Dec ember2020
What does the economic forecast look like for 2021? What are the real facts and figures behind global, national and local economic trends, and what is the impact of the COVID-19 pandemic on our region? Join us as local economist Ken Louie, Ph.D., director of the Economic Research Institute of Erie (ERIE) and associate professor of Economics at Penn State Behrend, provides an in-depth look at these timely topics and more, during this dynamic virtual presentation.
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BUSINESS
VOL. XXXIII NO. 12 | DECEMBER 2020
MAGAZINE
SPOTLIGHT Q&A:
PSU ECONOMIST DISCUSSES 2021 ECONOMIC OUTLOOK
BRANCHING OUT TO ASSIST EMPLOYERS IN NORTHWEST PA, NORTHEAST OHIO
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In this season of thanks, we extend our warmest wishes for a Christmas season filled with joy and a New Year filled with promise!
FEATURES FEATURE STORY | WHAT’S INSIDE
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Here’s to a Happy, Healthy Holiday We’re ready to zoom into 2021!
COVER STORY | LOCAL PROFILE
4 ERIEBANK
The full-service community bank, ERIEBANK, a division of CNB Bank, is branching out to assist employers and the community through its regional growth and services, as well as stability.
SPOTLIGHT Q&A | FORECAST
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DEPARTMENTS 8
BUSINESS BUZZ
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PEOPLE BUZZ
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HR CONNECTION
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HR Q&A
WHAT’S NEW
EVENTS 13 NETWORKING AND MORE
AWARDS AND PROMOTIONS
WORKPLACE TRENDS
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EDITORIAL
See the many ways that the MBA is reaching out to keep its members engaged and informed in person and online.
ON THE HILL | CONSIDER THIS
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READ ON THE GO! For the most current Business Magazine updates, visit mbabizmag.com
Contributing Writers Eileen Anderson Melissa Damico Craig Shamburg Bill Speros Rachel Tserkovniak, PHR
MBA takes the lead in campaign for health-care literacy. Eileen Anderson
LEGAL BRIEF | BORROWING
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Executive Editor Karen Torres ktorres@mbausa.org
Ken Louie, Ph.D., director of the Economic Research Institute of Erie (ERIE) and associate professor of economics at Penn State Erie, the Behrend College, discusses the financial toll of the COVID-19 crisis, as well as the statistics and trends that are expected to impact the economic outlook for 2021.
What’s ahead? Continued impact of PPP loans in 2021. Craig Shamburg and Bill Speros
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See the latest in-person and LIVEOnline training courses available at the MBA in 2021!
On the Cover: Wes Gillespie, Ohio regional president; Katie Jones, senior vice president and market manager; and David Zimmer, president, are leading the way as ERIEBANK branches out into new markets to provide financial support to customers in northwest Pennsylvania and northeast Ohio. For full story, see page 4. Mission Statement: The Manufacturer & Business
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© Copyright 2020 by the Manufacturer & Business Association. All rights reserved. Reproduction or use of editorial, pictorial or advertisements created for use in the Business Magazine, in any manner, without written permission from the publisher, is prohibited. Unsolicited manuscripts cannot be returned unless accompanied by a properly addressed envelope bearing sufficient postage. The magazine accepts no responsibility for unsolicited manuscripts or artwork. The Business Magazine and Manufacturer & Business Association do not specifically endorse any of the products or practices described in the magazine. The Business Magazine is published monthly by the Manufacturer & Business Association, 2171 West 38th Street, Erie, Pa. 16508. Phone: 814/833-3200 or 800/815-2660.
