Employer used PPP money to pay Christmas bonuses

A client asks: Employer used PPP money to pay Christmas bonuses in 2020. If the plan has no exclusion of bonuses from covered compensation, can these PPP funded bonuses be excluded from covered compensation?

Unless there are some regs that I haven't located, I can't see how these bonuses could be excluded.

I don't see how either. If it was paid as a type of compensation that's not excludable under the terms of the plan, there's no reason to exclude it. The fact that the "original" source of the money (i.e. before the employer paid it to the employee) was a PPP loan is irrelevant -- it's all just compensation to the employee.

Thank you. That's what I thought, but I promised the employer I would look into it further, in case there was something in the PPP rules that somehow made a difference. Thanks again for the follow-up.