Retirement Plan Contributions and the PPP – Some Clarification

October 2, 2020 | Authored by Chad R. O’Connell AIF

October 2, 2020 – Section 1102 of the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 created the Paycheck Protection Program (PPP) to help small businesses affected by the COVID-19 crisis by covering their near-term operating expenses and providing incentives to retain employees. PPP loans will be fully forgiven when used for certain expenses, including payroll costs. Among other things, under Section 1102, payroll costs include “payments of any retirement benefits.”

Questions have arisen as to how “payments of retirement benefits” are considered when employers are making various payments to retirement plans.

In FAQs released April 6, 2020, the Department of the Treasury clarified that employer contributions to both defined contribution plans and defined benefit plans are included in the definition of payroll costs when calculating the maximum amount of a PPP loan. Further, the $100,000 cap on compensation applies only to salary; the cap does not apply to employer contributions to DC and DB plans.  There is, however, one restriction on the amount of retirement benefit payments that can be forgiven related to owners.  Employer contributions to retirement plans on behalf of self-employed individuals or general partners, are not eligible for forgiveness, while contributions on behalf of other owner-employees are capped at 2 ½ months’ worth of the 2019 contribution amount for those owner-employees.

The Treasury Department FAQs make it clear that payroll costs include employer contributions to retirement plans, and those retirement plan contributions are not capped by the $100,000 limit. The $100,000 cap only applies to the salaries of employees.

This article is an excerpt from Dopkins Employee Benefits Newsletter.  To read the complete content, please click here.

For more information, contact Chad O’Connell at

* Dopkins Wealth Management, LLC is a registered investment advisor owned by the partners of Dopkins & Company, LLP.

About the Author

Chad R. O’Connell AIF

Chad manages Dopkins’ retirement plan services group, which focuses on investment management, consulting and fiduciary governance services to corporations and not-for-profit entities. In addition, Chad also provides financial services to high net worth individuals and business owners.

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