Does Recent Legislation Help or Hurt Your Retirement Accounts?

As if there are not enough issues in 2020 to process, legislative changes have been put into place that investors should be aware of and maximize this year.  Here is a quick recap of what has changed, what the current rules are and what we might see happen in the near future with Individual Retirement Accounts (IRAs), Required Minimum Distributions (RMDs) and Qualified Charitable Distributions (QCDs).


Congress passed the SECURE Act in late 2019, pushing back the start of Required Minimum Distributions (RMDs) from age 70 ½ to age 72. Allowing individuals to defer these distributions allowed IRA balances to continue to grow with some additional tax deferral along the way.

Congress offset this additional tax deferral by changing the way non-spousal beneficiaries of IRAs would have to take out these assets. Previously, beneficiaries could stretch the payments over their own calculated life expectancy, which potentially allowed for decades of continued tax deferral. The SECURE Act now requires those assets to be completely withdrawn within ten years, accelerating the recognition of income and payment of income tax.

With respect to Qualified Charitable Distributions (QCDs), individuals remained eligible to make these tax-free distributions (up to $100,000 per person) to qualified charitable institutions from their IRAs at age 70 ½, despite RMDs being pushed back to age 72.

  • Action Step: If you are over age 70 ½, consider completing any of your charitable gifts by utilizing a QCD.


In response to the COVID-19 pandemic, Congress passed the Coronavirus Aid, Relief and Economic Security (CARES) Act in late March. This relief package included the ability for any individual who would have been subject to taking an RMD in 2020 to waive that distribution for this year. This mirrored a similar provision that allowed IRA holders subject to RMDs to waive their RMD in 2009 in the depths of the Global Financial Crisis. While the CARES Act waived the RMD requirements, any IRA owner who has reached age 70 ½ can still make QCDs from their IRA in 2020.

  • Action Step: If you don’t need your RMD in 2020, you can leave it in your IRA to continue to grow tax-deferred or consider doing a Roth conversion instead.


This bipartisan legislation was just proposed on October 27 in the House of Representatives. There are a number of notable provisions within this bill that could have a big impact not only on retired IRA owners, but also workers currently saving for retirement.

For IRA owners, this bill would further delay the start of RMDs from the current age 72 (instituted by the SECURE Act) to age 75. In addition, if an IRA owner has less than $100,000 in their account, they would not be required to take any RMDs.

This bill also would increase the amount that an IRA owner could gift to charity via QCDs from $100,000 per year to $130,000 per year.

For those still working and in the accumulation phase, this bill has some potential benefits as well. Currently workers over age 50 can make a catch-up contribution of $6,500. The proposal in this bill would allow workers over age 60 to make catch-up contributions of $10,000 per year, indexed for inflation. This could be substantial for older workers trying to make up for lost time. For the younger workers, specifically those currently paying student loan debt, it would allow their employers to make a 401(k) match even if they are not yet contributing personally to the 401(k) because they are paying back student loans.

  • Action Step: It is unclear if this has a good chance of progressing in the lame duck session of Congress as more focus is going to directed at an additional COVID-19 stimulus package. However, there may be a better chance of this being seriously considered in 2021.

Keeping track of the two significant pieces of legislation which are already law in addition to new potential bills and stimulus proposals is difficult. Talk to us about deciphering and maximizing changes in the current landscape that affect your retirement accounts. Budros, Ruhlin & Roe is here to make sense of it all for you.


Scott Kidwell, CFP®, RICP®

Senior Wealth Manager

Preparing for the Unexpected Earlier in Your Career

Why do we think we’re so invincible?

When we hear the phrase long-term disability insurance, many assume that this is needed much later in life or possibly not at all if we consider ourselves active and healthy.   Yet, if you become ill or injured before you retire, do you know how you would protect your income?

According to the CDC, more than 61 million adults have a disability and approximately half of the disabled population are age 64 and younger. In 2019, the employment-population ratio for people with a disability between ages 16 to 64 was nearly 31%, while the ratio for persons without a disability in the same age group was nearly 75%. These statistics alone make a case as to why it is important to have a plan in place to replace your income in the case of disability, especially beginning earlier in your career.

Income protection comes in the form of Social Security disability insurance, short-term disability insurance, long-term disability insurance and workers’ compensation.

Some may choose to rely on Social Security Disability Insurance (SSDI) for disability income, a program that many Americans earn by paying a Social Security tax. Individuals must pay into SSDI for a certain number of years (depending on age of the disability) before they would qualify for these benefits. Eligibility criteria is stringent and fewer than half of SSDI claims are approved for benefits, making this a less reliable option. The average monthly benefit SSDI granted to disabled workers in the US in 2019 was $1,4901.

