How ERCs Can Help You Win More AORs with Aaron Lopez

Hey. Hey. Welcome back to the Broker's Voice. I am excited today. I have Aaron Lopez joining me from Evolve Benefits in San Diego, California. Aaron, welcome to the show.

Thank you, Andy.

Aaron, you may not know this, but you are third generation Evolve Benefits to be on the show. I have, I've had Tommy Gaffney, I've had Phil Cannon, now you and, and I've got you coming on for a very, very important reason.

You and I were having a conversation offline about employee retention credits, ERCs and the importance they can play in helping a broker open doors. And that's what we're going to talk about today. In fact, the title of this show is how ERCs can help you win more AORs. And so we are going to talk about employee retention credits because I would have to believe a lot of brokers still don't fully understand how they work and how they can leverage them. So I'm excited to have you on because I consider you an expert in that field, my friend.

Thank you very much, Andy.

Before we get there, let's open the show. Who the heck is Aaron Lopez?

Well, I'll keep it pretty simple for you guys. I'm a business consultant with 15 plus of years of experience working in the business and banking and payroll industry. I work with thousands of businesses helping them grow while staying in compliance with business regulations and providing them with tools and support to their employees. Currently, I'm the director of National Sales at Evolve Benefits. I help employee benefit advisors, bankers, CPAs, grow their business, increase revenue, and protect their best clients from the competition.

I like that. I like that pitch. That's a good kickoff. So let's, let's start with the ERCs. There might be some people listening in who don't even really understand employee retention credits. But let's go to a step farther back. The ERCs came out or came about as a result of the CARES Act. Talk about that for a second. Aaron, what is the CARES act and what parts of the CARES act do brokers really need to pay attention to?

Good question, Andy. A hot topic, obviously, right now in the market, it's employee retention credits. I tell brokers, bankers, CPAs, please try to understand a little bit about the CARES act, especially around the employee retention credit. Obviously, I tell business owners it's free money out there that you guys should definitely be taking advantage of or especially your clients, especially with the brokers.

What is an employee retention credit?

Well, erc, it's a stimulus program designed to help those businesses that, that were able to retain their employees during the COVID 19 pandemic established by the CARES Act. It's a refundable tax credit. It's not a grant, it's not a loan. It's money that you can claim for your business. In other words.

Awesome. So let's talk about. Okay, so we know what it is. How does it work? You know, I think what opened my eyes is when you were describing ERCs to me as a former advisor. It's something I had not thought about. But.

Why are so many employers overlooking ERCs? Are they just not aware they're even available?

It's, it's a very complex topic. A lot of CPAs are afraid of opening Pandora's box because they're afraid of obviously their clients being audited business owners. At the same time, they're just being a little extra, extra cautious.

Okay.

Without obviously taking that, that additional step.

What. When you think about ERCs. So let's, we know what they are. It's an opportunity to get free, basically. You said free money, right? It's, it's untapped money most employers don't even realize they have access to. Who qualifies? How. How can an employer qualify for an employee retention credit?

Good question, Andy. For 2020, any employer that has less than 100 full time employees can, can be a candidate for ERC. And for 2021, any employer that has less than 500 full time employees.

Okay, so I heard. Hold on, I heard you say more than 100.

I'm sorry, less than 100 for 2020.

Okay. And less than 500 for 2021.

That is correct.

Okay.

Any, any essential business may qualify for the credit in one of their operations or one of their affiliates was fully or partially suspended by the government order.

Which is a lot.

Especially in California.

Yeah, how is. Okay, so we know to qualify, a business had to have less than 100 employees in 2020, less than 500 in, in 2021. Which, let's be honest, that's the vast majority of the businesses out there today.

How is that employee retention credit calculated? So if they're eligible. Great. How is the ERC actually calculated?

So, so right now the ERC is available for all four quarters of 2021, up to 7,000 per quarter. The level of qualifying business disruption has been reduced so that a 20% in declining gross receipts during a single quarter make will make any business eligible for a maximum yielded benefit of 28,000 per employee.

28,000 per employee. And am I hearing you right? You know, we're sitting and having this conversation in May of 2023 employers are still eligible to get money from 2020 and 2020 21. Is that correct?

