Protecting Your Practice During the Coronavirus Shutdown

Mar 21, 2020

Protecting Your Practice During the Coronavirus Shutdown

It is extraordinary how much our lives are changing so quickly. Practices are shutting down for weeks with no assurance that they can reopen any time soon, certain states are on total lockdown and economic activity has ground to a halt. This is a Newsletter we never imagined writing. But, as we hunker down and navigate our way through this unprecedented time, here are a number of ideas that will limit the fallout. The federal and state governments are passing laws and changing the rules at warp speed. We will be providing further guidance as this happens:

Unemployment Insurance:

If you are closing your office, then you should direct your employees to your state’s unemployment benefits office. The states (with help from the federal government) are relaxing their requirements for claiming unemployment. Normally, employees have to be laid off and wait a certain period of time before benefits commence. These criteria are being waived, so that employees who have not been terminated, but whose companies have been temporarily closed, can collect ASAP.

You can help your team by researching your state's updated requirements. It shouldn't be hard to find the website. Google "[Your State] Unemployment Covid." The employees will have to provide some basic information about themselves and their employment situation and apply individually, and the unemployment payments should start quickly. Alternatively, your state may allow you to apply for your employees as a group which could start the payments sooner.

The unemployment benefits may not replace all of their lost compensation, but it will ease the strain on practice cash flow. You are asking your employees to sacrifice temporarily, but some of that lost income will be recaptured by the new $1 trillion bailout package being worked out in Congress. These checks may be as much as $1,200 per person, though they will be scaled back for higher earners.

Presumably, your unemployment insurance premiums will go up in future years with your employees now claiming benefits. Therefore, we recommend using up any employee accrued vacation before your team goes on unemployment.

Also, if you are required to pay an employee sick leave or family and medical leave (see the next item), then your state will likely require you to do that first before it pays unemployment benefits to that employee.

Will the practice owner be covered by unemployment? This will vary state to state. It doesn’t hurt to apply. You may qualify for a benefit, albeit at a reduced rate, and your practice may not have to completely close. Also, staff members whose hours have been cut back are likely eligible for unemployment.

Family and Medical Leave and Sick Leave:

The recently passed Families First Coronavirus Response Act (the “Act”) eases the strain on employees and employers by providing employees with (1) paid family and medical leave, and (2) paid sick leave and tax credits to employers to pay for it. If you have an employee who can’t work because he or she is sick or taking care of a sick relative, these will apply to you. Employers with fewer than 50 employees are exempted only if the Dept. of Labor finds that these requirements would compromise the viability of the business.

The ADA has requested the Labor Secretary to issue an exemption for dentists, but he has yet to do so. Here are the relevant details:

Family and Medical Leave. The Act requires employers with fewer than 500 employees to provide both paid and unpaid leave to employees through December 31, 2020. The emergency leave is available when an employee who has been employed for at least 30 days is unable to work or telework because school or daycare for a child under 18 has shut down due to COVID-19.

The first 10 days of leave may be unpaid. (The employee may elect, or the employer can require, that accrued paid vacation or personal leave be substituted for the unpaid leave.) After that, paid leave is required, equal to two-thirds of the employee's regular pay and the number of hours the employee would otherwise be normally scheduled to work, not to exceed $200 per day and $10,000 total.

Sick Time. The Act separately requires private employers with fewer than 500 employees to provide 80 hours of paid sick time to full-time employees who are unable to work (or telework) for specified virus-related reasons. Part-time employees are entitled to sick time based on their average hours worked over a 2-week period. This amount is immediately available regardless of the employee's length of employment.

The maximum amounts payable vary based on the reason for absence. Employees who are (1) subject to a quarantine or isolation order, (2) advised by a health provider to self-quarantine, or (3) experiencing symptoms and seeking diagnosis, must be compensated at their regular rate, up to a maximum of $511 per day ($5,110 total). Employees caring for an individual described in category (1), (2), or (3), caring for a son or daughter whose school or daycare is closed must receive two-thirds of their regular rate, up to a maximum of $200 per day ($2,000 total). Employers cannot require employees to find a replacement worker or use other sick leave or accrued vacation before this sick time.