The amount of income provided by SSDI (if an individual is lucky enough to be approved) is not enough to fund expenses for most families. Therefore, we almost always recommend the purchase of a long-term disability insurance policy for income earners. These policies are a cost-effective way to protect yourself financially if you lose the ability to work. It is best to purchase disability insurance as soon as you begin your career to begin protecting you and your family. Premium rates increase with age, so the earlier you purchase the policy, the lower your premium will be. Most policies also lock in the annual rate. Here are answers to a few commonly asked questions about long-term disability insurance that we hear in the planning process.

What does a long-term disability insurance policy cover?

There are generally two types of coverage a disability insurance policy provides. These are often referred to as “Own Occupation” and “Any Occupation”.

  • Own occupation policies provide coverage if the insured cannot perform his or her regular occupation. This type of coverage is optimal because it allows the disabled individual the option to earn income from a different occupation while collecting unemployment. For example, if a surgeon can no longer perform surgery due to a disability affecting his or her hands, he or she can collect disability income and move to a different career that can generate cash-flow.
  • Any Occupation policies will only provide coverage if the insured is disabled from all occupations and can no longer work at all. This type of coverage does not allow the insured individual to earn income while collecting disability.

An important, and often missed provision is a hybrid of the two options. Some policies provide Own Occupation coverage for a specific period of time (typically 24 months) and then will only provide coverage after that period if you are unable to perform Any Occupation. Other policies offer partial disability coverage (covers a partial loss of income) while some exclude coverage from certain pre-existing or mental conditions.

When will benefits begin and how long will they last?

Each disability policy has an elimination period that refers to the number of days that must pass between the injury/qualifying event and the day benefits begin. It is like a deductible you would pay for a claim on a homeowners or automobile insurance policy – just measured in time. Elimination periods can range from 90 days to 24 months. The second factor to consider with an elimination period is if the number of days need to be consecutive or if they allow the insured to accumulate over time. For example – if the insured has an accident and used 45 days of the elimination period, and then is injured again or their initial injury worsens, will credit be granted for those days or will the elimination period start over?

Alternatively, it is important to know when coverage ends. Some policies pay for a specified period of time while others pay through a certain age (typically 65 or 67).

What is the amount of the benefit?

Each policy will have a monthly maximum benefit equaling a specific dollar amount and/or a percentage of your salary. There are options/riders available on most policies to increase the monthly benefit by a certain percentage annually. Some riders begin to increase the amount immediately after purchase whereas some only increase once benefits are commenced.

While many may work directly with an insurance agent for a policy, a financial planner can be a neutral resource to help you determine how much insurance to purchase. It is important to work with a financial professional whose compensation is not tied to the commission on the sale of policies, so you will receive advice in your best interest.

Disability insurance can be complex, and you do not have to navigate it alone. Reach out to a trusted advisor like Budros, Ruhlin & Roe to guide you and your family.

Samantha Anderson, CFP®
Wealth Manager

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Managing A “Use It or Lose It” Account in Year You Couldn’t Use It

Families had no way of knowing during the benefit enrollment period last year what 2020 would bring.  Those who chose to automatically save pre-tax money from their paychecks in a Dependent Care Flexible Spending Account (DCFSA) did so assuming that their childcare expenses would mimic previous years’ routines.

This year has been anything but routine.

The challenge is that DCFSAs have a ‘use it or lose it’ feature, which means that any unused money in the DCFSA is forfeited at year end, though a short-grace period is extended into the following year.  Eligible dependent care expenses include daycare, school programs and camps.  With preschools and schools closed for much of the year, many families find themselves in a situation with more savings than expenses this year.

Previously, DCFSA holders could not change their contribution amounts after the original selection period unless there was a marriage, divorce or another qualifying event. The IRS changed the rules earlier this year, allowing employees to make a mid-year election to change and terminate any future contributions for the remainder of 2020.

If you have not changed your contributions amount yet and have a savings excess, it is not too late to contact your HR Department right away and request an immediate change. It will prevent the forfeiture of future savings and redirect the income you have earned.   Talk to your wealth manager at Budros, Ruhlin & Roe about additional ways to best manage savings before year end.


John McHugh, CPA, CFP®, CAP®

Senior Wealth Manager

Now is the perfect time to accelerate generous giving

As if a worldwide pandemic and subsequent recession isn’t difficult enough, the additional peak of a major cultural crisis now has us all searching for ways to best make a difference in this nation.   Affluent investors who want to accelerate their generous giving in response to current events have new incentives to do so, thanks to the CARES Act regulations passed earlier this year.  For those who want to help, but aren’t exactly sure how, a Donor Advised Fund (DAF) offers a flexible alternative to consider.


A DAF is a private fund established and managed by a DAF sponsor (described below) which gives the donor control over future distributions of charitable gifts.  Contributions to DAFs offer tax advantages of up to 60% adjusted gross income (AGI) for cash contributions and up to 30% of AGI for donated appreciated securities.  DAFs can hold funds indefinitely, whereas private funds or family foundations require funds to be distributed within a specific timeframe.