mbabizmag.com • DECEMBER 2020
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FEATURE STORY | WHAT’S INSIDE
Here’s to a Happy, Healthy Holiday WE’RE READY TO ZOOM INTO 2021 Although this year certainly has been trying, it also has tested and propelled us as a team, and we wanted to say thank you to our members and advertisers for your continued support. We are truly grateful! Here, at the MBA Business Magazine, we have been focused on the future and providing you with the best publications you’ve come to expect from us. In fact, over the past year, we have shared some incredible stories about our member companies and their ability to adapt and innovate — and we look forward to sharing even more good news in the year ahead. Based on what we are hearing from economists and industry experts, there is reason to be cautiously optimistic, even amid so much uncertainty, as we take a closer look at the economic outlook and head into 2021. This fall, the Conference Board Measure of CEO Confidence, in collaboration with The Business Council, reported some shifts in executives’ confidence in the economy’s health, even as employers and employees face hurdles. Their level of confidence, determined by polling over 100 CEOs from the Business Council’s membership — which includes executives from multinational corporations including Amazon, General Motors, JPMorgan Chase and Merck — in mid-September, increased sharply in the final month of the third quarter, up to 64 points from 45 in August. A score over 50 indicates net confidence. According to the report, capital spending plans improved, with 25 percent of CEOs anticipating increased spending over the
next 12 months, up from only 15 percent earlier in the quarter. Moreover, 36 percent foresaw upward revisions in capital spending beyond the next 12 months. The employment picture was more mixed: Hiring plans cooled, and the potential for layoffs remained, with one-third of CEOs saying they anticipate reducing their workforce over the next 12 months. Slower economic growth and demand translated into smaller wage gains and potential pay cuts, with 21 percent of CEOs foreseeing no increase in their employees’ wages and 5 percent saying they may reduce wages. However, expectations were that this is temporary, and wages will be on a much better trajectory beyond the next 12 months. In this month’s Business Magazine, we’ll focus on what’s ahead in the new year, including how ERIEBANK has assisted employers through the pandemic, as well as its plan to expand its market growth in northeast Ohio. We’ll also talk with economist Ken Louie, Ph.D., of the Economic Research Institute of Erie (ERIE)
on the 2021 economic forecast and what statistics and trends we need to watch as we move forward. Plus, we’ve got a lot of great resources to help your bottom line on the following pages. Be sure to check out our expert articles on the importance of health-care literacy and the advantages of ancillary benefits, as well as the latest updates on overtime pay that could impact your organization. You can also get a comprehensive look at all the in-person and LIVEOnline training courses available in the new year. See this month’s Training Catalog to learn more! For more information about how the Association can assist you and your organization now and in the near future, visit www.mbausa.org!
KEEP LOOKING FORWARD
mbabizmag.com • DECEMBER 2020
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COVER STORY | LOCAL PROFILE
Wes Gillespie (at right), Ohio regional president for ERIEBANK, discusses the bank’s expansion into the Greater Cleveland market with ERIEBANK President David Zimmer. ERIEBANK has forecast growth within its expanded footprint in 2021 and beyond.
Branching Out to Assist Employers in Northwest PA, Northeast Ohio ERIEBANK is banking on brighter days ahead. Today, the COVID-19 pandemic tests the resilience of the economy and the financial markets, but ERIEBANK, a division of CNB Bank and full-service community bank, is branching out to assist employers and the community through its regional growth and services, as well as stability. David Zimmer, president of ERIEBANK, credits his team with helping local businesses keep their doors open and preserving jobs throughout the region amid the health crisis. In fact, in northwest Pennsylvania alone, ERIEBANK assisted with the application of 852 Paycheck Protection Program (PPP) loans representing more than $83 million, nearly half of the 2,065 PPP loan applications processed through parent company CNB overall. “PPP was really a strange, dynamic process, but we were very aggressive in helping our clients through it,” states Zimmer. “Our stance from the beginning was, we need to find a way to get our customers through this pandemic no matter how long it lasts.”
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DECEMBER 2020 • mbabizmag.com
Banking Solutions With a Regional Reach
Since its founding in Erie, Pennsylvania in 2005, ERIEBANK has focused on providing full-service business banking, personal banking, loan and private client services to assist its customers in reaching their financial goals. Now, the bank is taking this business approach one step further, by extending its reach to employers and other customers throughout northwest Pennsylvania and northeast Ohio. Once the new kid of the banking industry in the area, ERIEBANK has grown as a regional powerhouse as it expands into the Cleveland market. At the helm of this expansion is ERIEBANK’s Ohio Regional President Wes Gillespie, who heads up the Cleveland Loan Production Office. Gillespie, a veteran banker with 28 years of experience who joined the ERIEBANK team in 2018, says the Ohio market
ERIEBANK President David Zimmer is forward thinking when it comes to the bank’s strategic growth and responsiveness. ERIEBANK’s expertise and experience have been vital to helping employers keep their operations up and running and preserving jobs by assisting with Paycheck Protection Program loan applications, in addition to its flexibility with local lending decisions.