That is correct. And we recommend to make this a top priority. Please speak with your CPA or even speak with your payroll provider at the end of the day. Like I said, it's a lot of information around the payroll that obviously we need to gather in order to determine eligibility. So it is important that owners are having this conversation with either their payroll company or their accountant.

Yeah, no, I mean, I think about, I was just doing a workshop a couple weeks ago with a client and we were talking, talking about one of their unique differentiators and it had nothing to do with ERCs, but it was another program they were leveraging that allowed them to help prospects get money back even before the prospect hired them. And that's really what we're talking about here is if you're a broker and you want to have a wedge, an opportunity to go in and open a door and talk to a prospect that about something, their broker probably isn't chatting with them about it. Oh, by the way, are you. Did you realize you are eligible to get money from two and three years ago that you didn't even realize is yours?

I agree. I tell people this, this is going to help business owners with their cash flow. It's going to help them get additional funds for working capital. It's a good time to obviously reinvest in your business. I know it's tough times nowadays.

Well, and talk about that for a second, Aaron, what was, you know, it came. The employee retention credits came out of the CARES Act. What was the purpose? Like, what is the, what, what was, what's the intention? So if you're eligible to get money back and you do, what's. What should that money be used for?

And that's where I tell business owners, this is a, it's a good opportunity for you to re. Analyze your business, see where you have some exposure gaps. Reinvesting your business, reinvesting your culture. Show your employees that you care about them. A lot of times business owners are like, what I do with this money. Take advantage of, of using this money mainly to obviously grow your business. Make sure that obviously you're, you stay in compliance with everything that might cost you money down the road.

And I, I think that would include things like benefits. Right. It's, it's. If you're eligible to receive some cases. We'll talk about this in a second. Hundreds of thousands of dollars, why not use some of that money to reinvest back in your employees by way of better benefits, you know, better recruiting strategies. Become that employer everybody wants to work for, because now you have some unfound or untapped money to use to do to do that.

I agree with you. And that's where business owners are like, hey, let's reinvest in our culture. Hor. Let's offer employees benefits at the end of the day instead of giving the money to Uncle Sam. Hey, show your employees that you care.

Go ahead. I'm sorry, Andy.

No, keep going, keep going. I apologize.

No, like, at the end of the day, just by. At the end of the day, your employees are the ones that are, in other words, made you eligible to resist this money. So at least showing them, hey, hey, because of you guys, I'm gonna reinvest part of this money into you guys.

So we've got eligibility requirements of less than 100 employees in 2020, less than 500 employees in 2021. You said your business must have also been negatively impacted by the lockdowns, by the shutdowns. Are there certain industries where you have seen ERCs to be very prevalent? Where. Where certain businesses should be seeking or at least digging into their opportunity to get some ERC money back?

Yes. Gyms, fitness centers, restaurants are among the top industries that qualify for ERC for 2020 through 2021.

Okay.

Obviously, a lot of them phase the partial shutdown. Later, they had to reduce their customer capacity, often drastically reducing their hours of operation. And that had to do to the government order as well.

Okay. And so gyms, restaurants, you also made the point that it doesn't mean they necessarily had to be shut down, but if their business, maybe they had to reduce capacity as a result of lockdown requirements, that too is considered a qualifying event.

Correct. And that's where a lot of people get a little confused, especially with restaurant owners. A lot of restaurants obviously experience growth during COVID Actually, their sales were much higher, but they actually have partial limitations, or they were required to reduce obviously their hours of hours of operation or the capacity of people being in the restaurant. So that's considered partial shutdown. So even though their sales were higher, if their business face government restrictions, they qualify under the partial shutdown.

So if a broker has a business, whether it's a client or a prospect that is possibly eligible, they apply to get erc. They get it. When can an employer expect to receive that money?

Good question, Andy. Some businesses that submitting claims for the employee retention tax credit have been waiting either four months to 12 months. It depends on the amount they're going to be getting any business that gets more than a million dollars refunds will automatically go through an audit process.

Give us an example, if you don't mind, maybe an example or two with companies you worked with. How much are we talking? You know, like, how much ERC money can businesses be eligible? How much money have you helped brokers give back to employers using ERC eligibility?