Families often pool contributions into DAFs to pursue family philanthropic objectives.  Gifts of appreciated securities to a DAF receive fair-market value tax deductions without incurring capital gains taxes.  For these reasons and more, the popularity of DAFs has increased over the years, with charitable assets in DAFs expanding to over $121 billion in 2019. In a simple description, a DAF can be considered a charitable investment account, where you get your tax deduction at the time of your contribution, along with flexibility to invest these contributions until you decide when to make a distribution to a charity.


Budros, Ruhlin & Roe’s wealth management strategies take philanthropic planning into consideration.  We don’t tell our clients where to invest, but rather how to invest for greatest tax advantages.  So where can someone get access to a DAF?

Individuals looking to make a charitable impact in this way would seek what is called a DAF sponsor.   There are three, primary types of DAF sponsors: Community Foundations, National Donor Advised Fund Organizations and Public Foundations.

Community Foundations
  • Community Foundations range from faith-based organizations to over 700 community foundations in existence today.  One example is the Columbus Foundation, a long-standing philanthropic advising resource in Ohio that is well-connected to efficient and effective non-profits in our area.  These foundations offer a connection to local charities that are appealing to investors, especially during times of unrest like we are experiencing.
National Donor Advised Fund Organizations
  • National Donor Advised Fund Organizations are typically charitable divisions of for-profit financial organizations, like Schwab, Fidelity and Vanguard.  The American Endowment Foundation or the National Philanthropic Trust are examples of others making up over 30 National Donor Advised Fund Organizations in existence today.
Public Foundations
  • Public foundations and charities typically advance their own charitable missions, focusing on a specific issue, region or population.  They are required to have less than 50% of its funding from a private entity.


The Coronavirus Aid, Relief, and Economic Security (CARES) Act created two tax benefits for non-profit donors. The first allows an “above-the-line” deduction for charitable cash gifts up to $300, if the taxpayer is not itemizing deductions.   Non-profits have long advocated for this benefit, but it does little to provide incentives to increase giving.

The more notable benefit for investors is the increased deduction cap for charitable gifts made with cash.   Current legislation caps the deduction at 60% of AGI.  However, thanks to the CARES Act, investors can now deduct up to 100% of their AGI with charitable cash gifts made in 2020.


Non-profits are facing some of their most challenging days.  Many fundraising events have been postponed or canceled altogether this year. These critical organizations are living in continued uncertainty of income sources and challenges around group gatherings. Now is the perfect time for investors to accelerate generous giving while maximizing the tax incentives of the CARES Act or the flexibility of Donor Advised Funds.  Talk to your wealth manager today about the causes your family supports and the strategies you can utilize to impact people in need.  Your community needs you.


Daniel Due, CFP®, CAP®

Senior Wealth Manager

You’ll be remembered most by your resiliency

Think back on your most vivid memories.  First work experiences. Recent career moves. There’s a high likelihood that some of your most defining moments revolved around a crisis or crossroad in your work or life and how you and the people around you responded.

As a leader, it’s easier to shine in clear skies. When business is in autopilot with all systems in synch, managers oversee operations as to not disrupt the well-oiled machine.  The true test of a leader, however, comes in navigating rough waters.  Leaders rise to the occasion when it’s time to disrupt to impose and manage change in adversity.  You’ll be remembered most by your resiliency.

For these reasons, I’ve been an active learner and subsequent teacher of all things resiliency.  Resilience is defined as the power or ability to return to the original form, position, after being bent, compressed, or stretched; elasticity. The ability to recover readily from illness, depression, adversity, or the like; buoyancy.

In business, I define resilience as the ability to recover quickly and advance forward from hardship, both mentally and physically, so that as leaders we can maintain a high level of performance and focus over extended periods of time.

There are three areas to strengthen in our leadership reserves so that we shine in challenging times: selfcare, delegation and mentorship.


You’ll find truth in the analogy of the airline oxygen mask; to best help others during a flight crisis, you must put the oxygen mask on yourself first.  Good leaders prioritize their mental and physical health as a part of their daily schedules. When it comes to selfcare, the little things add up and do make a difference.

  • Fuel your body properly. Track your actual food intake and reduce sugar and processed foods whenever possible.
  • Get consistent sleep. Try to get on a regular schedule of six to eight hours per night.  Limit your screen time, especially right before bedtime.
  • Move daily. Consider a standing desk, parking further away from the office entrance and taking the stairs.
  • Stay positive with mental recovery. Maintain perspective in processing concerns, uncertainty or fears through journaling, meditation, prayer or some combination.   Focusing on progress and what is going well will reset your approach and reactions.


If leaders insist on being in the minutia, the result will be a logjam of efficiencies and approvals.  Delegating to the smart, skilled leaders under you is critical during times of adversity and for their opportunities for growth and exposure.

