worker to voluntarily leave a job—the worker has to be let go by the employer. However, these new benefits qualification rules give rise to the potential for workers quitting (mostly due to a childcare situation/need, but sometimes from fear of coronavirus exposure).
In addition, the new federal benefit of $600/week amounts to about $13/hour on top of the state’s formula for replacing some of a worker’s regular pay. Some concerned employers—especially those with relatively low-paid essential workers—say that for workers earning a bit more than the federal minimum wage of $7.25/hour but less than about $20/hour, it can make economic sense to collect unemployment rather than to continue working. This “incentive to not work” is a problem that should be addressed, they say.
On April 3, the Department of Labor (DOL), in Guidance Letter 15-20, issued guidance on the issue of whether workers can quit their jobs and still collect unemployment benefits. Generally, the guidance says, if workers are quitting (rather than working or teleworking as allowed by the employer), they must provide proof that their decision to quit is due to one of the allowable coronavirus-related reasons. These include diagnosis with COVID-19, caring for a family member with COVID-19, caring for a child whose school/daycare is closed due to the coronavirus crisis, inability to travel to a job site because of a government order restricting travel, or on advice from a health care professional that a person’s compromised immune system requires the person to self-quarantine. Also included in this category are self-employed individuals who have been forced to suspend income-producing activity due to the public health emergency’s severe limitation on the individual’s ability to continue performing customary work activities.
Prospects: Unemployment benefits are near or at the top of the list of issues Congress wants to address in the emerging CARES 2 legislation. There will be a tussle between those who want to expand/extend the new federal benefits, and those who want to tighten the rules to lessen the “incentive to not work.” How it will play out remains uncertain, but ultimately the new rules will impact many NAIFA members and their clients.
NAIFA Staff Contacts: Diane Boyle – Senior Vice President – Government Relations at DBoyle@naifa.org; Judi Carsrud – Assistant Vice President – Government Relations at jcarsrud@naifa.org, or Michael Hedge – Director – Government Relations at mhedge@naifa.org.
CARES Act Allows for a Payroll Tax Holiday
The CARES Act allows employers to delay paying their share of their employees’ FICA taxes. The taxes must ultimately be paid, but the new law allows employers more time before having to remit the taxes to the government. The general rule is that the employers’ 6.2 percent obligation for FICA taxes can be deferred for 2020. However, the taxes must be paid later. Half must be paid by the end of 2021; the other half must be paid by the end of 2022.
Notice 2020-22, the Internal Revenue Service (IRS) guidance on this issue, was released at the end of March.
Tax experts caution employers to consider the interaction between deferring their payroll tax liability and the process for taking advantage of the new programs that are funded through refundable payroll tax credits. Those programs include the Paycheck Protection Program (PPP), the new paid leave rules, and the employee retention tax credit. For example, employers that took out a forgiven PPP loan are not eligible for the payroll tax deferral provision.
Prospects: Guidance to clarify not only the workings of the payroll tax holiday but also the issues arising from an employer considering using any of the other refundable payroll tax provisions in the coronavirus response laws is expected soon.
NAIFA Staff Contacts: Diane Boyle – Senior Vice President – Government Relations at DBoyle@naifa.org; Judi Carsrud – Assistant Vice President – Government Relations at jcarsrud@naifa.org.
Filing, Contribution Deadlines Extended
The Treasury Department and the Internal Revenue Service (IRS) have announced extended tax filing deadlines. The agency has also announced extended deadlines for 2019 tax year contributions to IRAs, retirement plans, and HSAs.
In Notice 2020-18, the Treasury and IRS extended the April 15 tax filing deadline to July 15. The Notice said that extension also applies to IRAs, retirement plan contributions, health savings accounts (HSAs), and Archer medical savings accounts (MSAs). The deadline for paying first quarter 2020 taxes has also been extended to July 15, 2020.
Prospects: There currently is no talk of extensions beyond July 15, but if the public health emergency (and its consequent shut down of economic activity) persist into the summer, it is possible that the deadlines could be extended further.