Employer Tax Credits. The federal government will repay employers for the family leave and sick pay through payroll tax credits. The credit for Family and Medical Leave will be the amount actually paid to the employee up to a maximum of $200/day and a maximum of $10,000. The credit for Sick Leave will be the lesser of paid leave or either the $511 or $200 described above.

Practice owners (at least C corporation owners and Schedule C sole proprietors) will be eligible for the credits too if they would otherwise meet the requirements for sick leave or family medical leave.

Credits will also cover the cost of keeping the employee enrolled in the practice’s group health insurance plan. In addition, there will be no FICA withholding for Family and Medical Leave and Sick Leave compensation, other than the employer’s 1.45% Medicare cost. The employer tax credit will reimburse you for this as well. If you end up having to pay either Family and Medical Leave or Sick Leave, discuss the mechanics of claiming the credit with your CPA.

Short-Term Loans to Keep the Practice Afloat – Personal Loans, Bank Lines of Credit and SBA:

If you have sufficient cash sitting in your personal bank account, then you can make a loan to your practice to help cover ongoing operating expenses. This should be documented with a promissory note with a reasonable repayment term (perhaps two to five years) and a reasonable interest rate. This will distinguish it from a capital contribution. The loan can be paid back tax-free and with interest that is deductible to the practice but taxable to you. A capital contribution would add complexity, especially in a group practice, and the "repayment" could end up being taxable.

If you don’t have enough personal cash, and your savings are in stocks that have gotten pummeled, then don’t sell the stocks to free up the cash -- if you have a bank line of credit or you can obtain one. If you have a line of credit, then draw down significantly on that now - even if you are on the fence about whether you will truly need it. In times of financial panic, there’s a big difference between having access to a line of credit and actually having the money. Banks may be stressed with clients drawing on their credit lines. If you wait too long, the funds may not be available, though the Fed may step in and prop up the banks as needed. Don’t begrudge having to pay a little bit of extra interest if you find, in hindsight, that you drew more than was necessary.

If traditional bank lending dries up altogether, the federal emergency bailout is infusing a massive amount into the Small Business Administration (SBA) to loan to small businesses during the emergency. Your governor will first have to declare your county a disaster area, but the repayment terms will be quite favorable. The areas currently eligible for disaster assistance loans can be found here:

Other Overhead – Rent, Office Supplies, Debt Service, Etc.

If you are leasing your office from a third party landlord, reach out to them and ask for a temporary rent abatement (free rent) or at least a deferral, with such deferred rent to be repaid over the remainder of the term. Supply orders should be kept to a minimum, sufficient only to cover your reduced work schedule. If you’ve made equipment or practice purchases with borrowed funds, contact your lenders and ask to have the loan restructured to extend the term or to convert the loan to interest only until you are back up and running.

Insurance Coverage for “Business Interruption”:

We are somewhat pessimistic that coverage will be available. Policy language differs from policy to policy so it is best to review this with your agent. Commercial policies (property/casualty) usually covers lost business income (up to a certain time period and dollar limit) when you can’t work due to a property loss. This typically means a fire or flood that causes actual property damage. Lawsuits are already being filed demanding that insurers pay business interruption coverage for coronavirus related losses on the theory that the virus has damaged the property. The insurers will argue that the property is fine and that the business is closing by government edict – something the policies usually don’t cover.

Todd Erkis, an insurance expert and friend of this Newsletter agrees. His take is, “It really depends on the policy language. Unfortunately, all insurance policies have general exclusions eliminating all coverage if there is a war or a widespread government shutdown. The theory is that insurance is for specific damage to your place of business from one of the events that they cover. A government shutdown is not something they can estimate, and do not charge for, so therefore do not cover. You may have some limited coverage in a specific business continuation rider to your policy and the specific language in your policy is something you should read carefully. It would make sense to call the insurance company or your broker to discuss what coverage you have.”

The insurance trade associations may be petitioning the federal government to create a business interruption fund, along the lines of the 9/11 Victims Compensation Fund, which would cover small businesses for business interruption and remove the onus from the insurers. We shall see.

Office overhead disability insurance policies likely won’t help. These require the doctor (not another employee) to actually be disabled or sick and unable to work — upon a physician’s certification. A doctor who is worried about the virus and self-quarantining will not be covered. A doctor who’s been diagnosed with coronavirus and must self-quarantine should be. But, then the typical 30 or 90 day elimination (waiting) period applies. If the doctor gets better and returns to practice during that time, there is no coverage.