“We are a different type of bank. We know our customers really well, and we’ve seen a lot of business from that.” — Wes Gillespie offers a blank slate to grow its market share while also fulfilling a need. The metro Cleveland area not only has a heavy industrial base that has pivoted to support personal protection equipment (PPE), but also technology and supporting industries, including wireless, which are positively positioned for 2021 and beyond. “These companies are thriving right now because they are in demand,” Gillespie explains. “We’re there to support them and assist our borrowers in need of more working capital.” Unlike some of its larger competitors, ERIEBANK’s size ideally is suited for its markets. The bank’s flexibility and local decision-making have been vital to weathering downturns in the past, including the financial crisis of 2008. Such attributes are particularly beneficial for small businesses in need of credit and financial services during these challenging times. “We’ve basically leaned into that because we are a different type of bank. We know our customers really well, and we’ve seen a lot of business from that,” Gillespie says. “It’s what I like to call ‘expansion through contraction’.”
Unparalleled Service and Support
In late spring, ERIEBANK opened its retail locations as soon as lockdown measures were lifted and implemented numerous safety protocols to ensure that customers were able to have a safe, in-person banking experience. ERIEBANK’s team also remained committed to providing customers with the same enthusiasm and service they expected before the pandemic. According to ERIEBANK executives, it’s this unparalleled service and support that will play a critical role in their success as they assist customers in the days ahead. Katie Jones, senior vice president and market manager at ERIEBANK who oversees all 10 of the bank’s retail branch
ERIEBANK’s Katie Jones, senior vice president and market manager (seated), oversees the bank’s branch locations. ERIEBANK has implemented numerous safety protocols to ensure customers can bank safely while guaranteeing the same level of service and support.
locations, says relationship building is a fundamental part of how ERIEBANK differentiates itself through its commercial and retail banking services. “Even under a mask, you can expect to be greeted by a smile, and we really want people to feel better when they walk out our doors than they did coming in,” Jones explains. “But it’s really about building those relationships. We’re going to steer them in the right direction and be more of an adviser to them.” Given ERIEBANK’s strategy for success, Zimmer is optimistic of the bank’s responsiveness and positioning for the future. “We’re being as pro-active with our customers and as aggressive in the market as possible,” he says. “We’re all very optimistic that it’s going to be OK, and our employees are really working hard with their customers to make sure that we all get through this together.” For more information about ERIEBANK, visit www.ERIEBANK.bank.
ERIEBANK is a division of CNB Financial Corp.’s CNB Bank, a Clearfield, Pennsylvania-based company with roughly $4.7 billion in assets. The community bank opened in Erie in August 2005 and now has 10 retail locations in northwest Pennsylvania (Erie, Crawford and Warren Counties) and northeast Ohio (Ashtabula, Lake and Cuyahoga Counties). Headquarters: 2035 Interchange Road, Erie, PA 16509 Phone: 814/868-7523 ERIEBANK was founded in Erie, Pennsylvania in 2005, but has since expanded its footprint throughout northwest Pennsylvania and northeast Ohio. The regional powerhouse has the flexibility of a community bank with the backing of a larger financial institution through CNB Bank.
Cleveland Loan Production Office: 5005 Rockside Road, Suite 625 Phone: 216/503-7371 Website: www.ERIEBANK.bank
mbabizmag.com • DECEMBER 2020
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SPOTLIGHT Q&A| FORECAST
PSU Economist Discusses 2021 Economic Outlook 2020 has been one of the most challenging years for the employers and the economy due to the COVID-19 pandemic. Here, Ken Louie, Ph.D., director of the Economic Research Institute of Erie (ERIE) and associate professor of economics at Penn State Erie, the Behrend College, discusses the financial toll of the crisis, as well as the statistics and trends that are expected to impact the economic outlook for 2021. COVID-19 shocked the world and has impacted nearly every business sector since the lockdown of spring, bringing an end to the longest economic expansion in U.S. history. How would you describe the outlook for the U.S. economy as we begin 2021? The COVID-19 pandemic has certainly created a dramatic and negative economic shock, causing U.S. employment to plummet by almost 22 million in the first four months of the year and U.S. real gross domestic product (GDP) to drop by a staggering 31.4 percent in the second quarter. But the U.S. economy is expected to resume a positive rate of growth as we head into 2021. The latest median projections by the Federal Reserve suggest that, although U.S. real GDP will contract by 3.7 percent in 2020, growth is expected to be 4 percent in 2021 before slowing down to 3 percent in 2022 and 2.5 percent in 2023. Economists appear to be divided on when the economy will return to prepandemic GDP levels. What does your research show? Economic projections generally differ across forecasting entities, and that is especially true given all the uncertainty due to the pandemic. In our research, we try to look at a wide range of prominent established forecasting sources to gauge economic trends in the U.S. economy. Although there are variations and
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DECEMBER 2020 • mbabizmag.com
