U.S. Treasury, PSP2 Guidelines and Application Procedures for Payroll Support to Passenger Air Carriers and Contractors (Dec. 29, 2020)
Summary
U.S. Department of the Treasury guidelines and application procedures for payroll support to passenger air carriers and contractors, dated December 29, 2020, issued under Subtitle A of Title IV of Division N of the Consolidated Appropriations Act, 2021 (the PSP Extension Law), enacted December 27, 2020. The guidelines apply only to PSP2 and state that Treasury will provide up to $15 billion to passenger air carriers and up to $1 billion to eligible contractors. The definitions section defines terms such as "Air carrier" (49 U.S.C. § 40102), "Contractor" and "Passenger air carrier". The closing sections state that Treasury will reduce amounts on a pro rata basis if awardable amounts exceed available funds, that approved applicants must enter into an agreement with clawback provisions, and that payroll support is expected in multiple payments.
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“U.S. Treasury, PSP2 Guidelines and Application Procedures for Payroll Support to Passenger Air Carriers and Contractors (Dec. 29, 2020).”
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Guidelines and Application Procedures for Payroll Support
to Passenger Air Carriers and Contractors
U.S. Department of the Treasury
December 29, 2020
INTRODUCTION
These guidelines and application procedures for payroll support to passenger air carriers and
contractors are issued pursuant to Subtitle A of Title IV of Division N of the Consolidated
Appropriations Act, 2021 (the PSP Extension Law). These guidelines and application
procedures may be updated, revised, or modified at any time, and the Secretary of the Treasury
may waive these requirements in his sole discretion to the extent permitted by law.
General Authority. In March 2020, the Department of the Treasury (Treasury) created the
Payroll Support Program (PSP1) under Division A, Title IV, Subtitle B, of the Coronavirus Aid,
Relief, and Economic Security (CARES) Act, to provide payments to passenger air carriers,
cargo air carriers, and certain contractors to be exclusively used for the continuation of payment
of employee wages, salaries, and benefits. The PSP Extension Law, which was enacted into law
on December 27, 2020, authorizes Treasury to provide further financial assistance to passenger
air carriers and certain contractors (PSP2).
These guidelines and application procedures apply only to PSP2 under the PSP Extension Law.
For information regarding PSP1 under the CARES Act, please refer to the guidance and
procedures Treasury issued in connection with that program, available on the Treasury website.
Aggregate Amounts. Under the PSP Extension Law, Treasury will provide financial assistance
in an aggregate amount of up to $15 billion to passenger air carriers and up to $1 billion to
eligible contractors.
DEFINITIONS
Treasury will apply the following definitions for purposes of these guidelines and procedures.
These definitions supplement and interpret certain terms in the PSP Extension Law.
“Air carrier” has the meaning given to such term under 49 U.S.C. § 40102.
“Awardable amount” means the amount of financial assistance Treasury determines an applicant
is eligible to receive under PSP2, prior to any pro rata reduction in accordance with the PSP
Extension Law.
“Benefits” means, without duplication of any amounts counted as salary or wages, pension
expenses in respect of employees, all expenses for accident, sickness, hospital, and death
benefits to employees, and the cost of insurance to provide such benefits; any severance pay or
other benefits payable to employees pursuant to a bona fide voluntary early retirement program
or voluntary furlough; and any other similar expenses paid by a passenger air carrier or
contractor for the benefit of employees, including any other fringe benefit expense described in
lines 10 and 11 of Financial Reporting Schedule P-6, Form 41, as published by the Department
of Transportation, but excluding any Federal, state, or local payroll taxes paid by a passenger air
carrier or contractor.
“Catering functions” means the preparation, assembly, or both, of food, beverages, provisions,
and related supplies for delivery, and the delivery of such items, directly to aircraft or to a
location on or near airport property for subsequent delivery to aircraft.
“Contractor” means:
1) a person that performs, under contract with a passenger air carrier conducting operations
under 14 CFR part 121:
a) catering functions; or
b) functions on the property of an airport that are directly related to the air
transportation of persons, property, or mail, including, but not limited to, the
loading and unloading of property on aircraft; assistance to passengers under 14
CFR part 382; security; airport ticketing and check-in functions; ground-handling
of aircraft; or aircraft cleaning and sanitization functions and waste removal; or
2) a subcontractor that performs such functions.