Some Good News! Tax Day is Postponed From April 15 to July 15:

This includes the postponement of both filing the 2019 individual tax return and paying the tax. It also includes the April 15, 2020, quarterly estimate, which now moves to July 15. The IRS won’t charge interest or penalties. This will provide some very needed relief. How will this affect the normal six-month filing extension? We don’t know that yet. It may be three months to October 15 or six months to January 15, 2021. We’ll update this in a future Newsletter.

Contributions to 401(k)-Profit Sharing Plans, SEPs and SIMPLE IRAs:

These should be cut back or eliminated altogether this year. Protecting the practice takes precedence over funding the plan.

Retirement Plan Hardship and Loan Rules Will be Loosened to Free Up Funds For Those Affected:

This is part of the Coronavirus, Aid, Relief, and Economic Security (CARES) Act being negotiated now in Congress, the same bill that will authorize the cash payments directly to U.S. citizens. “Hardship distributions” from a plan or IRA will be exempted from the 10% penalty tax, and the income tax hit on the distribution can be spread over three years. The distribution can also be returned to the plan to avoid the tax altogether. Retirement plan loans will double from $50,000 to $100,000, and loan repayments can be delayed temporarily. We’ll see what’s in the final version, but once it passes, these new features will be available immediately, and the plan document can be amended later.

Cash Balance Plans - Freezing Accruals and/or Using Prefunding Balances:

Cash balance contributions are unpredictable. If the markets do well, then the plan becomes over-funded which means future contributions are reduced. But, when markets fall, plans become under-funded and additional contributions are required. This will be a very difficult year. CB plans have suffered large losses and practices will be less profitable. If the CB plan loss is not recovered by year-end, then you may be in store for larger required contributions for the 2020 plan year. These are some ways to deal with the situation:

Freeze Accruals: If the plan is frozen before the participants accrue another year of service, then you are not required to make a normal annual contribution. This will buy you time to recover market losses. But, this will mean freezing accruals soon. Most plans have a 1,000 hour of service requirement that most participants would not meet if the plan is frozen by about mid-May. This will require an amendment to the plan, so contact your plan provider. If Collier & Associates prepares your CB plan, call us to discuss. If plan assets recover, we can amend the plan to remove the freeze before year-end. Freezing does not mean there will be no required contribution for 2020. It means there will be no accruals after the freeze date.

Prefunding Balances: Plans can create a prefunding balance (PFB). A PFB is a way to use some of the excess contribution for 2019 (the actual contribution over what was actually required) to offset the minimum required contribution for 2020. 2019 was a great year for plan asset growth. Your required 2019 contribution, for example, may have been $0. But, that didn’t mean that you stopped contributing. If your actual contribution was, say, $80,000, then this is a PFB, some of which can be used to offset required 2020 contributions. The PFB is created by an employer election at the time the IRS 5500 tax return is prepared. We (through our affiliated actuary) will be preparing the elections for most of our clients’ plans automatically this year.

General Concept of Plan Funding Requirements: Many plans were well funded for 2019 and are not for 2020. If such a plan freezes before new benefits accrue, the minimum required contribution will be approximately one-sixth of the difference between Cash Balance Account Balances (what’s needed for the plan to be “on track”) and what the actual plan assets are. If the plan is not frozen, the cost of the new contribution credits accrued for 2020 will be added to this amount.

Finally, on a personal note, we are wishing the best for you, your families and your practices. While this is a time of great anxiety, we are finding when speaking with clients, that many have an optimistic take that this is only a brief interruption in what has been a prolonged run of economic growth. Hopefully, we will emerge from these challenging time in the near future and get back to a sense of normalcy. In the meantime, it helps to recall the ancient words attributed to King Solomon, applicable in the best and worst of times . . . “And this too shall pass!”


The information contained in this Newsletter must not be construed as advice or consultation. Consult with your attorney, accountant or financial advisor.

To comply with certain U.S. Treasury regulations, we inform you that any federal tax advice contained in this Newsletter is not a covered opinion as described in Treasury Department Circular 230 and therefore cannot be relied upon to avoid any tax penalties or to support the promotion or marketing of any federal tax transactions.


