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PPP loan rules: HRA plans qualify as payroll expense for loan forgiveness

One of the most important programs to come out of the 2020 Coronavirus Aid, Relief, and Economic Security (CARES) Act is the Payroll Protection Plan (PPP), an offering of low-interest loans that are totally forgivable to employers. Companies may apply for loans of up to 2.5 times their monthly payroll expense, but what, other than wages, is a payroll expense? Do HRA plans qualify as an eligible PPP payroll expense?


HRA plans qualify as payroll cost for PPP loan forgiveness during COVID-19 crisis.

PPP loans under the CARES Act are helping businesses stay open and reopen during the COVID-19 crisis.


Payroll Protection Plan (PPP) loans

Employers seeking financial relief during the COVID-19 crisis are eligible for low-interest, forgivable PPP loans under the CARES Act. Up to $349 billion dollars is available under the same terms to all borrowers. Terms include eligibility for up to 2.5 times an employer’s monthly payroll expense and forgiveness of the entire loan amount when the following conditions are met:

  • Proceeds are used to cover payroll costs, and rent and utility, and most mortgage interest expense over the 8-week period after the loan is made; and,
  • Employee and compensation levels are maintained.

Determining payroll costs is critical in both the application and forgiveness process, to:

  • Calculate the PPP loan amount (2.5 monthly payroll costs), and
  • Demonstrate how much of the PPP loan is forgivable (up to 100%).

Do HRA plans qualify as payroll cost?

Since it will definitely affect a company’s bottom line, getting the total payroll cost right is important. Employers leaving out any part of it will only cheat themselves.

Around here, clients are wondering about Health Reimbursement Arrangements in particular. Does an Individual Coverage HRA count as a payroll expense? What about a QSEHRA small-business HRA, or a 1-person plan?

All HRA plans qualify

No matter how many employees are covered or how the plan is set up by the employer, all HRAs are ERISA-covered benefit plans. That includes an ICHRA or QSEHRA that reimburses premiums paid by employees as well as an HDHP employer-sponsored group health plan paired with a deductible-gap HRA.

Therefore, yes, an HRA meets the definition of a payroll cost, defined as, “payments required for the provisions of group health care benefits including insurance premiums,” according to the PPP Information Sheet for Borrowers and related resources.

Documentation required

Employers must document all elements included in payroll cost twice during the PPP loan process.


When applying for a PPP loan, an employer is usually asked for substantiation supporting the employer-paid group health plan. Simply upload the signed plan document for your company’s Health Reimbursement Arrangement.


When it’s time to request PPP loan forgiveness, the same plan document will serve as certification of the employer-sponsored HRA group health plan.

More COVID-19 resources:

Paycheck Protection Program (PPP) Information Sheet for Borrowers

PPP Interim Final Rule

PPP Loan Application

Coronavirus “CARES Act” restores OTC coverage for FSAs, HRAs, HSAs

Group Health Plans

Click image to download the Core COVID-19 brochure with forms.

Disclaimer: The information in this blog post is not meant as legal or tax advice. Core Documents and our staff are not attorneys or tax professionals; nor are we a part of the IRS or any governmental entity. The reader should consult with an attorney, accountant, or an appropriate government agency for answers based or their professional knowledge and the reader’s particular situation.


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Core Documents is the country’s leading provider of cost-effective, tax-saving benefit plan documents for Section 125 Cafeteria plans and Health Reimbursement Arrangements. The Trusted Source since 1997, thousands of satisfied agents and employer groups nationwide rely upon Core Documents for free plan design consulting services, plan document updates, ERISA Wrap SPDs, and administration services.