NAIFA Staff Contacts: Diane Boyle – Senior Vice President – Government Relations at DBoyle@naifa.org; Judi Carsrud – Assistant Vice President – Government Relations at jcarsrud@naifa.org.
Congress May Give More Direct Payments as Public Health Crisis Continues
Among the issues Congress is considering as lawmakers craft the next coronavirus crisis response legislation is whether to provide additional direct payments to individual Americans. The new CARES law directs the Treasury to give every individual with a Social Security number a direct payment if their income falls below certain specified limits. Congress is now talking about enacting a new law that would authorize additional direct payments to individuals.
The CARES Act direct payments have not yet been distributed, but Treasury says money will be deposited into the accounts it has on record (from tax and/or Social Security payments) within another week or so. The payments are $1,200/individual ($2,400/married) plus $500 per qualifying child for those whose 2019 or 2020 income was $75,000 or less. A lesser amount will go to those with incomes between $75,000 ($150,000/married) and $99,000 ($198,000/married). The payments are completely phased out above these amounts. The phase-out rate is $5 for every $100 above $75,000/$150,000.
Most—but not all—Democrats and Republicans agree that an additional round of direct payments is in order. However, President Trump is skeptical about more direct payments of this nature. And some lawmakers are worried about the exploding deficit and concerned that Congress is moving too fast, without giving the new laws enacted last month a chance to work.
Prospects: With unemployment currently at 10 percent (6.6 million people applied for unemployment during the first week of April, bringing total unemployment to 16 million since the start of the pandemic), chances are good that there will be an additional round of direct payments this spring. However, it is by no means a slam dunk. If lawmakers succeed in crafting the next coronavirus response bill (CARES 2) by the end of April, a new round of direct payments is likely to be included in it. However, if Congressional action is delayed and if in the meantime the public health emergency subsides and people go back to work, chances diminish.
NAIFA Staff Contacts: Diane Boyle – Senior Vice President – Government Relations, at DBoyle@naifa.org; Judi Carsrud – Assistant Vice President – Government Relations at jcarsrud@naifa.org, or Michael Hedge – Director – Government Relations at mhedge@naifa.org.
Bonus Pay for Essential Workers
Senate Democrats are proposing a federally funded “Hero’s Fund” from which hazard pay bonuses would be paid. The hazard pay would go to “frontline” essential workers—to be defined broadly.
The proposal is in discussion draft form, with many details—including which frontline essential workers would be eligible for the bonus pay—still to be decided. In its current form, it contemplates a $25,000 premium pay increase per worker (the equivalent of a $13/hour raise), for workers earning less than $200,000, for the rest of 2020. (There would be a $5,000 premium pay bonus for those earning $200,000 or more.) The federal government would send the money to employers for distribution to the frontline essential workers. Employer participation in the program would be voluntary, but strongly encouraged, said Sen. Chuck Schumer (D-NY), the proposal’s primary author.
The proposal also includes a $15,000 recruitment incentive for health and home care workers and for first responders.
The proposal explicitly states that the pool of workers eligible for Hero’s Fund payments would be the subject of debate. But, Sen. Schumer said, “This proposal is not meant to exclude any workers from this conversation. Rather, we hope this proposal will encourage a discussion about how large and diverse this universe of (essential) workers truly is.”
Prospects: There is growing public appreciation for frontline workers, especially those providing medical care to COVID-19 victims. As some of these workers—including grocery store clerks, garbage collectors, health care workers and others—are themselves getting sick, attention is shifting to how to reward them, or at least how to lessen the burdens they face as a result of their work. However, it is unclear whether this public appreciation will be enough to persuade a majority in Congress to support this proposal. This is particularly true given that the proposal is currently all-Democratic—no Republican has yet signed onto it. Partisan politics could come into play. Still, it’s a proposal that needs to be watched. And if the pool of frontline essential workers turns out to include insurance personnel who are working on-site rather than from home, it could have an impact on NAIFA members. And it will certainly be of interest to many of NAIFA members’ clients.
NAIFA Staff Contacts: Diane Boyle – Senior Vice President – Government Relations at DBoyle@naifa.org; Judi Carsrud – Assistant Vice President – Government Relations at jcarsrud@naifa.org, or Michael Hedge – Director – Government Relations at mhedge@naifa.org.