forecasts are subject to subsequent revision based on newly available data, the latest projections seem to reflect a consensus that U.S. real GDP will grow by 3 to 4 percent in 2021. What about the regional economic outlook? How does it compare with the state and nation for 2021? Early indications suggest that the Erie regional economy may face a slightly more challenging situation in 2021 compared to the state and nation. For example, consumer spending, an important indicator of future economic activity, decreased by 5.9 percent in Erie County between January and early October, but decreased by only 3.2 percent in the nation as a whole and increased by 5.4 percent in Pennsylvania during the same period. The Federal Reserve also projects the economy to improve next year, with unemployment falling to 5.5 percent by the end of 2021. What is your assessment of the employment rate? We are recovering some of the pandemic-related job losses. However, the pace of job recovery in the Erie economy has been slower than that in the state and nation. As of September, Erie has recovered only 44 percent of the jobs lost during the early months of the pandemic, while Pennsylvania has recovered 55 percent, and the U.S. has recovered 52 percent. Although it has been falling gradually and may continue to do so in 2021, Erie’s unemployment
rate of 11.2 percent (as of August) is still higher than that in the state and nation. COVID-19 continues to impact the business sector in new ways, creating emerging industries and unfortunate closures. Which sectors are rebounding better than others? Among the sectors that have suffered the biggest job losses in Erie, those that have rebounded at the fastest pace are Leisure and Hospitality; Mining, Logging, and Construction; Retail Trade; and Professional and Business Services. However, except for Mining, Logging, and Construction, employment in the other sectors is still below pre-pandemic levels. Job growth in the manufacturing sector has been relatively slower and more erratic. According to a recent Chief Executive survey, America’s CEOs report to be increasingly confident that the worst of the COVID-19 crisis is behind us, sparking optimism for 2021. But much of this confidence is built on two uncertainties: a COVID vaccine and the presidential election. How critical are these two variables to our economic recovery? These two elements will indeed play critical roles in influencing our economic recovery. A safe and effective COVID vaccine that is widely accepted by the general public may increase the likelihood that the economy will be able to restore the higher levels of production, employment and income
that can enhance our economic prosperity. And the outcome of the presidential election will determine the future course of government policies that affect the economy. What key areas/current issues should we be keeping our eyes on when it comes to the economic forecast for 2021? I think a key metric to watch is whether the pace of U.S. job recovery will pick up as we head into the new year. A faster rate of employment growth will indicate that businesses are expanding production at a higher rate, which will generate higher levels of household income. It also will be important to watch indicators of business, investor and consumer confidence, since this will affect investment and consumption decisions that will in turn influence the course of the economic recovery. Finally, we also need to be attentive to COVID-19’s economic and social impact in other countries across the world, since global events may also affect U.S. economic performance.
In the United States, economic stimulus has been used to combat the pandemic and economic pain it’s inflicted. What do you believe is the impact of this debt going forward? According to the Congressional Budget Office, U.S. federal debt held by the public is projected to equal 98 percent of GDP by the end of 2020 and reach 107 percent of GDP by 2025. In the long run, such high levels of federal debt may pose financial risks, so it’s important that we try to devise a long-term strategy that will gradually reduce the size of the debt. However, with an ongoing pandemic that has caused so much unanticipated economic hardship for so many workers and their employers, I think the more important short-run imperative is to continue to provide financial assistance where it is needed. This is especially true in light of the current low-interest environment, which effectively reduces the cost of servicing the debt.
In your opinion, what is the most important economic lesson that we’ve learned from the COVID-19 crisis and why? The most important economic lesson is that a relatively stable and robust economy can be devastatingly disrupted by sudden and unexpected noneconomic forces. A corollary is that, going forward, we should strive to build elements of resilience into all parts of our economy and society so that we will be much better able to withstand any future negative shocks to the system.
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mbabizmag.com • DECEMBER 2020
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BUSINESS BUZZ | WHAT’S NEW
MCDOWELL MANUFACTURING RECEIVES HIGH-TECH EQUIPMENT
McDowell High School recently received Haas CNC Milling and Lathe machines, featuring state-of-the-art full 5th Axis Mills and Quality Assurance equipment. A program at McDowell High School known as McDowell Manufacturing is a student-run enterprise that works in partnership with local manufacturing companies to produce actual parts, deliver services and add value as part of the supply chain. McDowell Manufacturing is a program developed between a collaborative partnership between the Millcreek Township School District and the Northwest Pennsylvania Industrial Resource Center (NWIRC). The program enables qualifying students at McDowell High School the opportunity to participate in a manufacturing enterprise that is making actual parts, delivering services and adding value as part of the supply chain for local manufacturers. For more information, visit https://www.mtsd.org/district/ activities-programs/mcdowell-manufacturing.
