ppp loan forgiveness application · if step 2 is greater than step 1, the safe harbor does not...

PPP Loan Forgiveness ApplicationSpeakers

Grethell AnasagastiPrincipal

David EvangelistaPrincipal

David MoshashviliPrincipal

Emilio EscandonPrincipal

Moderator

Jordan ArgizDirector

Margaret ReachManager

2

Today’s Topics

• Details of the SBA Loan Forgiveness Application (Form 3508)• General Concepts• Payroll Costs including Loan Reduction Exceptions and Safe

Harbors• Non-Cash Compensation and Compensation to Owners• Non-Payroll Costs • Calculating the Forgiveness Amount• Required Documentation• MBAF Loan Forgiveness Application Estimator Overview• Areas of Uncertainty

3

Details of the SBA Loan Forgiveness Application (Form 3508)

4

SBA Loan Forgiveness Application (Form 3508)

5

SBA Loan Forgiveness Application (Form 3508)

6

General Concepts

7

General Concepts

• Paid or Incurred?• Owner’s Compensation Cap - 2019 Lookback• An owner can be one of the following:

– owner-employee,– self-employed individual, or– general partner

• Alternative Payroll Covered Period– The Alternative Payroll Covered Period is the eight-week period beginning

on the first day of the first pay period following the disbursement date of your PPP loan.

• A Full-time Equivalent Employee is an employee that works at least 40 hours or more per week

• Borrowers and their affiliates receiving PPP Loan proceeds exceeding $2M– Affiliation is waived for franchises and NAICS codes beginning with “72”

8

Case Study Introduction

9

Case Study

A Through Z, Inc. (AZ) is an S Corporation owned 100% by Adam and had the following employees in 2019:

*For purposes of this example, will assume no retirement contributions and no state and local taxes assessed on employee compensation.

On April 16th, AZ received a loan of $117,188 based on 250% of the 2019 average monthly compensation (~$562,500/12 x 2.5)

Facts and Assumptions

2019 Gross Annual Comp

2019 Gross Compensation

capped at $100K

2019 Health Insurance

2019 Avg hours per

week2019 Total

Compensation*2019 FTE

countAdam (owner) 50,000 50,000 10,000 60 60,000 1.0 Bob 60,000 60,000 7,500 30 67,500 0.8 Carla 90,000 90,000 7,500 40 97,500 1.0 David 30,000 30,000 7,500 20 37,500 0.5 Emily 110,000 100,000 10,000 45 110,000 1.0 Frank 80,000 80,000 7,500 45 87,500 1.0 Grace - - - - - - Henry 95,000 95,000 7,500 40 102,500 1.0

515,000 505,000 57,500 562,500 6.3

INSERT 1

AZ Inc.

COMPUTATIONS:FACTS:

STEP 1: Complete Worsheet A:AZ is an S Corporation with the following employees:

I. TABLE I - Employees who earned less than $100K in 201920194/16/20 - 6/10/20

a) Cash compesation "paid" during 8 week period2019 Gross Annual Comp2019 Gross Compensation capped at $100K2019 Health Insurance2019 Avg hours per week2019 Total Compensation*2019 FTE countAnnual SalaryCovd period compCovd pd. Health InsuranceCovd pd. Hours workedCovd Pd. Average FTE

b) Compute average FTE for each employeeAdam (owner)50,00050,00010,0006060,0001.0150,000.0023,076.921,538.4660.001.00

c) Determine Salary/Hourly Wage ReductionBob60,00060,0007,5003067,5000.840,000.006,153.851,153.8530.000.75

c1) Average annual salary:Carla90,00090,0007,5004097,5001.0

c2) Average salary 1/1/20 - 3/31/20David30,00030,0007,5002037,5000.530,000.004,615.3811,538.4620.000.50

c3) Percentage of covd over Q1Emily110,000100,00010,00045110,0001.090,000.0013,846.151,538.4645.001.00

c4) if less than 75%, tentave reductionFrank80,00080,0007,5004587,5001.080,000.0012,307.691,538.4645.001.00

75% of Q1 wages less actual average salary during coveredGrace- 0- 0- 0- 0- 0- 040,000.006,153.851,538.4640.001.00

Divide by 52 and multiply times 8Henry 95,00095,0007,50040102,5001.0

515,000505,00057,500562,5006.3430,000.0066,153.8518,846.155.25

c1c2c3c4117,187.50

Employee:Average salary during covered periodAverage salary Q1Covered over Q1Tentative Reduction (annual)

Bob40,000.0060,000.0066.67%5,000.002020 Q1 (ALSO TO BE USED AS OF 2/15/20)AS OF 4/1/2020AS OF 6/30/2020

David30,000.0030,000.00100.00%N/AAnnual SalaryWeekly HoursAvg FTEAnnual SalaryWeekly HoursAvg FTEAnnual SalaryWeekly HoursAvg FTE

Frank80,000.0080,000.00100.00%N/AAdam (owner)50,000.0060.001.0050,000.0060.001.00150,000.0060.001.00

Grace40,000.0050,000.0080.00%N/ABob60,000.0030.000.7540,000.0030.000.7540,000.0030.000.75

Carla90,000.0040.001.0090,000.0040.001.00

d) Determine possible safe harbor exception for Bob:David30,000.0020.000.5030,000.0020.000.5030,000.0020.000.50

d1) Annual salary as of 2/15/2020Emily110,000.0045.001.0090,000.0045.001.0090,000.0045.001.00

d2) Average salary 2/15/20 - 4/26/2020Frank80,000.0045.001.0080,000.0045.001.0080,000.0045.001.00