  1. Brandon Collier on at 3:59 pm

    The age limit is 18 (really 17 and under). Here is the language from Division C, Section 110(a)(2)(A) and (B) of the new law:

    “(A) QUALIFYING NEED RELATED TO A PUBLIC HEALTH EMERGENCY.—The term ‘qualifying need related to a public health emergency’, with respect to leave, means the employee is unable to work (or telework) due to a need for leave to care for the son or daughter under 18 years of age of such employee if the school or place of care has been closed, or the child care provider of such son or daughter is unavailable, due to a public health emergency.

    (B) PUBLIC HEALTH EMERGENCY.—The term ‘public health emergency’ means an emergency with respect to COVID–19 declared by a Federal, State, or local authority.”

    There’s nothing wrong with asking a staff member, “Does your 16 or 17 year old really need you to take care of them?” If the child can take care of himself or herself, then the employee could come to work and not get FMLA. But, if the staff members says, “That’s none of your business; they need me” then there’s little you can do, and FMLA would kick in. But, again, this is to be reimbursed and it ends Dec. 31, 2020.

  2. MAi on at 2:19 pm

    “…unable to work or telework because school or daycare for a child under 18 has shut down due to COVID-19.”
    Any input to this statement from any one who reads this? On some other links, I read that …FOR A CHILD OF MINOR AGE whose school has closed…
    This can make a big difference of a child of minor age can be interpretated to like up to 12 or 13 years old vs a child under 18.
    Any input out there? Thank you.

  3. Todd Hickman on at 12:22 pm

    Thanks for the update!
    What is our risks as employers if one of our employees gets infected and then dies? Are we at risk for a wrongful death lawsuit?
    Should only Drs. see emergency patients if needed?
    Thanks in advance for your thoughts.

    • Brandon Collier on at 3:43 pm


      These are my thoughts only and not legal advice. I suggest you discuss this with an employment attorney for that. Obviously, you would never spread the disease intentionally, but could be found to have acted recklessly or negligently?

      If you are OSHA compliant, permitted by your state to be practicing and following the ADA/CDC’s recommendations for dealing with patients and staff who appear sick, then I don’t think so.

      It’s a great question. I’ll also be reaching out to lawyers who specialize in this and get their take.


  4. David & Sherry Regiani on at 11:09 am

    RE: the new FFMLA. That program does not start until April 2, has a 10-day waiting period, and only applies in certain circumstances where an employee is ill w/Covid-19, or has a family member or child sheltered with them who is quarantined. Lots of moving parts. We are one of the few offices still open in our area, but necessary operative only. We will officially lay-off our Hygiene team on Monday (4 hygienists and one assistant). According to our Michigan attorney, the FFMLA will not apply to those already receiving unemployment benefits.

  5. Edward P Snyder on at 9:26 am

    Brandon, first thanks for the comprehensive update which we all know is full of moving parts. Good advice, accumulate cash now. If this is of reasonable duration, then send the cash back to pay down the credit line. The big question is this idea by our government leaders, who continue to get a paycheck, no interruption, deciding that we small business owners can pay our team members for up to 10 weeks to cover leaves due to having the virus, or are taking care of family members who are affected by the virus. This 10 week pay period comes after we have already lost practice income for 3-5 weeks due to the current shutdown. That loss of cash flow will greatly diminish those of us still in business when the federal/state governments finally get around to providing us with a tax credit when we file our taxes now after July 15.
    Any thoughts?
    Ed ‘Chopper’ Snyder

    • Brandon Collier on at 3:35 pm

      Hi Chopper,

      Yes, the politicians (federal and state) are not distinguishing themselves at the moment – an understatement!

      The FMLA and sick leave only apply when employees qualify for them – if they’re sick or need to take care of a sick family member, etc. If employees have been let go, then, sad to say, they aren’t employees anymore and aren’t eligible for these benefits. Once they get rehired, they may qualify for them – if they happen to get the virus. Let’s hope they don’t and nobody needs to get this benefit. The under 50 employee exception is not yet an exception. The Labor Secretary has to issue an exclusion, and he hasn’t done so. Also, any sick and FMLA pay will be reimbursed through tax credits, so the government will
      ultimately pay this. Lastly, it ends Dec. 31, 2020.