New state-of-the-art manufacturing equipment was recently delivered to McDowell High School for its McDowell Manufacturing enterprise.
AUTO EXPRESS KIA OPENS NEW LOCATION IN ERIE
Auto Express KIA recently cut the ribbon on its new location on Upper Peach Street. The dealership had been located on Route 8 in Wattsburg. According to a report by Erie News Now, Joe Askins, vice president of Auto Express KIA, says the KIA brand success over the years made it necessary to find a bigger location. And at its new location, both the lot and service department are double the size. Askins has been in business along Route 8 for 26
years, and this new facility has been in the works for four years, he credits the businesses’ success to the Erie community, “The Erie community has been great to our businesses, great to our family, and for me, to be able to continue to grow in our Erie community that’s exciting. Erie’s home and I wouldn’t want a dealership in any other location than right here in our hometown.” The Route 8 property in Wattsburg is still in operation as Off-Road Express and selling used vehicles. For more information, visit www.autoexpresskia.com.
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Keep your PA Tax Dollars local while supporting student achievement Win-Win! Educational Improvement Tax Credit (EITC) allows businesses to earn tax credits up to 90% for contributions made to a scholarship organization, such as the STAR Foundation. Want to learn more? starfund@ErieRCD.org 814-824-1188 Diocese of Erie
The Scholarship Organization for Catholic Schools in the Diocese of Erie
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DECEMBER 2020 • mbabizmag.com
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PEOPLE BUZZ | AWARDS AND PROMOTIONS ERIE FEDERAL CREDIT UNION WELCOMES FINANCIAL ADVISERS
Chuck Molloy has joined Erie Federal Credit Union (Erie FCU) as a financial adviser, exclusively serving the credit union’s membership through Erie Advisors.
Molloy, a financial adviser with more than 13 years in the financial industry, will meet with individuals to evaluate their financial situation, offer recommendations and coordinate their investment and insurance choices. “Our goal is to be a life-long, trusted partner for our members,” explains Erie FCU CEO Brian Waugaman. “Chuck Molloy shares these goals, along with the credit union values of trust, safety and service every member of the Erie FCU team strives to achieve. I’m confident Chuck will provide our members with the information and support to meet their financial planning needs. Erie Federal Credit Union also welcomed David Garres as a financial adviser for Erie Advisors, providing investment and insurance products
EVIDENT FINANCIAL NAMES CHIEF FINANCIAL OFFICER
services to members through CUNA Brokerage Services, Inc. (CBSI). Garres has more than 16 years of experience in the financial industry. He was most recently a financial adviser at PSECU Financial Services and is FINRA registered as well as has a life insurance license. In his position, Garres will provide personalized financial management strategies for clients interested in investing, estate and retirement planning, retirement spending, long-term care solutions and more. Garres will be based out of the Glenwood corporate office. “We are pleased to welcome David to our team. His knowledge and experience will be an asset in helping our members plan their financial futures by investing wisely and strategically,” said Waugaman. “I am confident that he will be a valuable addition to the Erie Advisors team that serves the credit union’s members and the local community.” Designed exclusively for credit union members, and located at the credit union’s Glenwood Branch Office, Erie Advisors is a fullservice financial advisory program providing retirement, insurance and investment services to individuals.
Evident Financial recently announced the appointment of Cherie Sayban, CPA, as chief financial officer and client accounting specialist. In addition to overseeing Evident Financial’s treasury duties as the company’s CFO, Sayban helps clients reduce their tax burden with tax-efficient investing strategies. Prior to her new duties at Evident Financial, Sayban served four years as the company’s outside accountant. She has more than 25 years of experience in accounting, taxation and financial management. Earlier in her career, Sayban was a senior tax accountant at Schaffner, Knight, Minnaugh & Co. accounting firm. Sayban holds a bachelor’s degree in accounting from Gannon University and is a certified public accountant. Headquartered in the core of downtown Erie, Evident Financial is an independent Registered Investment Advisor, one of the fastest-growing segments in financial services.