Salary 2/15 - 3/3160,000.00assume 6 weeksGrace50,000.0040.001.0040,000.0040.001.0040,000.0040.001.00

Salary 4/1 - 4/2640,000.00assume 4 weeksHenry

Average salary52,000.00470,000.006.25330,000.005.25520,000.006.25

d3) Average salary at 6/30/202040,000.00

d1d2d3Ignoring retirement expense and state tax for purposes of this example

Employee:Salary 2/15/20Avg 2/15/20 - 4/26/20Avg at 6/30/20On January 1, 2020 AZ Inc hired Grace with an annual compensation of $50,000

Bob60,000.0052,000.0040,000.00On January 1, Henry was let go for reasons not related to Covid-19

SAFE HARBOR DOES NOT APPLY

On March 31, AZ Inc cut the salaries of the following individuals:

Bob40,000.00

TABLE 1:abEmily90,000.00

Employee nameEmployee IdentifiedCash CompensationAverage FTESalary/Hourly Wage ReductionGrace40,000.00

BobB6,153.850.75769.23

DavidD4,615.380.50

FrankF12,307.691.00On April 1, 2020, Carla was let go

GraceG6,153.851.00

On April 16, AZ Inc. received PPP Funds of $117,188 based on 2.5 times maximum payroll

No alternative covered period necessary. Payroll period starts 4/16/20

29,230.773.25769.23

On April 16, Adam increased his compensation to $150,000

On June 20th, AZ Inc rehires Carla

I. TABLE 2 - Employees who earned $100K or more during 2019

a) Cash compesation "paid" during 8 week period8 Week Covered Period Nonpayroll Costs

b) Compute average FTE for each employee16,000.00R/E Rent

4,000.00Equipment leases

TABLE 2:- 0No Mortgage interest

Employee nameEmployee IdentifiedCash CompensationAverage FTE5,200.00Utilties

EmilyE 13,846.151.00

13,846.151.00

FOR PPT INSERTS:

STEP 2: Complete Schedule ATABLE 1:ABC

Employee:Average salary during covered periodAverage salary Q1Covered over Q1

PPP Schedule A Worksheet - Table 1Bob40,000.0060,000.0066.67%

Line 1Cash compensation from Table 129,230.77David30,000.0030,000.00100.00%

Line 2Average FTE from Table 13.25Frank80,000.0080,000.00100.00%

Line 3Wage reduction from Table 1769.23Grace40,000.0050,000.0080.00%

PPP Schedule A Worksheet - Table 2

Line 4Cash compensation from Table 213,846.15Wage reduction computation for Bob:

Line 5Average FTE from Table 21.0025% of Q1 salary15,000.00

Actual reduction20,000.00

Non-Cash Compensation Payroll Costs Excess reduction5,000.00

Line 6Employer Contributions for Employee Health Ins.18,846.15Annualized769.23

Line 7Employer Contributions to employee retirement plans0

Line 8Total amounts paid by borrower for state & local tax0

Wage Reduction Safe Harbor for Bob:

Compensation to Owners:Step 1:Salary 2/15/202060,000.00

Line 9lower of actual paid during covered period OR the

eight week equivalent of the 2019 comp.7,692.31Employee:FTE 2019FTE 2/15/2020FTE 4/1/2020FTE 6/30/2020Step 2:Average Salary for 2/15 - 4/26:

Adam (owner)1.001.001.001.00Salary 2/15 - 3/1560,000.00*

Total Payroll CostsBob0.750.750.750.75Salary 3/16 - 4/2640,000.00**

Line 10Add lines 1,4,6,7,8, & 969,615.38Carla1.001.00- 01.00Average salary48,000.00

David0.500.500.500.50

Emily1.001.001.001.00* assume 4 weeks for 2/15 - 3/15

FTE Reduction Calculation:Frank1.001.001.001.00** assume 6 weeks for 3/16 / 4/26

Line 11Average FTE during Reference PeriodGrace1.001.001.00

FTEs 2/15/19 - 6/30/196.25Henry 1.00Step 4:Salary 6/30/202040,000.00

FTEs 1/1/2020 - 2/29/20206.256.256.255.256.25

Lower FTE6.25Because Step 3 is not equal or greater than Step 2,

the safe harbor does not apply.

Line 12Total Avg FTE (during covered period)5.25

Line 13FTE Reduction QuotientFTE Reduction Safe Harbor:

Per above0.84

If Safe Harbor met, 1.01.0Step 1:Average FTE for 2/15 - 4/26:

FTE 2/15/20 - 4/26/206.25*

FTEs 2/15/20 - 3/15/205.25**

Average FTE for period5.65

STEP 3: Determine FTE Safe Harbor (if any) - From Worksheet A* assume 4 weeks for 2/15 - 3/15

** assume 6 weeks for 3/16 / 4/26

Step 1FTE 2/15/20 - 3/31/206.25assume 6 weeks

FTEs 2/15/20 - 3/15/205.25assume 4 weeksStep 2:Total FTE for pay period that includes 2/156.25

Average FTE 2/15/20 - 4/26/205.85

Step 4:Total FTE on 6/306.25

Step 2FTEs on 2/15/206.25

Because Step 4 is equal to Step 3, the FTE Safe Harbor applies

Step 3If Step 2 is greater than Step 1, proceeds to step 4

Step 4FTEs on 6/30/206.25Payroll Cost Limitation:

Step 5If Step 4 greater than or equal to step 2, Safe Harbor MetTotal forgiveness cannot exceed69,615.00

75% of payroll costs

STEP 4: Complete Actual App

Payroll & Nonpayroll Costs

Line 1Payroll Costs from Schedule A69,615.38

Line 2Mortage Interest- 0

Line 3Business Rent or Lease Payment20,000.00

Line 4Business utility payments5,200.00

Adj for FTE and Wage reduction

Line 5Total Salary/Hourly Wage Reduction769.23

Line 6Add Lines 1,2,3, & 4, and subtract Line 594,046.15

Line 7FTE Reduction Quotient1.0

Potential Forgiveness Amount

Line 8Modified Total (line 6 by line 7)94,046.15

Line 9PPP Loan Amount117,187.50

Line 10Payroll Cost 75 % Reqt (divide line 1 by .75)92,820.51

Forgiveness Amount

Line 11Forgiveness (smallest of 8,9, & 10)92,820.51

example (2)

AZ Inc.

COMPUTATIONS:FACTS:



a) Cash compesation "paid" during 8 week period2019 Gross Annual Comp2019 Gross Compuation capped at $100K2019 Health Insurance2019 Avg hours per week2019 Total Compensation2019 FTE count*Annual SalaryCovd period compCovd pd. Health InsuranceCovd pd. Hours workedCovd Pd. Average FTE

b) Compute average FTE for each employeeAdam (owner)50,000.0050,000.0010,000.0060.0060,000.001.00150,000.0023,076.921,538.4660.001.00

c) Determine Salary/Hourly Wage ReductionBob60,000.0060,000.007,500.0030.0067,500.000.7540,000.006,153.851,153.8530.000.75

c1) Average annual salary:Carla90,000.0090,000.007,500.0040.0097,500.001.00

c2) Average salary 1/1/20 - 3/31/20David30,000.0030,000.007,500.0020.0037,500.000.5030,000.004,615.3811,538.4620.000.50

c3) Percentage of covd over Q1Emily110,000.00100,000.0010,000.0045.00110,000.001.0090,000.0013,846.151,538.4645.001.00

c4) if less than 75%, tentave reductionFrank80,000.0080,000.007,500.0045.0087,500.001.0080,000.0012,307.691,538.4645.001.00

75% of Q1 wages less actual average salary during coveredGrace- 00- 040,000.006,153.851,538.4640.001.00

Divide by 52 and multiply times 8Henry 95,000.0095,000.007,500.0040.00102,500.001.00

515,000.00505,000.0057,500.00562,500.006.25430,000.0066,153.8518,846.155.25

c1c2c3c4117,187.50





Grace40,000.0050,000.0080.00%N/ABob60,000.0030.000.7540,000.0030.000.7540,000.0030.000.75

Carla90,000.0040.001.0090,000.0040.001.00






Average salary52,000.00470,000.006.25330,000.005.25520,000.006.25







Bob40,000.00



BobB6,153.850.75769.23

DavidD4,615.380.50


GraceG6,153.851.00



29,230.773.25769.23









EmilyE 13,846.151.00

13,846.151.00

FOR PPT INSERTS:






















David0.500.500.500.50





FTEs 1/1/2020 - 2/29/20206.256.256.255.256.25





Per above0.84


FTE 2/15/20 - 4/26/206.25*

FTEs 2/15/20 - 3/15/205.25**






Average FTE 2/15/20 - 4/26/205.85






















Forgiveness Amount


10

Case Study

• On January 1, AZ hired Grace at an annual salary of $50,000. On the same day, AZ let go of Henry for reasons not related to Covid-19 or the economy.

• On March 31st, AZ reduced salaries of the following employees:– Bob $40,000– Emily $90,000– Grace $40,000

• On April 1st, Carla was let go as a result of the economic crisis• Payroll period starts April 16th (which is also the date loan was funded so no alternative payroll

period was chosen)• On April 16th, Adam (the owner) increased his compensation to $150,000• On June 15th, Carla was rehired at her original salary of $90,000


FOR PERIOD 4/16/20 THROUGH 6/10/20

Employee Annual Salary

Actual Cash Compensation (capped

at $15,385)Health

InsuranceAverage

HoursAverage

FTEAdam (owner) 150,000 15,385 3,141 60 1.0 Bob 40,000 6,154 3,141 30 0.8 CarlaDavid 30,000 4,615 3,141 20 0.5 Emily 90,000 13,846 3,141 45 1.0 Frank 80,000 12,308 3,141 45 1.0 Grace 40,000 6,154 3,141 40 1.0

430,000 58,462 18,846 5.3

INSERT 1

AZ Inc.

COMPUTATIONS:FACTS:


I. TABLE I - Employees who earned less than $100K in 20192019FOR PERIOD 4/16/20 THROUGH 6/10/20

a) Cash compesation "paid" during 8 week period2019 Gross Annual Comp2019 Gross Compuation capped at $100K2019 Health Insurance2019 Avg hours per week2019 Total Compensation2019 FTE count*Employee Annual SalaryActual Cash Compensation (capped at $15,385)Health InsuranceAverage HoursAverage FTE

b) Compute average FTE for each employeeAdam (owner)50,000.0050,000.0010,000.0060.0060,000.001.0Adam (owner)150,00015,3853,141601.0

c) Determine Salary/Hourly Wage ReductionBob60,000.0060,000.007,500.0030.0067,500.000.8Bob40,0006,1543,141300.8

c1) Average annual salary:Carla90,000.0090,000.007,500.0040.0097,500.001.0Carla

c2) Average salary 1/1/20 - 3/31/20David30,000.0030,000.007,500.0020.0037,500.000.5David30,0004,6153,141200.5

c3) Percentage of covd over Q1Emily110,000.00100,000.0010,000.0045.00110,000.001.0Emily90,00013,8463,141451.0

c4) if less than 75%, tentave reductionFrank80,000.0080,000.007,500.0045.0087,500.001.0Frank80,00012,3083,141451.0