“Corporate officer” means, with respect to a passenger air carrier or contractor, a president; any
vice president in charge of a principal business unit, division, or function (such as sales,
administration or finance); any other officer who performs a policy-making function; or any
other person who performs similar policy-making functions for the passenger air carrier or
contractor. Executive officers of subsidiaries or parents of a passenger air carrier or contractor
may be deemed corporate officers of the passenger air carrier or contractor if they perform such
policy-making functions for the passenger air carrier or contractor.
“Employee” means an individual who is employed by an air carrier or a contractor and whose
principal place of employment is in the United States (including its territories and possessions),
including salaried, hourly, full-time, part-time, temporary, and leased employees, but excluding
any individual who is a corporate officer or independent contractor.
“Involuntary termination or furlough” means a passenger air carrier or contractor terminating the
employment of one or more employees or requiring one or more employees to take a temporary
suspension or unpaid leave for any reason, including a shut-down or slow-down of business;
provided, however, that an involuntary termination or furlough does not include a permitted
termination or furlough.
“Passenger air carrier” means an air carrier that, during the period from April 1, 2019, to
September 30, 2019, derived more than 50 percent of its air transportation revenue from the
transportation of passengers.
“Permitted termination or furlough” means, with respect to an employee, (1) a voluntary
furlough, voluntary leave of absence, voluntary resignation, or voluntary retirement; (2)
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termination of employment resulting from such employee’s death or disability; or (3) a passenger
air carrier or contractor terminating the employment of such employee for cause or placing such
employee on a temporary suspension or unpaid leave of absence for disciplinary reasons, in
either case, as reasonably determined by the passenger air carrier or contractor acting in good
faith.
“Recall” means the dispatch of a notice by a passenger air carrier or contractor, via mail, courier,
or electronic mail, to an involuntarily terminated or furloughed employee notifying the employee
that:
1) the employee must, within a specified period of time, elect either:
a) to return to employment or bypass return to employment, in accordance with an
applicable collective bargaining agreement or, in the absence of a collective
bargaining agreement, company policy; or
b) to permanently separate from employment with the passenger air carrier or
contractor; and
2) failure to respond within such time period specified shall be considered an election to
permanently separate from employment with the passenger air carrier or contractor.
“Returning employee” means an involuntarily terminated or furloughed employee who has
elected to return to employment pursuant to a recall notice.
“Salary” means, without duplication of any amounts counted as benefits, a predetermined regular
payment, typically paid on a weekly or less frequent basis but which may be expressed as an
hourly, weekly, annual or other rate, as well as cost-of-living differentials, vacation time, paid
time off, sick leave, and overtime pay, paid by a passenger air carrier or contractor to its
employees, but excluding any Federal, state, or local payroll taxes paid by the passenger air
carrier or contractor.
“Wage” means, without duplication of any amounts counted as benefits, a payment, typically
paid on an hourly, daily, or piecework basis, including cost-of-living differentials, vacation, paid
time off, sick leave, and overtime pay, paid by a passenger air carrier or contractor to its
employees, but excluding any Federal, state, or local payroll taxes paid by the passenger air
carrier or contractor.
ELIGILIBITY FOR PSP2
Under the PSP Extension Law, Treasury has authority only to provide financial assistance to
PSP2 applicants that are passenger air carriers or contractors. Only an entity (whether in the
form of a corporation, limited liability company, sole proprietorship, or otherwise) that is
individually eligible for PSP2 may receive payroll support. If an application includes more than
one affiliated legal entity, Treasury will review each entity to determine whether it meets the
eligibility criteria as a passenger air carrier or contractor. Any entity that is not itself an eligible
passenger air carrier or contractor should not be included on a PSP2 application.