MediPlanConnect offers a turn-key, no cost, personal solution to Manufacturer & Business Association member companies and all your Medicare-eligible employees and retirees. • • • • •
Personal advising and guidance Plan selection Easy enrollment HR support Employee education
Call 717.980.3201 today to connect to a personal MediPlanConnect advisor. Or email info@mediplanconnect.com.
www.MediPlanConnect.com
mbabizmag.com • DECEMBER 2020
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ON THE HILL | CONSIDER THIS
MBA Takes the Lead in Campaign for Health-Care Literacy Eileen Anderson is the director of Government Relations for the SMC Business Councils, which merged with the Manufacturer & Business Association in 2019. Contact her at eileenanderson@smc.org. While peering through the looking glass to see the U.S. economy, one area that deserves a hard look is the health-care spending forecast. “Overall health-care costs — including all private and public spending — are anticipated to rise by an average of 5.5 percent per year over the next decade… .” — “Healthcare Costs for Americans Projected to Grow at an Alarmingly High Rate” by Peter G. Peterson Foundation, May 1, 2019 Forecasts like that make us want to throw our cards down and say, “I’m out.” Health-care costs drive the cost of health insurance, which is always a top concern for businesses. Insurance is an important benefit to retain and attract workers and that will not go away. There is no one silver bullet to constrain health-care costs, but there are actions employers and employees can take. According to Paul Keckley, Ph.D., here are the five main drivers of healthcare costs:
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DECEMBER 2020 • mbabizmag.com
1. Increased utilization due to aging, population growth and social disparities. 2. Unit prices for drugs, devices, specialty care and hospitals. 3. Volume-based incentives for providers — the more they do the more they are paid. 4. Lack of transparency regarding prices, costs and business relationships. 5. Consumer ignorance and passivity. Employers and employees cannot do much about Nos. 1 through 4 but can act on No. 5. Consumers are ignorant and passive by habit because for years we have been shielded from the true cost of health care by the “third-party payers” — someone else who pays the bills. The challenge for employers and employees is to become educated on health care or health-care literate. Just as the pandemic has pushed all to learn about e-commerce, develop virtual meeting skills and use telehealth medical services, we must push ourselves to become health-care literate. “Attention to and investment in health literacy is woefully inadequate in the U.S. system. Though nine of 10 adults say they have difficulty using everyday health information routinely available in clinics, hospitals, retail outlets, social media, and communities, little progress has been made.” — Paul Keckley, Ph. D., The Keckley Report, September 28, 2020
The reasons to develop health-care literacy grow more compelling every day. As the cost of health insurance spirals, employers have no choice but to shift more costs onto employees and use high-deductible plans. Out-of-pocket costs, premiums, co-pays and deductibles increase for employees. If you do not have a high-deductible plan now, you may have one soon. “Twenty-eight percent of all covered workers and 45 percent of those in small companies have high deductible plans with a $2,000 or higher deductible requirement…” — The Keckley Report, Survey Result: U.S. Employers taking Health Matters into their Own Hands, September 30, 2019 When we pay more of our own bills, we have more decision-making power, more responsibility and accountability for costs and choices. It is in our best interest to learn where the costs come from and what we can do about them. Health-care literacy enables us to engage in our own health care. The Manufacturer & Business Association, for one, is on the fast track to become a leader in health-care literacy. Visit the MBA’s new Government Affairs website at https://www.mbausa.org/services-andbenefits/government-affairs/ and click the Government Advocacy tab to view our newest free resource, Health-Care Costs: A Resource for Employers and Employees. Progress won’t happen overnight but will be a slow and steady cultural shift over the next decade. So, let’s get started!
What’s Ahead? Continued Impact of PPP Loans in 2021
LEGAL BRIEF | BORROWING
before closing the business transaction. Once the forgiveness process is complete, the escrowed funds must be disbursed first to the SBA, if necessary, to repay any remaining PPP loan balance plus interest. If the PPP borrower is unable to escrow the SBA-required funds, the intended business transfer cannot proceed without prior SBA approval.
Craig Shamburg is a partner at MacDonald Illig. He counsels clients on estate planning and administration, tax, business transaction, and succession planning matters.
Bill Speros is a partner at MacDonald Illig. He counsels clients on commercial business transactions, mergers and acquisitions, and corporate compliance.
The Paycheck Protection Program (PPP) launched in April has provided approximately 5 million federal loans totaling more than $500 billion to assist businesses affected by the Coronavirus pandemic. Under the PPP, most borrowers will be able to receive loan forgiveness from the U.S. Small Business Administration (SBA) if they satisfy certain spending requirements.
have already started) the forgiveness process before the close of the 2020 calendar year, they likely will not know the status of their application until 2021. This unfortunate timing presents some unique challenges for PPP borrowers.