75% of Q1 wages less actual average salary during coveredGrace- 00- 0Grace40,0006,1543,141401.0

Divide by 52 and multiply times 8Henry 95,000.0095,000.007,500.0040.00102,500.001.0430,00058,46218,8465.3

515,000.00505,000.0057,500.00562,500.006.3

c1c2c3c4117,187.50





Grace40,000.0050,000.0080.00%N/ABob60,000.0030.000.840,000.0030.000.840,000.0030.000.8

Carla90,000.0040.001.090,000.0040.001.0






Average salary52,000.00470,000.006.3330,000.005.3520,000.006.3







Bob40,000.00



BobB6,153.850.75769.23

DavidD4,615.380.50


GraceG6,153.851.00



29,230.773.25769.23









EmilyE 13,846.151.00

13,846.151.00

FOR PPT INSERTS:






















David0.500.500.500.50


FTE Reduction Calculation:Frank1.001.001.001.00** assume 4 weeks for 4/1 - 4/26



FTEs 1/1/2020 - 2/29/20206.256.256.255.256.25





Per above0.84


FTE 2/15/20 - 4/26/206.25*

FTEs 2/15/20 - 3/15/205.25**



** assume 4 weeks for 4/1 - 4/26



Average FTE 2/15/20 - 4/26/205.9






















Forgiveness Amount


example (2)

AZ Inc.

COMPUTATIONS:FACTS:












515,000.00505,000.0057,500.00562,500.006.25430,000.0066,153.8518,846.155.25

c1c2c3c4117,187.50





Grace40,000.0050,000.0080.00%N/ABob60,000.0030.000.7540,000.0030.000.7540,000.0030.000.75

Carla90,000.0040.001.0090,000.0040.001.00






Average salary52,000.00470,000.006.25330,000.005.25520,000.006.25







Bob40,000.00



BobB6,153.850.75769.23

DavidD4,615.380.50


GraceG6,153.851.00



29,230.773.25769.23









EmilyE 13,846.151.00

13,846.151.00

FOR PPT INSERTS:






















David0.500.500.500.50





FTEs 1/1/2020 - 2/29/20206.256.256.255.256.25





Per above0.84


FTE 2/15/20 - 4/26/206.25*

FTEs 2/15/20 - 3/15/205.25**






Average FTE 2/15/20 - 4/26/205.85






















Forgiveness Amount


11

Case Study

• During the covered period (April 16th through June 10th), AZ had the following non-payroll related expenses:

– Rent on Building ($16,000): • Paid $8,000 on May 1st • Paid $8,000 on June 1st

– Equipment Leases ($4,000):• Paid $1,000 on April 20th for lease from March 11th through April 10th • Paid $1,500 on May 20th for lease from April 11th through May 10th • Paid $1,500 on June 20th for lease from May 11th through June 10th

– Utilities ($5,200):• Paid $2,600 on May 1st • Paid $2,600 on June 1st


12

Payroll Costs including Loan Reduction Exceptions and Safe Harbors

13

PPP Schedule A

14

PPP Schedule A Worksheet

15


• Table 1 Requirements – Were employed by the Borrower at any point during the Covered Period or

the Alternative Payroll Covered Period whose principal place of residence is in the United States; and

– Received compensation from the Borrower at an annualized rate of less than or equal to $100,000 for all pay periods in 2019 or were not employed by the Borrower at any point in 2019*.

• Cash Compensation – Box 1• FTE Average – Box 2• Salary & Wage Reduction – Box 3

*New employees in 2020 should be included in Table 1 regardless of their annualized salary

Table 1 - Under $100k Employees

16


• Table 2 Requirements – Were employed by the Borrower at any point during the Covered Period or

the Alternative Payroll Covered Period whose principal place of residence is in the United States; and

– Received compensation from the Borrower at an annualized rate of more than $100,000 for any pay period in 2019.

• Cash Compensation – Box 4• FTE Average – Box 5• Salary & Wage Reduction – DOES NOT APPLY

Table 2 - Over $100k Employees

17


• Cash Compensation – Box 1 & Box 4– Gross salary, wage, commission, or similar compensation;– Payment of cash tip or equivalent;– Payment for vacation, parental, family, medical, or sick leave; or– Allowance for dismissal or separation.

• Compensation does not include:– The compensation of an individual employee in excess of an annual salary of

$100,000, prorated over the covered period. • maximum of $15,385 (~$100,000/52*8) per individual for Table 1 or Table 2.

– Any compensation of an employee whose principal place of residence is outside of the United States; or

– Qualified sick leave wages for which a credit is allowed under section 7001 or 7003 of the Families First Coronavirus Response Act (Public Law 116–127)

Cash Compensation

18


• FTE Average – Box 2 & Box 5– This calculates the average full-time equivalency (FTE) per employee during the

Covered Period or the Alternative Payroll Covered Period. – For each employee, enter the average number of hours paid per week, divide by

40, and round the total to the nearest tenth.– The maximum for each employee is capped at 1.0.