  6. MIchael Goyette on at 8:43 am

    Brandon, thank you for all you do for our industry. I have relied on the good counsel of you and your father for 25 years. However, I had this same question as Christina Carter. I was shocked, frankly at the suggestion that we should pay the employees paid time off, while we as practice owners should file for unemployment. I advised my employees to file for unemployment as soon as we realized we would have to shut down. I have since done so this morning upon the suggestion of you and my CPA, but the notion of of paying my employees the PTO they have accrued for potentially many weeks or months without any income coming into the practice is mystifying to me. That would dry up whatever cash I have as well as my line of credit. Are you suggesting the potential cost of our unemployment rate increase outweighs the interest I would have to pay to take out just to meet the practice financial obligations, including putting some money in my pocket to keep me in my house, feed my kids, etc. Supposedly Ohio has declared that there were measures in place to mutualize the unemployment rate increases that may arise in the future, so I took that to mean the rates would be buffered somewhat. My assumption was that it was best to avoid going further into debt by getting tied into a government loan as much as possible, am I wrong? Again, thank you for this service you have provided for us.

    • Brandon Collier on at 3:29 pm

      Hi Michael,
      No, the intent wasn’t to pay employees for months on end to sit at home. On the other hand, if an employee has a week or two of accrued vacation so far this year (they may not, it’s early) then they might stay on the payroll at their current salary and have this be treated as their paid vacation. Once we get to the other side of this and the staff comes back, if they take vacation later in the year it will be unpaid. The alternative is that everyone goes on unemployment now and keeps their accrued vacation to use down the road.

      An open issue will be the impact on future unemployment premiums. Ohio, as you say, will not be shifting the full costs of the current payouts back onto employers.

      Best wishes,

      • MIchael Goyette on at 2:50 pm

        Thank you for taking the time to answer our questions, Brandon. First class. Just to finish our conversation here, my staff is a very veteran one and they have accumulated quite a bit of PTO. I realize this is costly for me, but I value their experience and the many bonds they have created with our patients. If the PTO was indeed only a week or two, I could understand paying it out now, but for me, the PTO amounts in some cases to as much as 4-6 weeks. As you mentioned, it’s early in the year, so most have used little if any.

        Many thanks,

  7. Sam Ghosh on at 12:41 am

    Thank you Brandon for this timely and thorough insight. It is exactly what we all needed at this time. Been through wars, floods, market crashes and the tragedy of 9/11, but nothing so dark as this one. I remain optimistic.

  8. Tashie Wehrman on at 12:32 am

    Thanks Brandon!

  9. Daniel Maas on at 11:34 pm

    On the last paragraph, personal note: how true. The values from King Solomon and the Proverbs are sound and definitely apply to today. I have been in this profession several decades, and storms do arise, but they to quell. “this too shall pass” (it might pass like a kidney stone, but it will pass…..) Hang in there everyone. Keep looking up.

  10. “Alternatively, your state may allow you to apply for your employees as a group which could start the payments sooner.” Are you aware if this option is available in Illinois.

    • Brandon Collier on at 3:22 pm

      I’m not. The Newsletter recommendations are more general. Each state’s unemployment websites are being updated continuously and should cover questions like these. Your CPA may be able to help. He/she may have some recent experience helping clients with applications.

  11. Christina Carter on at 10:27 pm

    Another question: will you explain why we should borrow money to pay employees for up to 12 weeks? Why is it our responsibility to take on liability because others have not saved ? I’m trying to understand the reasoning behind placing the burden on the business owner.

    • Brandon Collier on at 3:19 pm

      Paying employees for up to 12 weeks is only if they qualify for FMLA — which is applicable only if they are still employed and qualify for FMLA. FMLA doesn’t require that you pay your staff even during an office shutdown. If the office is shutting down, then many of the staff can be fired (as painful and bizarre as that sounds) and go on unemployment. At this point, they are not employees, not eligible for benefits, sick leave, FMLA, etc. The good news is that’s temporary. They would be told they’ll be hired back when the practice is up and running.

      Many practices will be operating in the red for the next several weeks and borrowing some money may be necessary, whether it’s from the doctor(s) individually or from a bank.