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REQUIRED ASSURANCES AND OTHER CONDITIONS FOR PSP2 RECIPIENTS
Passenger Air Carriers. Pursuant to the PSP Extension Law, to be eligible to receive financial
assistance under PSP2, passenger air carrier applicants must agree to:
• use such payments exclusively for the continuation of employee wages, salaries, and
benefits;
• until March 31, 2021, refrain from conducting involuntary terminations or furloughs, or
reducing pay rates and benefits, of employees of the applicant;
• through March 31, 2022, ensure that neither the applicant nor any affiliate thereof
purchases, in any transaction, an equity security of the applicant or of any direct or
indirect parent company of the applicant that, in either case, is listed on a national
securities exchange;
• through March 31, 2022, not pay dividends, or make any other capital distributions, with
respect to the common stock (or equivalent equity interest) of the applicant;
• not later than 72 hours after entering into a PSP2 agreement with Treasury, recall any
employees involuntarily terminated or furloughed by the applicant between March 27,
2020 (for applicants that did not receive financial assistance under PSP1) or October 1,
2020 (for applicants that received financial assistance under PSP1), and the date of the
applicant’s PSP2 agreement;
• compensate such returning employees for lost pay and benefits (offset by any amounts
received by the employee from the applicant as a result of the employee’s termination or
furlough, including, but not limited to, furlough pay, severance pay, or separation pay)
between December 1, 2020, and the date of the applicant’s PSP2 agreement with
Treasury; and
• restore the rights and protections for such returning employees as if they had not been
involuntarily terminated or furloughed.
Contractors. Pursuant to the PSP Extension Law, to be eligible to receive financial assistance
under PSP2, contractor applicants must agree to:
• use such payments exclusively for the continuation of employee wages, salaries, and
benefits;
• until March 31, 2021, or the date on which the applicant exhausts such financial
assistance, whichever is later, refrain from conducting involuntary terminations or
furloughs, or reducing pay rates and benefits, of employees of the applicant;
• through March 31, 2022, or the date on which the applicant exhausts such financial
assistance, whichever is later, ensure that neither the applicant nor any affiliate thereof
purchases, in any transaction, an equity security of the applicant or of any direct or
indirect parent company of the applicant that, in either case, is listed on a national
securities exchange;
• through March 31, 2022, or the date on which the applicant exhausts such financial
assistance, whichever is later, not pay dividends, or make any other capital distributions,
with respect to the common stock (or equivalent equity interest) of the applicant;
• not later than 72 hours after entering into a PSP2 agreement with Treasury, recall any
employees involuntarily terminated or furloughed by the applicant between March 27,
2020 (for applicants that did not receive financial assistance under PSP1) or October 1,
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2020 (for applicants that received financial assistance under PSP1), and the date of the
applicant’s PSP2 agreement;
• compensate such returning employees for lost pay and benefits (offset by any amounts
received by the employee from the applicant as a result of the employee’s termination or
furlough, including, but not limited to, furlough pay, severance pay, or separation pay)
between December 27, 2020, and the date of the applicant’s PSP2 agreement with
Treasury; and
• restore the rights and protections for such returning employees as if they had not been
involuntarily terminated or furloughed.
Collective Bargaining Agreements. Under the PSP Extension Law, neither Treasury nor any
other actor, department, or agency of the Federal Government may condition the issuance of
financial assistance under PSP2 on an applicant’s implementation of measures to enter into
negotiations with the certified bargaining representative of a craft or class of employees of the
applicant under the Railway Labor Act (45 U.S.C. § 151, et seq.) or the National Labor Relations
Act (29 U.S.C. § 151, et seq.), regarding pay or other terms of employment. With respect to
passenger air carriers, this restriction applies from the date on which the passenger air carrier is
first issued such assistance and ending on March 31, 2021. With respect to contractors, this
restriction applies from the date on which the contractor is first issued such assistance and ending
on March 31, 2021, or the date on which the applicant exhausts all such financial assistance,
whichever is later.