• Simplified Method – FTE Average: – Assigns a 1.0 for employees who work 40 hours or more per week and 0.5 for

employees who work fewer hours may be used at the election of the Borrower.

NOTE: FTE Average concept also applies to the FTE Reduction. FTE Reduction Exception and Safe Harbor to be discussed on slides 25 and 26.

FTE Average

19


• Salary/ Hourly Wage Reduction – Box 3– This calculation is used to determine whether the Borrower’s

loan forgiveness amount must be reduced concerning reductions in employee salary and wages.

– Reduction applies if the salary or hourly wages of employees listed in Table 1 were reduced by more than 25% as compared to the period of January 1, 2020 through March 31, 2020.

NOTE: Salary/Hourly Wage Reduction is waived if borrower restores salary/hourly wage levels. Salary/Hourly Wage Reduction Safe Harbor to be discussed on slide 23.

Salary/Hourly Wage Reduction

20

Case Study

FOR TABLES 1 & 2:• Step 1: Determine the cash compensation paid during the 8 week covered period

• Step 2: Compute the average FTE for each employee

Table 1 and Table 2

Employee Annual Salary

Actual Cash Compensation

(capped at $15,385)Health

InsuranceAverage

HoursAverage

FTEBob 40,000 6,154 3,141 30 0.8 CarlaDavid 30,000 4,615 3,141 20 0.5 Emily 90,000 13,846 3,141 45 1.0 Frank 80,000 12,308 3,141 45 1.0 Grace 40,000 6,154 3,141 40 1.0

280,000 43,077 15,705 4.3

INSERT 1

AZ Inc.

COMPUTATIONS:FACTS:


I. TABLE I - Employees who earned less than $100K in 20192019FOR PERIOD 4/16/20 THROUGH 6/10/20

a) Cash compesation "paid" during 8 week period2019 Gross Annual Comp2019 Gross Compuation capped at $100K2019 Health Insurance2019 Avg hours per week2019 Total Compensation2019 FTE count*Employee Annual SalaryActual Cash Compensation (capped at $15,385)Health InsuranceAverage HoursAverage FTEEmployee Annual SalaryActual Cash Compensation (capped at $15,385)Health InsuranceAverage HoursAverage FTE

b) Compute average FTE for each employeeAdam (owner)50,000.0050,000.0010,000.0060.0060,000.001.0Adam (owner)150,000.0015,385.001,538.4660.001.0Bob40,0006,1543,141300.8

c) Determine Salary/Hourly Wage ReductionBob60,000.0060,000.007,500.0030.0067,500.000.8Bob40,000.006,153.851,153.8530.000.8Carla

c1) Average annual salary:Carla90,000.0090,000.007,500.0040.0097,500.001.0CarlaDavid30,0004,6153,141200.5

c2) Average salary 1/1/20 - 3/31/20David30,000.0030,000.007,500.0020.0037,500.000.5David30,000.004,615.3811,538.4620.000.5Emily90,00013,8463,141451.0

c3) Percentage of covd over Q1Emily110,000.00100,000.0010,000.0045.00110,000.001.0Emily90,000.0013,846.151,538.4645.001.0Frank80,00012,3083,141451.0

c4) if less than 75%, tentave reductionFrank80,000.0080,000.007,500.0045.0087,500.001.0Frank80,000.0012,307.691,538.4645.001.0Grace40,0006,1543,141401.0

75% of Q1 wages less actual average salary during coveredGrace- 00- 0Grace40,000.006,153.851,538.4640.001.0280,00043,07715,7054.3

Divide by 52 and multiply times 8Henry 95,000.0095,000.007,500.0040.00102,500.001.0430,000.0058,461.9218,846.155.3

515,000.00505,000.0057,500.00562,500.006.3

c1c2c3c4117,187.50





Grace40,000.0050,000.0080.00%N/ABob60,000.0030.000.840,000.0030.000.840,000.0030.000.8

Carla90,000.0040.001.090,000.0040.001.0






Average salary52,000.00470,000.006.3330,000.005.3520,000.006.3







Bob40,000.00



BobB6,153.850.8769.23

DavidD4,615.380.5


GraceG6,153.851.0



29,230.773.3769.23









EmilyE 13,846.151.00

13,846.151.00

FOR PPT INSERTS:






















David0.500.500.500.50


FTE Reduction Calculation:Frank1.001.001.001.00** assume 4 weeks for 4/1 - 4/26



FTEs 1/1/2020 - 2/29/20206.256.256.255.256.25





Per above0.84


FTE 2/15/20 - 4/26/206.25*

FTEs 2/15/20 - 3/15/205.25**






Average FTE 2/15/20 - 4/26/205.9






















Forgiveness Amount


example (2)

AZ Inc.