I will tell you. Easily $27 million between all the ERCs that we have processed.

27 million total?

Correct.

Wow.

And in you, it's restaurants, retail, construction companies, you name it. Some clients got 1.4 million. 2 million. The largest we did was 2.4 million. It took eight months for this client to receive the funds. So like I said, it's a huge benefit for a lot of businesses out there that are struggling.

2.4 million for one employer.

Correct.

Wow. So this is nothing to overlook. It's not. It's nothing to bat an eye at. That's, that's. So I hope for the brokers listening in, you heard that you want to. You want to talk about an opportunity to open a prospect's eyes. You want to talk about an opportunity to have a conversation their broker is not having with them. Start talking about employee retention credits if, especially if it's an industry where you think it could be applicable. Aaron's talked about gyms, restaurants. I know those aren't ideal benefit prospects for, for every broker. But construction companies, I mean, you want to impress a prospect, you want to have credibility of the prospect. Show them how they can get hundreds of thousands of dollars back before they ever hire you. That's why I said this is one of the quickest paths to the AOR is by helping a prospect get money back before they ever hire you.

Wow.

Okay, so this is maybe the most important question I'm going to ask you, Aaron, because this is what caught my attention, said, okay, we probably should have this conversation sooner than later.

We've got companies who are eligible for ERC money. They haven't applied yet because they probably don't even know what they're eligible. However, there's a deadline.

Correct.

Talk about that. This isn't going to always be available to them, is that correct?

Correct. So really good question, Andy. And this is where I'm encouraging everyone out there. Please speak to your accountant so that we can get the ball rolling with this. The upcoming deadlines to file the ERC. So eligible employers who want to claim ERC funds for Q2, Q3 and Q4 of 2020 must submit their 941x by April 15, 2024.

Okay.

And for eligible employers that want to receive ERC funds for Q1, Q2 and Q3 of 2021, they must submit the 941x by April 15, 2025.

Good information to have. I hope everybody wrote those down. Those are your deadlines. So the first deadline is April 15, 2024. And what was the second deadline? Repeat that one more time.

April 15, 2025.

So they go, okay, perfect. So let's, let's move this into the sales side of things. Let's, let's help the brokers a little. Let's help the people listening.

Open these conversations, Open the doors to these conversations. What questions should an advisor be asking companies, clients, prospects to initiate this ERC conversation?

Like I said, super simple. The first thing is like if they're aware of the program and if they're not, to please speak with their accountant or contact us as soon as possible so that we can obviously do the analysis ourselves. To be honest, if they're aware of the ERC and the CARES act, that's about it.

Okay. So it's just, it's just asking them if they're aware that whether or not they're eligible. If they don't know, the best thing they can do is go have a conversation with their accountant to see if it's something they are eligible for.

And then this is where we also encourage the accountant to give us a call. We can do a three way call with the accountant and the client so that we can all be on the same page.

Okay.

We tell accountants we take full responsibility of the erc. So let's say the client were to get audited. We're going to represent the client. The accountant won't have to do any work.

Okay, good to know. You know and one of the reasons I wanted you on was you've done this, you've been doing this for quite a while. $27 million returned. That's a large sum of money. How can you evolve benefits? Help facilitate. Facilitate. I can't talk today. Facilitate this process. How is your process different? So one, how can you help facilitate the process of helping a company apply for erc? And number two, how is your process different than what some might have seen out there?

Pretty simple. Our partner trustee, they've been around since 1999. Their CEO is a tax attorney from KPMG and they have national partners to the largest CPA firms in the country. They work with brokers. They also work with ADP and paychecks they perform all the work upfront on a contingency fee and guarantee all the work performed with free IRS audits representation included in their scope of services. So that's where we kind of give the clients a little peace of mind that you're dealing with tax professionals, that they've been doing this for quite a while.

Okay, so if I'm an advisor. Listening, Aaron, what you're telling me is if I step into the discomfort of initiating this conversation and I uncover the fact a prospect is probably eligible for this, they. They get in touch with their accountant, find out they are, I get you involved, you're going to help me create or initiate the application process to help my prospect get the money they are deserved. Is that, Am I hearing that correctly?