  • Define your high-payoff activities (HPAs). It’s important to decide what is worth your focus and attention and what is best managed by other competent leaders.  Do you really need several members of the leadership team in the same meeting, or is this an opportunity for others to step up?
  • Leverage strengths. Pick the areas where you can best guide and coach while empowering others to take the lead in areas that may be a known weakness for you.
  • Be willing to trust. Teams must know that you believe in them to bring recommendations forward and see alternatives from a view you don’t have. Your people will rise to the occasion when you trust them to succeed.  Trust must be built from the top down.



Many of us have excelled in our careers because a leader served as a mentor in our path, guiding us with advice.   The reality is that you never stop learning no matter what position you hold.  When facing challenging times, it’s helpful to have mentors in place as a sounding board.

  • Find your coach. Seek out a person in your industry or city who can meet to give wise counsel and networking suggestions. Good mentors have mentors, good coaches get coached.
  • Develop a personal board. Consider bringing a few people together to give career advice and identify blindspots for advancement.


Corporate America is sailing in unchartered waters today.  Leaders at all levels are having to redirect operations to react to changing environments and global crises in record time.  The ones who will leave a positive legacy will have found balance in selfcare, delegation and mentorship.  I hope you are one of those leaders, shining in resilience.

Scott Rister

President – Budros, Ruhlin & Roe


Federal Student Loan Payment Relief During The Pandemic

The Coronavirus Aid, Relief and Economic Security (CARES) Act was created to provide financial relief for people impacted by COVID-19.  If you have federal student loans, you are eligible for payment relief and 0% interest through the end of September.

Temporary Suspension of Payments

With many suffering job transitions or loss during the pandemic, the CARES Act administrative forbearance, or temporary suspension of federal tuition loan payments, is a tremendous subsidy.  Administrative forbearance will last from March 13, 2020 through September 30, 2020. Any auto payments in place will be suspended automatically during this period.

If you want to continue making payments, contact your loan service provider to opt out of the administrative forbearance. You can also make manual payments by visiting your loan service provider’s website. Since you are not required to make payments during the administrative forbearance, you are able to make payments of less than your minimum payment amount.

During the forbearance period, interest will not accrue, and your credit history will not show the payment lull.

Types of Loans Offering Relief

The CARES Act provisions for federal student loan relief are specific to these types of loans:

  • Direct Loans owned by the US Department of Education
  • Federal Family Education Loans (FFEL) owned by the US Department of Education (DOE)
  • Federal Perkins Loans owned by the US Department of Education
  • Defaulted Health Education Assistance Loans owned by the US Department of Education

It is important to note that CARES Act provisions will not apply to FFEL and Federal Perkins Loans owned by a third-party lender outside of the DOE.

Refinancing Consideration Outside of CARES Act Provisions

If you have private student loans or student loans not owned by the DOE, you can still reduce your interest rate, reduce your payment or some combination of the two.

With current interest rates at or near all-time lows, it is a good time to investigate refinancing your private student loans with a third party like SoFi, Earnest or a handful of other providers.

However, refinancing federal student loans covered by the CARES Act is not needed with 0% interest rates in effect through September 30 and the possibility of relief being extended past September 30. These student loans can always be refinanced separately or refinanced with your private student loans at a later date.

If you are a high-income earner looking for additional guidance in debt management, investment management, tax and estate planning or asset allocation, the advisors at Budros, Ruhlin & Roe are here to help. Student loan repayment should not prevent you from having confidence in building your financial future.  Our GROWwithBRR program can help turn uncertainty into assurance in your wealth strategies.

Kevin Wuebker, CFP®

Senior Wealth Manager


More PPP Legislation Changes, Called The Paycheck Protection Flexibility Act

Yet another round of PPP legislation changes arrived in early June. 

There were a few different pieces of pending legislation circulating to address shortfalls in the existing program. The U.S. Senate recently passed the House bill that would make significant changes to the PPP loan program, called the Paycheck Protection Flexibility Act (“Act”). It is designed to help borrowers by extending the period to spend the funds and allow more spending on non-payroll costs. The end result is likely to increase the probability of forgiveness of the PPP loan.

Here is a summary of the most important changes from the Act:

Extended Covered Period

Borrowers who received a PPP loan prior to enactment of the Act can now choose whether to spend their funds over a covered period of 24 weeks or the original eight weeks. New borrowers will have a 24-week covered period, but the covered period cannot extend beyond December 31, 2020. This obviously gives borrowers more time to spend the funds appropriately, but many borrowers are in the later weeks of the eight-week covered period and have already spent or have plans on spending the funds.

Reduction in Payroll Cost Percentage

The Act reduces the percentage amount a borrower must spend on payroll costs from 75% to 60%. Recall that this percentage requirement initially began with the SBA’s guidance but now it is statutory. More importantly, the 60% requirement appears to be a cliff event for a borrower, meaning that if 60% of the loan proceeds are not spent on payroll costs, then none of the loan will be forgiven. However, it is possible that later guidance or technical corrections may change this result and make it a proportional rate of forgiveness.