COMPUTATIONS:FACTS:












515,000.00505,000.0057,500.00562,500.006.25430,000.0066,153.8518,846.155.25

c1c2c3c4117,187.50





Grace40,000.0050,000.0080.00%N/ABob60,000.0030.000.7540,000.0030.000.7540,000.0030.000.75

Carla90,000.0040.001.0090,000.0040.001.00






Average salary52,000.00470,000.006.25330,000.005.25520,000.006.25







Bob40,000.00



BobB6,153.850.75769.23

DavidD4,615.380.50


GraceG6,153.851.00



29,230.773.25769.23









EmilyE 13,846.151.00

13,846.151.00

FOR PPT INSERTS:






















David0.500.500.500.50





FTEs 1/1/2020 - 2/29/20206.256.256.255.256.25





Per above0.84


FTE 2/15/20 - 4/26/206.25*

FTEs 2/15/20 - 3/15/205.25**






Average FTE 2/15/20 - 4/26/205.85






















Forgiveness Amount


21

Case Study

FOR TABLES 1 & 2 (cont’d):• Step 3: For Table 1, Determine Wage Reduction:

– A) Calculate average annual salary during covered period– B) Calculate average annual salary for Q1– C) Determine percentage of reduction– D) If more than 25% reduction:

• Calculate the excess of the 25% reduction• Annualize the amount (divide by 52 and multiply by 8)

Table 1 and Table 2

TABLE 1: A B C

Employee:

Average salary during covered

periodAverage salary

Q1Covered over Q1

Bob 40,000.00 60,000.00 66.67%David 30,000.00 30,000.00 100.00%Frank 80,000.00 80,000.00 100.00%Grace 40,000.00 50,000.00 80.00%

Wage reduction computation for Bob:25% of Q1 salary 15,000 Actual reduction 20,000 Excess reduction 5,000 Annualized 769

example (2)

Alphabet, Inc.

COMPUTATIONS:FACTS:

STEP 1: Complete Worsheet A:Alphabet, Inc. is an S Corporation with the following pact pattern:

I. TABLE I - Employees who earned less than $100K in 2019

a) Cash compesation "paid" during 8 week period2019 Gross Annual Comp2019 Gross Compuation capped at $100K2019 Health Insurance2019 Avg hours per week2019 Total Compensation2019 FTE count*

b) Compute average FTE for each employeeAdam (owner)50,000.0050,000.0010,000.0060.0060,000.001.00

c) Determine Salary/Hourly Wage ReductionBob60,000.0060,000.007,500.0030.0067,500.000.75


c2) Average salary 1/1/20 - 3/31/20David30,000.0030,000.007,500.0020.0037,500.000.50

c3) Percentage of covd over Q1Emily110,000.00100,000.0010,000.0045.00110,000.001.00

c4) if less than 75%, tentave reductionFrank80,000.0080,000.007,500.0045.0087,500.001.00

75% of Q1 wages less actual average salary during coveredGrace- 00- 0

Divide by 52 and multiply times 8Henry 95,000.0095,000.007,500.00102,500.00

515,000.00505,000.0057,500.00562,500.005.25

c1c2c3c4117,187.50


Bob40,000.0060,000.0066.67%5,000.00

David30,000.0030,000.00100.00%N/AIgnoring retirement expense and state tax for purposes of this example

Frank80,000.0080,000.00100.00%N/A

Grace40,000.0050,000.0080.00%N/AOn January 1, 2020 Alphabet Inc hired Grace with an annual compensation of $50,000

On January 1, Henry was let go for reasons not related to Covid-19

d) Determine possible safe harbor exception for Bob:

d1) Annual salary as of 2/15/2020On March 31, Alphabet Inc cut the salaries of the following individuals:

d2) Average salary 2/15/20 - 4/26/2020Bob40,000.00

Salary 2/15 - 3/1560,000.00assume 4 weeksEmily90,000.00

Salary 3/16 - 4/2640,000.00assume 6 weeksGrace40,000.00

Average salary48,000.00


On April 1, 2020, Carla was let go

d1d2d3On April 16, Alphabet Inc. received PPP Funds of $117,188 based on 2.5 times maximum payroll

Employee:Salary 2/15/20Avg 2/15/20 - 4/26/20Avg at 6/30/20No alternative covered period necessary. Payroll period starts 4/16/20

Bob60,000.0048,000.0040,000.00

SAFE HARBOR DOES NOT APPLYOn April 1, Adam increased his compensation to $120,000

For period 4/16/2020 - 6/10/2020, Alphabet Inc incurred the following expenses:

TABLE 1:abFACTS:CompensationHealth InsuranceAverage Hours worked

Employee nameEmployee IdentifiedCash CompensationAverage FTESalary/Hourly Wage ReductionAdam (owner)23,076.921,538.4660.00

BobB6,153.850.75769.23Bob6,153.851,153.8530.00

DavidD4,615.380.5Carla

FrankF12,307.691David4,615.3811,538.4620.00

GraceG6,153.851Emily13,846.151,538.4645.00

Frank12,307.691,538.4645.00

Grace6,153.851,538.4640.00

29,230.773.25769.23

66,153.8518,846.15

I. TABLE 2 - Employees who earned $100K or more during 201916,000.00R/E Rent

a) Cash compesation "paid" during 8 week period4,000.00Equipment leases

b) Compute average FTE for each employee- 0No Mortgage interest

5,200.00Utilties

TABLE 2:

Employee nameEmployee IdentifiedCash CompensationAverage FTEJune 20th, Alphabet Inc rehires Carla

EmilyE 13,846.151No increase in salary as of 6/30

13,846.151.00

STEP 2: Complete Schedule A


Line 1Cash compensation from Table 129,230.77

Line 2Average FTE from Table 13.25

Line 3Wage reduction from Table 1769.23




Non-Cash Compensation Payroll Costs FOR PERIOD 4/16/2020 THROUGH 6/10/2020

Line 6Employer Contributions for Employee Health Ins.18,846.15CompensationHealth InsuranceAverage Hours workedAverage FTE

Line 7Employer Contributions to employee retirement plans0Adam (owner)23,076.921,538.4660.001.00

Line 8Total amounts paid by borrower for state & local tax0Bob6,153.851,153.8530.000.75