Limitation on Certain Employee Compensation. Under the PSP Extension Law, all PSP2
recipients must enter into an agreement with Treasury providing that during the two-year period
beginning October 1, 2020 and ending October 1, 2022:
• no officer or employee of the passenger air carrier or contractor whose total
compensation exceeded $425,000 in calendar year 2019 (other than an employee whose
compensation is determined through an existing collective bargaining agreement entered
into prior to December 27, 2020) will receive from the passenger air carrier or contractor:
o total compensation that exceeds, during any 12 consecutive months of such two-
year period, the total compensation received by the officer or employee in 2019;
or
o severance pay or other benefits upon termination of employment with the
passenger air carrier or contractor which exceeds twice the maximum total
compensation received by the officer or employee in 2019; and
• no officer or employee of the passenger air carrier or contractor whose total
compensation exceeded $3,000,000 in calendar year 2019 may receive during any 12
consecutive months of such period total compensation in excess of the sum of:
o $3,000,000; and
o 50 percent of the excess over $3,000,000 of the total compensation received by
the officer or employee in 2019.
Taxpayer Protection. To provide appropriate compensation to the Federal Government for the
provision of financial assistance under PSP2, certain applicants will be required to provide
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warrants or notes to Treasury in a manner consistent with the warrants and notes required under
PSP1. Under PSP1:
• Passenger air carriers that received over $100 million in payroll support were required to
provide notes and warrants. The note principal amount in PSP1 was equal to 30 percent
of the payroll support provided to the applicant over $100 million. The notes had 10-year
terms, and the cash interest rate was 1 percent per year in the first five years and the
Secured Overnight Financing Rate plus 2 percent per year in the last five years.
• Contractors that received over $37.5 million in payroll support were required to provide
notes. The note principal amount in PSP1 was equal to 44 percent of the payroll support
provided to the participant over $37.5 million. The notes had 10-year terms, and the cash
interest rate was 1 percent per year in the first five years and the Secured Overnight
Financing Rate plus 2 percent per year in the last five years. The notes also included a
payment-in-kind interest rate of 3 percent per year in the first five years, with an increase
of 1 percentage point per year in years six through ten.
The warrants under PSP1 provided Treasury with the right to purchase shares of common stock
or receive a cash payment. The number of warrants required equaled 10 percent of the principal
amount of the note issued by the participant, divided by an exercise price.
Compliance. If an applicant for PSP2 received financial assistance in PSP1, Treasury’s approval
of the PSP2 application may be subject to the applicant providing certifications, documentation,
or information, reasonably satisfactory to Treasury, that the applicant was entitled to receive the
amount of its financial assistance under PSP1 and that the applicant is in compliance with the
terms of its agreement with Treasury under PSP1. Similarly, if an applicant for PSP2 received a
loan from Treasury pursuant to section 4003 of the CARES Act, Treasury’s approval of the PSP2
application may be subject to the applicant providing certifications, documentation, or
information, reasonably satisfactory to Treasury, that the applicant is in compliance with the
terms of its loan agreement and related transaction documentation. In addition, if an applicant
that received financial assistance in PSP1 owes a debt to Treasury, including as a result of an
obligation to repay a portion of the PSP1 funds, Treasury may offset the applicant’s awardable
amount in PSP2 against such debts.
Audit. Under the PSP Extension Law, the Treasury Inspector General will audit applicants’
certifications regarding their awardable amounts.
Bankruptcy. If an applicant has taken, or is evaluating, any action to commence a bankruptcy or
insolvency filing in any jurisdiction, Treasury may impose additional requirements on the
applicant’s receipt of funds in PSP2.
Consultation with Department of Transportation. Under the PSP Extension Law, Treasury will
consult with the Department of Transportation on the implementation of PSP2.
Minimum Air Service Guarantees. Under the PSP Extension Law, the Department of
Transportation may require a passenger air carrier that receives financial assistance under PSP2
to maintain scheduled air transportation service, as the Department of Transportation deems
necessary to ensure services to any point served by that air carrier before March 1, 2020.
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AWARDABLE AMOUNTS FOR PSP2 APPLICANTS
The PSP Extension Law provides several alternative methods for calculating an applicant’s
awardable amount under PSP2. These methods are described below.