New Deadline to Restore Workforce

Previously, borrowers had a safe harbor to restore employee levels or Full Time Equivalents (FTEs) prior to June 30 to avoid any reduction in forgiveness. The Act allows borrowers to use the 24-week covered period (no later than Dec. 31, 2020) to restore their FTEs.

New Exceptions for FTE Reductions

he Act allows a borrower a couple new exceptions from the FTE requirement similar to the previous exceptions regarding voluntary terminations, termination for cause or rejection of a good faith offer to return. The two new exceptions are if the borrower 1) could not find qualified employees or 2) was unable to restore business operations to February 15, 2020 levels due to COVID-19 related operating restrictions.

Loan Terms Extended

Borrowers and their lender can agree to extend the term of the loan from two years to five years. The interest rate remains at 1%. The time when interest and principal begin has be extended until after the forgiveness determination has been made by the lender.

Delay of Employment Taxes

The Cares Act permitted employers to defer half of the employer portion of employment taxes on wages in 2020 until the end of 2021 and 2022. However, the Cares Act prohibited PPP borrowers from benefiting from this deferral. The Act allows PPP borrowers to take advantage of this employment tax deferral.

Obviously, these new provisions will need some additional interpretation resulting in additional guidance. We will continue to keep you informed of any major changes and clarifications. If you have any questions regarding the PPP Loan program, please do not hesitate to contact me or your BRR team.

John Schuman, JD, CFP®, CPA(Inactive)

Chief Planning Officer, Chief Compliance Officer, Co-CEO



Translation of PPP Loan Forgiveness and May 14 Repayment for Business

Businesses desperately needed help keeping their workforce employed during the Coronavirus. In order to quickly get money into the hands of employers to pay employees during the economic shutdown, Congress established the Paycheck Protection Program (PPP) through the CARES Act on March 27. The key component of the PPP was forgivable loans made available through the Small Business Administration (SBA).  Many business owners applied right away, knowing the demand would exceed the supply.

At this point many businesses’ loan have been funded, but business owners are needing additional guidance as to how the forgiveness provisions of these loans will be administered or applied.

Based on recent announcements from the SBA and Treasury questioning a business’s certification that a loan was necessary, business owners may need to reflect and rethink whether they should repay the loan.  The SBA and Treasury have set a deadline for May 14 to repay the loans without any question or penalty of whether or not the loan was a necessary for ongoing operations. The summaries below about loan forgiveness and repayment will help business owners evaluate the best course of action under deadline and provision interpretation.


With the most PPP loan applications in process or completed, the next phase of the program will become loan forgiveness. Here is our current understanding until we get better guidance:

General Rule for Forgiveness

Within the eight weeks following receipt of the loan, employer must use no less than 75% of loan proceeds for payroll costs and 25% for rent, mortgage interest or utilities.

What eight weeks?

The eight-week window begins upon your receipt of the loan proceeds. This can create an awkward situation if this is received in the middle of a payroll cycle. For borrowers who may be impacted beyond eight weeks, this gives them money to make payroll for a time but then they will have to make a difficult decision about employee layoffs later.

75% of the Loan Proceeds Used for Payroll Costs

There are two aspects to this requirement. First, no less than 75% of the loan proceeds must be spent on payroll costs for the employees over the eight-week period. Second, no employee can be paid less than 75% of what he or she was previously paid in the prior regular quarter. This second requirement prevents paying some employees more of their salary to the detriment of other employees.

What are Payroll Costs?

This has been defined as gross payroll. So, it would encompass all of those things that are typically deducted from an employee’s gross payroll such as employee’s share of FICA, income tax withholding, 401k contribution, health insurance, etc. However, payroll costs would not include the employer’s share of FICA. An employer’s match into a 401k plan would be a payroll cost. Remember, that the maximum salary amount for any employee cannot exceed $100,000. However, the other payroll costs associated with that salary can make that amount more than $100,000. Additionally, payroll costs do not include amounts paid to independent contractors.

Use of 25% of Loan Proceeds

The borrower can use 25% of the loan to pay other business expenses, limited to rent, mortgage interest or utilities. The statute indicates that rent also includes “rent under a lease agreement”. It is possible this could include a lease of personal property and not just real estate but need additional guidance. It is important to note that only the interest component of a mortgage payment is counted, not the principal portion. Interest on other outstanding indebtedness is allowed if it’s secured by real or personal property. Utilities are specifically defined to include electric, gas, water, telephone, transportation, internet. All of these items have to be in existence or service began prior to February 15, 2020.