Correct. Like I said, it's a simple call, 15 to 20 minutes. If the client wants to move forward, we'll email them a list of items we need from them. Once we gather that information from the client, we get an agreement signed from the client. Our implementation team will take care of the whole. The whole process, which might take two to three weeks. Once we submit those amendments, that's where we're looking at the four months to a year of the clients receiving the funds.

So it's not an overnight process, but the application process itself, two to three weeks, that's once submitted, it could be anywhere from four to 12 months to actually get that money back. But again, as easy as it is to look at that and say, man, that just sounds like a lot of. A lot of work and a lot of time when you're talking the potential of getting millions back, it is something you don't want to mess around with. And again, one thing I know about brokers, Aaron, is they love to have a differentiator, right? They love to have that wedge to go in and have a different conversation with a prospect. Not to mention, you got to be having this conversation with your clients if you want to create a client for life.

Help a client find a source of untapped money that is already theirs.

I agree with you.

So let's wrap this up, Aaron, with this. Number one, I'm going to ask you how people can get in touch with you. But if I've got, if I have got a prospect or a client who is owed, I'm just making the number up for the conversation's sake. A million dollars in erc. How can I advisor help that client or that prospect reinvest that million dollars?

What would you suggest in this case? Because we're so involved with the amendment process and when the client is going to receive the funds, obviously that's where we encourage the client to get their CPA in contact with us as well so that we can strategize, hey, Mr. Klein, you're going to receive this much funds. Let's see if you're going to end up paying taxes on this, not on the ERC funds, but on your business as a whole. And let's see if we can help you reinvest some of that money into your business so that obviously you don't have a huge tax liability at the end of the year. And like I said, since we're so involved, we're also communicating with a broker so that we can create a game plan. And obviously, all of us can obviously speak to the client and provide a solution.

That's important to note, though. If I am an employer and I do get that money back and I don't do anything with it, I just put it in my coffers, I'll have tax implications. However I get the money back, I reinvest it in my people, whatever, or my business. That's how I can reduce or eliminate my tax liability. And which is why the ERC came about already. It wasn't, hey, here's money just for the sake of bumping up your profits. It's, here's some money to use to support your people. That's why it's in call. That's why it's called an employee retention credit. So. All right, Aaron, I'm an advisor. I'm excited. I want to take this conversation and I want to go talk to some prospects. I better make mention of this to some of my clients. But I need your help. What is the easiest way to get a hold of you?

You can email me at erinevolved benefits.com or you can call my cell phone at 619-389-7584. Like I said, I'm gonna keep.

And usually within.

Tell you their client is eligible or not. Like I said, it's a pretty simple process. Simple call.

So they can start by calling you to find out if the company, if that's a prospect or client, the company is eligible. And then from there you take step two.

Correct.

Cool. Awesome. Well, Aaron, I want to thank you for taking the time to be on. I think again, this is a very important topic that can't be overlooked. And because, number one, there's a lot of money out there to be had, there's a lot of employers who are eligible for this that probably have not received it. Yet. And there's a lot of brokers out there who could use this information to drive one hell of a conversation with prospects and clients. And I see it as a differentiator to win new business. But at the same time, I can see it being a very important tool to have or to do to provide two clients to create that client stickiness everyone is looking for. And the most important part is this is going away in the next couple years. So if you're not having this conversation sooner than later, eventually these companies won't be eligible for this money anymore. And so, man, I see a huge opportunity. Aaron, thank you for taking the time. You guys are doing a lot of unique things to help brokers in this country. And so if you're a broker listening in, don't take this conversation lightly. Reach out to Aaron. If you've got some prospects in mind, got some clients in mind that you think might be eligible, what does it hurt to email Aaron, Schedule, call and find out. Worst case, you find out they're not eligible. Best case, they're eligible and you could do a lot of good for them. So you know what happens when you get confidence and you get it, you mix it with clarity, which is what I hope this show does for you. You go do amazing things for clients, you go do amazing things for prospects. So that that is what Aaron's going to help you do. So, Aaron, thank you one more time. Thank you so much, Andy, for everybody else, be good for.