Forgiveness Decision As of the time of this writing, most PPP borrowers are still waiting for their lending bank to assist with completing a forgiveness application. Once the bank accepts and completes the borrower’s application, the bank has 60 days to send the completed application to the SBA, which has 90 days to process the application and issue a decision. Thus, even if PPP borrowers start (or
For one, the COVID-19 pandemic, along with current federal estate tax exemption amounts, has resulted in a busy transactional market where many PPP borrowers are looking to sell business assets and/or transition ownership to the next generation. SBA Procedural Notice 5000-20057 applies to any PPP borrower that has not fully satisfied its loan and wants to sell or transfer 20 percent or more of its ownership interest or 50 percent or more of its business assets. Under the Notice, PPP borrowers must set aside in an escrow account funds equal to their outstanding loan balance
Applying for such approval can potentially be a costly and lengthy process that includes submitting copies of the intended transaction documents and a justification for why the PPP borrower can neither fully repay its loan nor escrow the required funds. For any business owner intending to sell, gift or acquire stock or assets of a PPP borrower prior to the end of 2020, the SBA Notice has injected a significant new concern into the transaction. Tax Implications The delay in obtaining SBA approval of the forgiveness may also create uncertainties for the 2020 income tax return filing season. With Notice 2020-32, the Internal Revenue Service (IRS) stated that forgiveness of a PPP loan will not create discharge-of-indebtedness income; however, any expenses paid with PPP loan proceeds that are ultimately forgiven are not deductible by the taxpayer. As of this writing, the IRS has not issued further guidance regarding how to account for forgiveness obtained in 2021 for expenses incurred in 2020. Therefore, if your PPP loan is not forgiven until 2021, you should discuss the impact with your tax preparer prior to filing and consider extending your 2020 income tax returns. While the PPP loans provided a potentially business saving lifeline in 2020, the financial implications of forgiveness are likely not to be finalized until 2021. For more information, contact Craig Shamburg at 814/870-7716 or cshamburg@ mijb.com or Bill Speros at 814/870-7764 or wsperos@mijb.com.
mbabizmag.com • DECEMBER 2020
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HR CONNECTION | WORKPLACE TRENDS SURVEY: CFOs EXPECTING LOWER REVENUE, EMPLOYMENT IN 2021
Though CFOs remain optimistic about future financial prospects, they generally expect employment and revenues to remain below pre-COVID levels until at least 2021, a survey from Duke University’s Fuqua School of Business and the Federal Reserve Banks of Richmond and Atlanta found. The survey, conducted among 269 CFOs in late September, found CFOs’ optimism for their firms’ financial prospects to hover around 70 on a scale of 0 to 100 — approximately the same as in June. “The economy is recovering, to be sure, and business confidence has improved since the spring,” Federal Reserve Bank of Richmond Vice President Sonya Ravindranath Waddell said. “But all indicators from The CFO Survey point towards a slow return to normal that is challenging to forecast due to the uncertainty created by this virus.”
BILLIONS OF DOLLARS IN COVID-19 LOSSES IMPACT PENNSYLVANIA
The COVID-19 pandemic has had grave economic consequences on Pennsylvania’s nonprofit sector, a new survey of about 800 organizations shows. The Impacts of COVID-19 on Pennsylvania Nonprofits study reports revenue losses of $612 million and new operating expenses of $95.3 million, for a total of $708 million. Based on the data collected from 808 nonprofits — 2 percent of the state’s total — the actual economic toll to organizations ranging from child care centers to arts organizations balloons to billions of dollars. The survey, conducted by the national community and economic development firm Fourth Economy and coordinated through a partnership of The Pittsburgh Foundation, its affiliate, The Community Foundation of Westmoreland County, The Forbes Funds, the Pennsylvania Association of Nonprofit Organizations (PANO) and the United Way of Southwestern Pennsylvania, is the most comprehensive data gathered about the economic impact of COVID on the nonprofit sector to date. Regional and county-specific data is available for review online.