Requirement to Maintain Employee Count

This last forgiveness requirement is separate from previous summarized requirements related to the use of the loan proceeds. This requirement is based on maintaining the number of Full-Time Equivalent Employees (FTEs) for the period prior to February 15, 2020. Generally, it requires that the borrower compare the FTEs prior to February 15, 2020 with the average FTEs per month during the 8-week period of the loan. Ultimately, the borrower must restore any reductions in the FTEs prior to June 30, 2020 to avoid any reduction in loan forgiveness.

The SBA has clarified that an employee who has been laid off is offered to be rehired (on same terms) and refuses to return to work will not impact forgiveness. This overall requirement still needs some additional clarification from the SBA or Treasury. Questions still needing answered include what about normal employee turnover or reduction, what is the significance of the June 30, 2020 date compared to the average monthly FTEs during the eight-months, and what’s the impact of employee layoffs after June 30, 2020?

New Pressure for Repayment of PPP Loan

There have been many new developments and some change of perspective about who these loans were intended to benefit. When these loans were initially rolled out, the Act waived the requirement for borrowers to show that they were unable to obtain credit elsewhere (which is typically required for an SBA loan). The PPP loan application asked that the borrower (and any 20% or more owner) to certify, in good faith, that the “current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant”. This certification is subject to certain civil and criminal penalties. The problem is there was no guidance to borrowers about the time frame to consider if the loan is “necessary for ongoing operations”. Is it eight weeks or a longer period of time? There was also no guidance on what makes it “necessary”. Is it more likely than not to be needed or absolutely necessary? Should a borrower consider other current resources or not?

SBA and Treasury’s Repayment Deadline 

On April 23, the SBA and Treasury made it clear that businesses owned by a large company with adequate sources of liquidity likely didn’t make a “good faith” certification as to the necessity for the loan. The guidance went on to state that a borrower, such as a public company with access to liquidity, can repay the loan by May 7, 2020 and will be deemed to have made a certification in good faith. Although this guidance was primarily directed at large or public companies, it left it unclear as to if this same approach applied to private companies. More recently, the SBA and Treasury made it clear that private companies with adequate sources of liquidity also need to consider if they made the certification in good faith and consider repayment of the loan by May 7, 2020.

 Treasury Secretary Steven Mnuchin’s Comments

The media has written many stories about borrowers who took PPP loans and have chosen to repay the loans. On April 28, Mnuchin proclaimed that any company that receives more than $2M of a PPP loan will be subject to an audit or full review before there is any loan forgiveness. Mnuchin went on to express that civil and criminal penalties will be enforced. Shortly thereafter, the SBA made clear that loans less than $2M will be reviewed, “as appropriate” following a borrower’s forgiveness application. Mnuchin targeted private elementary and high schools with large endowments and other resources to repay loans as being not “necessary”.

This new development around who these loans were intended for and focus on a borrower’s financial situation has created significant uncertainty. It would have been prudent to provide upfront guidance to borrowers on what financial impact warrants a loan. Congress expressed financial requirements in other relief provisions. To express a new standard in the middle of the loan program is unfair to borrowers. Although it is also appropriate to make sure that the almost $600 billion loan program is utilized by those who need it the most.

 What Should Borrowers Do?

Obviously, there are a lot of unanswered questions and interpretation issues with regard to PPP loan forgiveness as well as whether the PPP loan was “necessary” to begin with. It is hoped that future guidance that has been promised will provide additional answers and clarity. Until we have more guidance, here are some thoughts on how to consider a decision to repay the loan and best practices to maximize forgiveness.

Should I Repay the Loan?

There is an emphasis on liquidity and payroll. Is the business considered essential or non-essential? It would seem that a non-essential business would have a greater “necessity” but depending on size and access to liquidity maybe not. For essential businesses, you should analyze the businesses financial position at the time of application and throughout the shutdown.

Review and document access to liquidity at the time of application for the loan. Consider cash-on-hand, accounts receivable collectability, available credit facilities, accounts payable and potential deferrals of payments.

Review and document revenue and budget projections at the time of application. Consider impact of lost revenue, lost customers, reduced capacity, change in supply chain and how this impacts your ability to retain employees and payroll.

·         Review and document how you’ve performed against prior years.

·         Document potential risks to the business that would significantly impact liquidity and retention of employees.

·         Ownership and ownership’s access to liquidity.

Best Practices to Maximize Forgiveness

To receive forgiveness, a borrower will need to make application to the SBA. The requirements and disclosures on this application have not been identified. However, this application will likely request not only questions about how the proceeds were utilized, but also investigate and evaluate the borrower’s need for the loan. It will likely be how the SBA will determine which loans under $2m to review.

·         Place loan proceeds in a separate account to better track utilization of proceeds for designated purposes.

·         Use this separate account to pay only those payroll costs and other designated costs.

·         Attempt to rehire and restore FTEs as quickly as possible and no later than June 30.

·         Make sure that each employee is being paid at least 75% of their prior gross wages.