      • Christina Carter on at 6:51 pm

        Thank you for taking the time to answer questions.

  12. Greg Rabitz on at 10:26 pm

    Clear and Concise Pearls. Thank you Brandon!

  13. NEAL JONES on at 9:25 pm

    Thanks, Brandon.

    I’ve been out of school 11 years and your philosophy got me through the 2008-2009 crash, the long bull run, and confirming good practices now.

    Your sound advice has kept me from running around like many, including some colleagues, with hair on fire.

    • Brandon Collier on at 3:14 pm

      Thanks, Neal. As they say, it’s the train you don’t see coming that runs you over. The train in this case isn’t the virus; it’s the reaction to it. Logic says to ride it this out, which is easier to do when you understand why you bought your particular investments and are comfortable owning them. What’s painful is needing to liquidate investments now to cover living/practice expenses. If that’s a possibility, look into a home equity loan or business credit line to tide things over.

  14. Diana Liley on at 8:57 pm

    Thank you Brandon for clear and thorough explanations as new information develops.

  15. Christina Carter on at 8:13 pm

    Will you send your comments on how to handle remaining 401k deposits this year? It appears this is missing.
    If we lay off employees now, will we still be required to pay the 2-12 weeks of pay later?

    • Brandon Collier on at 3:09 pm

      If employees are let go, their 401(k) deposits stop. Once the employees are rehired, the sick pay and FMLA rules would remain in place through the end of this year – but eligible for tax credits that would repay you.

  16. steve sudbrink on at 7:56 pm

    very thorough and appreciated!

    • Dr. Seymour Glick on at 10:30 pm

      Dear Brandon…..I have been a subscriber to the Sarner news letter…the Sarner&Collier news letter….the Collier newsletter and now the Collier and Associates newsletter. I am 87 and have been retired for almost 25 yrs.
      I still find your newsletter insightful, up to date on important tax info, wonderful on important info for all dentists still in practice and those that are retired, and general good common sense
      info. You have followed admirably in the footsteps of Harvey and your father.
      If you have any info on RMD’s
      kindly advise. Many thanks
      Sy Glick

      • Brandon Collier on at 3:08 pm

        Dear Sy,

        It happened in 2009 and I’d be surprised if it didn’t happen this year too. An RMD based on 1/1/2020 plan balances would be very difficult. The market rout is due more to the government response than to the virus itself, and it’s incumbent on the government to ameliorate the situation. Don’t take your RMD for a while.

        Best wishes,

        • Matt Brink on at 11:14 am

          What is an RMD?

    • Peter Bowman on at 8:40 am

      Brandon, thank you for taking the time to share this info with your clients. Wild times.

  17. Terry Angevine, DDS on at 7:54 pm

    Very good info. Having lived through and practiced during the Carter years with 18+% interest rates (we were constructing a new office building at the time…ouch!), Black Monday in 1987, September 11th tragedy, financial crisis in ‘08-‘09…I was all-in, in the market through all of this. Equities came back each time and America prospered. I’m retired now, my IRA has taken a hit, butI too am still an optimist; and continue to take the newsletter for timely news and investment advice.

  18. Daniel T Sullivan, DDS on at 7:24 pm

    Thank you, Branden.

    Your calmly matter-of-fact approach and words of wisdom are always welcome. Even to someone like me, who retired and sold my practice 10 years ago, but still subscribes for the sound investment advice.

    Speaking of that, I’m sure I’m not the only one who would appreciate any ongoing/evolving special thoughts or advice you might have on investments during this crazy time (aside from grit your teeth and hold on, and hope to be able to do some bargain hunting when — but when?? — the market begins its recovery).

    Best regards, Dan Sullivan

  19. Ken Versman on at 7:21 pm

    Are the new laws going to have any effect on RMDs

  20. Michael Moon on at 7:17 pm

    Comprehensive as always.
    Thank you Brandon

    • Krista Woodlock on at 9:04 am

      Thank you Brandon!!
      Best Regards,
      Krista Woodlock

  21. David G Long DDS on at 7:13 pm

    Thanks for the information Brandon. Even though I retired last year, my heart goes out to the dental community. But remember, it is always darkest before the dawn. Keep your spirits up! Winners are not people who never fall, but people who never quit! God Bless everyone.


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