States Begin Issuing Bridge Licenses for Producers
The coronavirus crisis has caused testing centers and finger printing centers to close, leaving pre-licensed individuals unable to obtain their licenses despite completing required coursework and training. This comes at a time when applications for life insurance policies are being filed at a historically high rate. NAIFA and advocacy partners are encouraging state insurance departments to issue temporary licenses that are offered under a set of strict conditions. As of today, such licenses are being offered in the following states: Alabama, Arizona, Delaware, Idaho, Illinois, Louisiana, Mississippi, Nebraska, New Jersey, Oklahoma, South Carolina, Texas, Washington, West Virginia and Wyoming. A few of the states listed, already allowed temporary licenses, while others issued new bulletins and/or used emergency regulatory authority to grant the licenses. The recommendations that NAIFA and other national trade associations are pushing on state insurance departments include the requirement that the temporary licenses are only valid in the producer’s resident state, and that the producers are sponsored by an insurance carrier that accepts responsibility for the temporary license holder.
NAIFA Staff Contacts: Julie Harrison – Director, State Chapters – Government Relations at jharrison@naifa.org.
House Financial Services Committees Calls for Pandemic Risk Insurance Act
Committee Chairwoman Maxine Waters (D-CA) has called for a program similar to the Terrorism Risk Insurance Act to encourage government to look to how best to provide support to the insurance sector in the event of pandemic risk.
The proposed Pandemic Risk Insurance Act (PRIA) would work by capping total insurance industry losses that companies face from a pandemic event, with the reinsurance provisions kicking in to support claims above that level.
As economic losses continue to mount due to the COVID-19 pandemic, numerous legal efforts to force insurers to pay pandemic related business interruption claims have begun floating around a Congress looking for potential legislation to support retailers and other business owners at a time when many been forced to shutter and cease operations.
Many legislators realize that retroactively forcing insurance providers to cover losses not covered by existing insurance policies would financially devastate the insurance industry while threatening the solvency of insurers. Any efforts to have Covid-19 business interruption claims honored by insurers would create a need for a way to backstop the sector as well.
Additionally, the Committee has called for measures in place to mandate public companies disclose their exposure to pandemic risks and supply chain disruption. Companies would be required to disclose potential financial losses that could be incurred during future pandemic disruptions.
Disclosing future potential losses would allow the insurance industry to more accurately assess the amount of policy protection companies require, ensuring that premiums are adequate to cover the additional risk created by pandemic responses.
Prospects: Details on a specific plan for PRIA are still in development and it’s too early to form a clear picture of a final version of proposed legislation, but it’s likely that any attempts at creating PRIA would also include a discussion of the use of capital markets as part of the reinsurance mechanism behind it.
NAIFA Staff Contacts: Michael Hedge – Director – Government Relations at mhedge@naifa.org.
SEC Decides Not to Extend Reg BI Compliance Date
The U.S. Securities and Exchange Commission (SEC) announced on April 2nd that it would not delay the June 30, 2020 date for compliance with Regulation Best Interest and development of the Form CRS relationship summary disclosure document.
In light of the disruptions to normal business operations brought about by efforts to curtail the spread of the Coronavirus, the SEC had discussed the possibility of delaying the June 30, 2020 implementation/effective date for compliance with the Commission’s new Regulation Best Interest, which establishes a heightened “best interest” standard of care for broker-dealers and their registered representatives. NAIFA had submitted a letter to the SEC requesting a reasonable delay in the Reg BI implementation/effective date. However, in comments published on April 2, 2020, SEC Chairman Jay Clayton stated that based on the Commission’s extensive discussions and engagement with broker-dealers, investors and others, the SEC believed “that the June 30, 2020 compliance date for Reg BI and other requirements, including the requirement to file and begin delivering Form CRS, remains appropriate.”
(In a related matter, the SEC has changed the deadline for BD firms to file their Forms ADV from March 30, 2020 to June 30, 2020.)
NAIFA Staff Contact: Gary Sanders - Counsel and Vice President - Government Relations at gsanders@naifa.org .
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