For a passenger air carrier that was required to report salaries and benefits to the Department of
Transportation pursuant to 14 CFR part 241 as of March 27, 2020, the awardable amount is equal
to:
1) if the passenger air carrier received financial assistance under PSP1:
a) the amount such passenger air carrier was approved to receive (without taking
into account any pro rata reduction) under PSP1; or
b) at the request of such passenger air carrier, the amount of salaries and benefits
reported by the passenger air carrier to the Department of Transportation
pursuant to 14 CFR part 241, for the period from October 1, 2019 through March
31, 2020; or
2) if the passenger air carrier did not receive financial assistance under PSP1, the amount
of salaries and benefits reported by such passenger air carrier to the Department of
Transportation pursuant to 14 CFR part 241, for the period from October 1, 2019
through March 31, 2020.
For a passenger air carrier that was not required to report salaries and benefits to the Department
of Transportation pursuant to 14 CFR part 241 as of March 27, 2020, the awardable amount is
equal to:
1) if the passenger air carrier received financial assistance under PSP1:
a) the amount such passenger air carrier was approved to receive (without taking
into account any pro rata reduction) under PSP1, plus an additional 15 percent of
such amount; or
b) at the request of such passenger air carrier, the sum of:
i) the amount that such passenger air carrier certifies, using sworn financial
statements or other appropriate data, as the amount of total salaries and
related fringe benefits that such passenger air carrier incurred and would
be required to be reported to the Department of Transportation pursuant
to 14 CFR part 241, if such passenger air carrier were required to transmit
such information during the period from April 1, 2019 through
September 30, 2019; and
ii) an additional amount equal to the difference between the amount certified
under clause (i) and the amount the passenger air carrier received under
PSP1; or
2) if the passenger air carrier did not receive financial assistance under PSP1, the amount
that such passenger air carrier certifies, using sworn financial statements or other
appropriate data, as the amount of total salaries and related fringe benefits that such
passenger air carrier incurred and would be required to be reported to the Department of
Transportation pursuant to 14 CFR part 241, if such passenger air carrier were required
to transmit such information during the period from October 1, 2019 through March 31,
2020.
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For a contractor, the awardable amount is equal to:
1) if the contractor received financial assistance under PSP1, the amount such contractor
was approved to receive (without taking into account any pro rata reduction) under
PSP1; or
2) if the contractor did not receive financial assistance under PSP1, an amount that the
contractor certifies, using sworn financial statements or other appropriate data, as the
amount of wages, salaries, benefits, and other compensation that such contractor paid
the employees of such contractor during the period from October 1, 2019 through March
31, 2020.
Pro Rata Authority. In the event that the aggregate PSP2 awardable amounts for passenger air
carriers or for contractors exceed the amounts available under the PSP Extension Law, Treasury
will reduce, on a pro rata basis, the amounts due to approved applicants to address such shortfall.
APPLICATION FORM AND PSP2 AGREEMENT
Treasury will post a web-based application form for PSP2 applicants to complete and submit.
Each approved applicant must also enter into an agreement with Treasury, which Treasury will
provide after an application is approved. The agreement will include terms containing:
• the required assurances and other conditions described above;
• certain other conditions and covenants; and
• provisions for the clawback of payments upon the applicant’s failure to satisfy certain
assurances, conditions, or covenants.
APPLICATION EVALUATION BY TREASURY
Complete applications will be reviewed and evaluated by Treasury. In determining whether to
approve an application and the applicant’s requested awardable amount, Treasury may consider
the requirements under and purposes of the PSP Extension Law; the eligibility of the applicant;
whether the requested awardable amount was calculated consistent with applicable requirements;
the availability of funds; the applicant’s ability to comply with the PSP2 agreement; whether the
applicant is in compliance with the terms of its agreement under PSP1, if applicable; the
applicant’s provision of certifications, documentation, or information reasonably satisfactory to
Treasury to confirm the applicant’s compliance with its agreement under PSP1; and any other
factors that Treasury deems appropriate.
PSP2 PAYMENTS
Approved applicants should expect to receive payroll support in multiple payments. The
amounts, timing, and conditions of such payments will be determined by Treasury in its sole
discretion. To the extent an approved applicant’s initial payment is less than the applicant’s
awardable amount, Treasury may make additional payments to the applicant, resulting in a total
payment up to the applicant’s awardable amount.
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