·         Make sure that 75% of loan proceeds are used for payroll costs and no more than 25% of loan proceed are used for other designated expenses

·         Do not make any large capital expenditures with other resources, unless necessary or previously committed.

·         Do not make distributions of profits to ownership with other resources.

·         Do not payoff other outstanding debts or obligations with other resources.

·         Be prepared to document need for the loan.

Wealth management teams at Budros, Ruhlin & Roe are here to help clients interpret the provisions of the PPP and evaluate best next steps. Generally, it would be ideal to get together with your executive team and outside advisors to review your need for the loan and steps to maximize forgiveness. In short, if you don’t believe that you can demonstrate a need for the loan, repay it by the May 7 deadline. If you can demonstrate a need for the loan, be prepared to do so, and then take the steps outlined above to maximize your opportunity for forgiveness.

John Schuman, JD, CFP®, CPA (Inactive)
Chief Planning Officer, Chief Compliance Officer, Co-CEO

An Effective Investment Weapon in an Unpredictable Market Battle

To say the stock market has been volatile lately would be a bit of an understatement.  Consider that in the month of March alone, every trading day but one saw the S&P 500 price index close 1% higher or lower than the day before.  And so far, April has been more of the same.  Given this extreme market volatility, even the most seasoned investors or financial advisors may find themselves asking, “What should I do now?”

Experienced RIAs and clients often turn to the most effective investment weapon in an unpredictable market battle: the Investment Policy Statement.

Don’t go to battle without one

An Investment Policy Statement, or IPS, is a written document, mutually agreed upon by you and your financial advisor that dictates how investment decisions are to be made.  The IPS is the “blueprint” for your portfolio construction and management and should include all the important factors and unique considerations that impact your investment plan.

Ideally, the IPS should clearly state the objective, time horizon and risk/return expectations for your portfolio.  It should establish your strategic asset allocation (as a function of your risk tolerance and goals) and note the various asset classes and asset class percentage targets that will comprise your globally diversified portfolio.

The IPS should determine how often you review your portfolio and how you measure performance. It should also state which accounts or specifically identified assets are subject to exclusion, limitations or restrictions, to eliminate any confusion around the parameters of the managed portfolio.  While a complete IPS may include more details than those noted here, it shouldn’t be much longer than two pages.

The weapon of choice in the emotional investing battle

In times of uncertainty, feelings of anxiety, fear and even panic can take over and easily cloud our investment decision-making.  Alternatively, in good times, feelings of over confidence and greed can do the same.

We often believe we are making logical decisions based on critical thinking, but really, and unbeknownst to us at the time, our emotions are taking over.  It’s not our fault; it’s human nature.  And as such, we’re all subject to our own inherent biases and behaviors based on a lifetime of observations and personal experiences.

While emotions and feelings can and should play a vital role in our daily lives, they have no place when it comes to your investment decisions.  The IPS serves as a barrier to emotional reactions and enforces discipline around your investment decisions in good times and bad.  It helps ensure consistency and clarity around your strategy, eliminates surprises, and keeps your plan in place.

Who is standing shoulder to shoulder with you in battle?

A market like we face today reminds us why every investor should always have a well-developed IPS in place.  No commander wants to develop a strategy after the conflict has already started.  An agreed-upon IPS created with an experienced, battle-tested advisor can prevent you from making decisions that “feel” right at the time, but ultimately could turn out to be significant mistakes; like selling at a market bottom or buying too much of one stock or one sector, for example.

Creating, following, referencing and evolving IPS documents is an invaluable part of the fiduciary process with our clients at Budros, Ruhlin & Roe.  Remember, you can’t control the market and it can be very difficult to control your emotions, but you can control your investment decisions. An IPS is the most effective tool in unpredictable markets.  We stand ready to help you put one in place.

Michael Kline, CFP®

Senior Wealth Manager

CARES Act Translation for Business Owners

Coronavirus, Aid, Relief and Economic Security (CARES) Act

Congress and the President designed provisions of the CARES Act to provide approximately $877 billion of relief to businesses. Since this is the largest relief package in the history of the United States, we wanted to provide a CARES Act translation for business owners. You’ll find the most relevant provisions summarized below to assist in determining applicability to your circumstances.

Key CARES Act provisions for business owners could be instrumental for recovery during our country’s current crisis. There will likely be a combination of relief options for consideration.

Refundable Employee Retention Credit

The CARES Act provides a refundable payroll tax credit to impacted employers who continue to pay employees their wages. The refundable tax credit is equal to 50 percent of the qualified wages paid by an eligible employer to an employee from March 13, 2020 to December 31, 2020. The maximum amount of wages eligible to be considered for the credit is $10,000 per employee.

Eligibility: The employer must have either:

  • Suspended or reduced business operations due to a government order regarding COVID-19; or
  • Sustain a 50% or more decline in gross receipts for the comparable calendar quarter from 2020 to 2019. Once eligible, the employer remains eligible for succeeding quarters until gross receipts during a calendar quarter are 80% or more of the gross receipts in the comparable calendar quarter in the preceding year. The credit is also available to certain tax-exempt organizations.