Ancillary Benefits Can Help Retention With health insurance premiums continuing to rise, more small businesses are looking for other benefits they can offer to help with employee retention. Employees who are happy with their insurance plans are more likely to stick around and report overall job satisfaction. Best of all, these plans can often be provided at little or no cost to the employer. Purchasing these benefits at a group level is more affordable because: As group insurance, the risk is spread through a large population, which keeps premiums lower. If you have a Section 125 plan, premiums are paid with pre-tax dollars. The cost can be covered by the employer or employee. Thanks to the Manufacturer & Business Association’s (MBA) long-term partnerships with industryleading insurance carriers, MBA members can enjoy exclusive access to premium benefit plans at highly competitive rates! Available plans include: Vision Members with at least two participants can add vision benefits through VBA Insurance with rates starting as low as $3.48 for an employee! This flexible plan can be employer or employee-paid. Dental The MBA offers exclusive plans through Delta Dental at discounted rates, including a plan that covers adult orthodontics, for groups with two or more employees. Best of all, there is “no waiting period” for coverage or treatment! Life, Short-Term And Long-Term Disability MBA members with groups as small as two can select from various Hartford life and disability coverage options that offer no medical underwriting, no waiting periods and that include flat rates, as well as salary rates. Workers’ Compensation MBA members have access to workers’ compensation insurance through its partner Eastern Alliance Insurance Group (EAIG) that offers the potential of a group policyholder dividend reimbursement for all participants, including small groups! Medicare Through the Association’s partner, MediPlan Connect, MBA members have experts available to help with navigating Medicare for your eligible employees — provided at no cost to MBA members. For more information on the Manufacturer & Business Association-sponsored ancillary benefit plans, contact your broker or contact me at 814/833-3200, 800/815-2660 or mdamico@mbasua.org.
Tracy-Daggett
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Melissa Damico is the manager of Client Services at the Manufacturer & Business Association. Contact her at 814/833-3200, 800/815-2660 or mdamico@mbausa.org.
HR Q&A | GET ANSWERS
Pennsylvania Raises Exempt Salary Threshold Rachel Tserkovniak, PHR is an HR consultant and trainer at the Manufacturer & Business Association. Contact her at 814/833-3200, 800/815-2660 or rtserkovniak@mbausa.org.
Pennsylvania employers will need to start analyzing their workforce to determine the economic impact of the Pennsylvania Department of Labor & Industry’s (DLI) recent announcement. The DLI issued its final amended ruling to increase the salary threshold for
employees qualifying as exempt. Under the Pennsylvania Minimum Wage Act (PMWA), the salary threshold will change in periodic stages and soon exceed the FLSA’s salary threshold requirements. This gives Pennsylvania employers just one year to prepare for the upcoming changes. The regulation under Pennsylvania law will increase the salary threshold to: • $684 per week ($35,568 annually), effective October 3, 2020. • $780 per week ($40,560 annually), effective October 3, 2021. • $875 per week ($45,500 annually), effective October 3, 2022.
Starting October 3, 2023 (and each third year thereafter), the salary threshold will reset automatically to the 10th percentile of Pennsylvania workers who work under exempt classifications. The final regulation also revises the duties test, in an effort to closer align Pennsylvania with its Fair Labor Standards Act (FLSA) counterpart. The new rule will: • Eliminate the requirement that executive exempt employees “customarily and regularly” exercise discretionary powers. • Eliminate the requirement that administrative exempt employees “customarily and regularly” exercise discretion and independent judgment (instead requiring that their primary duty includes the exercise of discretion and independent judgment with respect to matters of significance). The PMWA, however, will not entirely match with FLSA guidelines as it still differs from existing federal regulations. PA employers will be required to analyze both the PMWA and existing FLSA requirements to ensure compliance under both federal and state laws.
EVENTS & EXTRAS | NETWORKING & MORE
See the many ways that the MBA is keeping members engaged and informed in person and online, as well as recognizing some of our recent member milestone anniversaries. To learn more, visit www.mbausa.org.
milestone anniversar y The MBA recently presented a al for its 25th year in plaque to Penn-Sylvan Internation sylvania company is business. The Spartansburg, Penn of ¾ lumber. America’s leading manufacturer
Laurie Golden of Perseus House was the grand prize winner of the MBA’s HR & Employment Law Conference raffle. Next year’s conference is planned for September 15, 2021.
Pennsylvania Speaker of the Hous e, State Rep. Bryan Cutler (R-10 0th District), was the guest speaker at a legislative roundtable earlier this fall at the MBA headquarters in Erie.
mbabizmag.com • DECEMBER 2020
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PRSRT STD US POSTAGE PAID ERIE, PA PERMIT #199
Stick with what works. 96% of businesses that choose UPMC Health Plan stay with UPMC Health Plan. You’ve given a lot of thought to your employees’ health coverage. And you’ve come to a familiar conclusion — nothing’s better than UPMC Health Plan. Choose us for affordable plan options. Full in-network access to UPMC along with other doctors and hospitals in the community. Urgent care when you travel. Service from a designated Health Care Concierge. And health tools that keep up with busy lives and schedules. All this is worth sticking with, don’t you agree? To learn more, visit UPMCHealthPlan.com/employers. #stickwiththeplan