The credit must be reduced by any credits claimed under the Families First Coronavirus Response Act which provides paid sick leave and paid family and medical leave.

Delay of Employer Payroll Tax Payments

The CARES Act allows employers (and self-employed individuals) to defer payment of the 6.2 percent employer-side Social Security payroll tax, effective for wages paid between the March 13, 2020 and December 31, 2020. Payment ultimately would be due in equal parts on December 31, 2021, and December 31, 2022.

Net Operating Loss Carryback Allowed

The CARES Act allows taxpayers to carry back net operating losses (NOLs) arising in 2018, 2019, and 2020 to the five prior tax years. NOLs incurred in these years can fully offset prior-year taxable income or be carried forward. These provisions change the Tax Cut and Jobs Act (TCJA), which generally eliminated all carrybacks and provided that the NOLs arising in years beginning after December 31, 2017 are only carried forward and deductible against only 80 percent of taxable income.

Enhanced Refundability of Previously Generated AMT Credits

The TCJA repealed the corporate alternative minimum tax (AMT) but continued to allow corporations to recover previously generated AMT credits against regular tax before 2022. The CARES Act generally enables corporations to accelerate any remaining AMT credits they have not yet utilized into 2019.

Enhanced Interest Deductibility

The TCJA generally limited the deduction for business interest expense to business interest income plus a threshold amount of 30 percent of “adjusted taxable income” (a defined term). The CARES Act provides that, for 2019 and 2020, the percentage of adjusted taxable income threshold would be increased from 30 percent to 50 percent. The CARES Act also provides special rules for deductibility of interest expense for partnerships. This provision also allows businesses to use their adjusted taxable income from 2019 in tax year 2020 in order to deduct more interest.

TCJA Technical Correction for Qualified Improvement Property

The TCJA inadvertently failed to define qualified improvement property (i.e. leasehold improvements) as 15-year property for MACRS depreciation purposes resulting in a 39-year depreciation period. The CARES Act corrects this mistake and classifies qualified improvement property as 15-year property and eligible for current law 100 percent bonus depreciation. This correction is retroactive to the effective date of the TCJA, so a refund could be claimed for property placed in service dating back to 2018.

Modification of Charitable Limitations

The CARES Act increases a corporation’s limitation on charitable deductions for 2020 from 10 percent to 25 percent of the corporation’s taxable income. This provision applies only to cash donations and is not applicable to donations to a donor-advised fund.

Extension of Plan Funding Deadlines

Employer sponsors of qualified defined benefit plans can postpone the funding of any plan contributions with a due date in 2020 until January 1, 2021.

Small Business Loans Through the Paycheck Protection Program

The CARES Act, utilizing the Small Business Administration (SBA), creates a loan program to assist small businesses and nonprofits with payroll support (including paid sick and medical leave), mortgage payments, lease payments, insurance premiums, interest payments and utility payments.

Eligibility: To be eligible, the business must:

  • have less than 500 employees;
  • have been operational on February 15, 2020;
  • have employees (or independent contractors) to whom it paid wages;
  • have been substantially impacted by COVID-19 (not defined).

Loan Amounts and Terms: The loan amounts are 2.5 times the business’s average monthly payroll costs (including medical and retirement benefits) for the trailing 12 months. The maximum loan amount is limited to $10 million. However, it seems that these payroll costs do not include the compensation paid to an employee (or an independent contractor) who made in excess of $100,000 during the 12-month period.

The terms of the loan are very favorable and include:

  • Interest not to exceed 4%;
  • Term up to 10 years;
  • Deferred interest and principal of up to 6-12 months;
  • No personal guarantee;
  • No collateral;
  • Origination fees reimbursed by SBA;
  • No prepayment penalty.

Potential Forgiveness: Principal can be forgiven in an amount equal to the payroll costs, mortgage payments, lease payments and utilities incurred from February 15, 2020 through June 30, 2020 for. Any amounts forgiven will be reduced proportionately by any reduction in the number of employees retained compared to the prior year and reduced by the reduction in pay of any employee beyond 25 percent of their prior year compensation. Employers that re-hire previously laid off employees will not be penalized for having a reduced payroll at the beginning of the period. Most importantly, any forgiven indebtedness will not be taxable income to the employer.

The Paycheck Protection Program has a lot of uncertainties and many provisions require greater clarity. This program looks to get cash into the hands of businesses quickly, so clarifications should be available soon. It’s also being administered by retail banks, so they also may have different interpretation of how to implement this program.


We hope this CARES Act translation for business owners will be beneficial to your company. If you need further clarification about any of these provisions, please don’t hesitate to reach the wealth managers of Budros, Ruhlin & Roe.

John Schuman

Co-CEO and Chief Planning Officer