David4,615.3811,538.4620.000.50

Compensation to Owners:Emily13,846.151,538.4645.001.00

Line 9lower of actual paid during covered period OR theFrank12,307.691,538.4645.001.00

eight week equivalent of the 2019 comp.7,692.31Grace6,153.851,538.4640.001.00

Total Payroll Costs66,153.8518,846.155.25

Line 10Add lines 1,4,6,7,8, & 969,615.38

TABLE 1:ABC

FTE Reduction Calculation:Employee:Average salary during covered periodAverage salary Q1Covered over Q1

Line 11Average FTE during Reference PeriodBob40,000.0060,000.0066.67%

FTEs 2/15/19 - 6/30/195.25David30,000.0030,000.00100.00%

FTEs 1/1/2020 - 2/29/20206.25Frank80,000.0080,000.00100.00%

Lower FTE5.25Grace40,000.0050,000.0080.00%


Line 13FTE Reduction QuotientWage reduction computation for Bob:

Per above0.8125% of Q1 salary15,000

If Safe Harbor met, 1.01.0Actual reduction20,000

Excess reduction5,000

Annualized769

STEP 3: Determine FTE Safe Harbor (if any) - From Worksheet A


FTEs 2/15/20 - 3/15/205.25assume 6 weeks

Average FTE 2/15/20 - 4/26/205.65




Step 5If Step 4 greater than or equal to step 2, Safe Harbor Met















Forgiveness Amount


outline

APPLICATION:

I. APPLICATION

A. GENERAL:

1. EIDL

2. COVERED PERIOD

3. ALTERNATIVE PAYROLL COVERED PERIOD

4. $2M

B. PAYROLL AND NONPAYROLL COSTS

1. Payroll Costs

a. Schedule A Worksheet

b. Schedule A

2. Business Mortgage interest payments

3. Business Utility Payments

C. ADJUSTMENTS FOR FTE AND SALARY REDUCTION

1. Salary/Hourly Reduction

2. FTE Reduction

D. 75% REQUIREMENT

NEW CONCEPTS:

Owner Employee Concept

No consideration for employees not paid during covered period

FTEs based on 40 hours

Alternative Covered Period

Paid and/or incurred

example

Alphabet, Inc.

COMPUTATIONS:FACTS:



a) Cash compesation "paid" during 8 week period2019 Gross Annual Comp2019 Health Insurance2019 Avg hours per week2019 FTE

b) Compute average FTE for each employeeAdamowner95,000.0010,000.0060.0095,000.00105,000.001

c) Determine Salary/Hourly Wage ReductionBob60,000.007,500.0030.0060,000.0067,500.000.75

c1) Average annual salary:Carla90,000.007,500.0040.0090,000.0097,500.001

c2) Average salary 1/1/20 - 3/31/20David30,000.007,500.0020.0030,000.0037,500.000.5

c3) Percentage of covd over Q1Emily110,000.0010,000.0045.00100,000.00110,000.001

c4) if less than 75%, tentave reductionFrank80,000.007,500.0045.0080,000.0087,500.001

75% of Q1 wages less actual average salary during coveredGrace- 0

Divide by 52 and multiply times 8

465,000.0050,000.00455,000.00505,000.005.25

c1c2c3c4105,208.33

Employee:Average salary coveredAverage salary Q1Covered over Q1Tentative Reduction (annual)

Bob40,000.0060,000.0066.67%5,000.00


Frank80,000.0080,000.00100.00%N/A


On March 31, Alphabet Inc cut the salaries of the following individuals:

d) Determine possible safe harbor exception for Bob:Bob40,000.00

d1) Annual salary as of 2/15/2020Emily90,000.00

d2) Average salary 2/15/20 - 4/26/2020Grace110,000.00

Salary 2/15 - 3/1560,000.00assume 4 weeks


Average salary48,000.00On April 1, 2020, Carla was let go


On April 16, Alphabet Inc. received PPP Funds of $105,208 based on 2.5 times maximum payroll


d1d2d3

Employee:Salary 2/15/20Avg 2/15/20 - 4/26/20Avg at 6/30/20On April 1, Adam increased his compensation to $120,000

Bob60,000.0048,000.0040,000.00

SAFE HARBOR DOES NOT APPLYFor period 4/16/2020 - 6/10/2020, Alphabet Inc incurred the following expenses:

FACTS:CompensationHealth InsuranceAverage Hours worked

Adamowner18,461.541,538.4660.00

TABLE 1:abBob6,153.851,153.8530.00

Employee nameEmployee IdentifiedCash CompensationAverage FTESalary/Hourly Wage ReductionCarla

BobB6,153.850.75769.23David4,615.3811,538.4620.00

DavidD4,615.380.5Emily13,846.151,538.4645.00

FrankF12,307.691Frank12,307.691,538.4645.00

GraceG15,385.001Grace16,923.081,538.4640.00

72,307.6918,846.15

38,461.923.25769.23

18,000.00R/E Rent


I. TABLE 2 - Employees who earned $100K or more during 2019- 0No Mortgage interest

a) Cash compesation "paid" during 8 week period5,200.00Utilties

b) Compute average FTE for each employee

June 20th, Alphabet Inc rehires Carla

TABLE 2:No increase in salary as of 6/30

Employee nameEmployee IdentifiedCash CompensationAverage FTE

EmilyE 13,846.151

13,846.151.00









Non-Cash Compensation Payroll Costs

Line 6Employer Contributions for Employee Health Ins.18,846.15



Compensation to Owners:


eight week equivalent of the 2019 comp.14,615.38

Total Payroll Costs

Line 10Add lines 1,4,6,7,8, & 985,769.62

FTE Reduction Calculation:

Line 11Average FTE during Reference Period

FTEs 2/15/19 - 6/30/195.25

FTEs 1/1/2020 - 2/29/20206.25

Lower FTE5.25


Line 13FTE Reduction Quotient

Per above0.81

If Safe Harbor met, 1.01.0




Average FTE 2/15/20 - 4/26/205.65



















Forgiveness Amount


22

Loan Reduction Exceptions and Safe Harbors

23

Salary/Hourly Wage Reduction Safe Harbor

Salary/Hourly Wage Reduction Safe Harbor applies if both:• The average annual pay between February 15, 2020 and April

26, 2020 is greater than the average annual pay as of February 15, 2020, and

• The average annual pay as of June 30, 2020 is greater than the average annual pay as of February 15, 2020

24

Case Study

TO COMPUTE THE WAGE REDUCTION SAFE HARBOR:• Step 1: Determine average annual salary as of February 15th

• Step 2: Determine average annual salary for the period from February 15th through April 26th

• Step 3: If Step 2 is greater than Step 1, the safe harbor does not apply• Step 4: Determine average annual salary as of June 30th

If Step 4 is NOT equal to or greater than Step 1, the safe harbor does not apply

Wage Reduction Safe Harbor

Wage Reduction Safe Harbor for Bob:Step 1: Salary 2/15/2020 60,000

Step 2: Average Salary for 2/15 - 4/26:Salary 2/15 - 3/15 60,000 * Salary 3/16 - 4/26 40,000 **Average salary 52,000

* assume 6 weeks for 2/15 - 3/31


Step 4: Salary 6/30/2020 40,000

Because Step 4 is not equal to or greater than Step 1, the safe harbor does not apply.

example (2)

Alphabet, Inc.

COMPUTATIONS:FACTS:



a) Cash compesation "paid" during 8 week period2019 Gross Annual Comp2019 Gross Compuation capped at $100K2019 Health Insurance2019 Avg hours per week2019 Total Compensation2019 FTE count*

b) Compute average FTE for each employeeAdam (owner)50,000.0050,000.0010,000.0060.0060,000.001.00

c) Determine Salary/Hourly Wage ReductionBob60,000.0060,000.007,500.0030.0067,500.000.75


c2) Average salary 1/1/20 - 3/31/20David30,000.0030,000.007,500.0020.0037,500.000.50

c3) Percentage of covd over Q1Emily110,000.00100,000.0010,000.0045.00110,000.001.00

c4) if less than 75%, tentave reductionFrank80,000.0080,000.007,500.0045.0087,500.001.00

75% of Q1 wages less actual average salary during coveredGrace- 00- 0

Divide by 52 and multiply times 8Henry 95,000.0095,000.007,500.00102,500.00

515,000.00505,000.0057,500.00562,500.005.25

c1c2c3c4117,187.50


Bob40,000.0060,000.0066.67%5,000.00


Frank80,000.0080,000.00100.00%N/A


On January 1, Henry was let go for reasons not related to Covid-19

d) Determine possible safe harbor exception for Bob:

d1) Annual salary as of 2/15/2020On March 31, Alphabet Inc cut the salaries of the following individuals:

d2) Average salary 2/15/20 - 4/26/2020Bob40,000.00

Salary 2/15 - 3/1560,000.00assume 4 weeksEmily90,000.00

Salary 3/16 - 4/2640,000.00assume 6 weeksGrace40,000.00

Average salary48,000.00


On April 1, 2020, Carla was let go

d1d2d3On April 16, Alphabet Inc. received PPP Funds of $117,188 based on 2.5 times maximum payroll

Employee:Salary 2/15/20Avg 2/15/20 - 4/26/20Avg at 6/30/20No alternative covered period necessary. Payroll period starts 4/16/20

Bob60,000.0048,000.0040,000.00

SAFE HARBOR DOES NOT APPLYOn April 1, Adam increased his compensation to $120,000

For period 4/16/2020 - 6/10/2020, Alphabet Inc incurred the following expenses:

TABLE 1:abFACTS:CompensationHealth InsuranceAverage Hours worked

Employee nameEmployee IdentifiedCash CompensationAverage FTESalary/Hourly Wage ReductionAdam (owner)23,076.921,538.4660.00

BobB6,153.850.75769.23Bob6,153.851,153.8530.00

DavidD4,615.380.5Carla

FrankF12,307.691David4,615.3811,538.4620.00

GraceG6,153.851Emily13,846.151,538.4645.00

Frank12,307.691,538.4645.00

Grace6,153.851,538.4640.00

29,230.773.25769.23

66,153.8518,846.15

I. TABLE 2 - Employees who earned $100K or more during 201916,000.00R/E Rent

a) Cash compesation "paid" during 8 week period4,000.00Equipment leases

b) Compute average FTE for each employee- 0No Mortgage interest

5,200.00Utilties

TABLE 2:

Employee nameEmployee IdentifiedCash CompensationAverage FTEJune 20th, Alphabet Inc rehires Carla

EmilyE 13,846.151No increase in salary as of 6/30

13,846.151.00









Non-Cash Compensation Payroll Costs FOR PERIOD 4/16/2020 THROUGH 6/10/2020

Line 6Employer Contributions for Employee Health Ins.18,846.15CompensationHealth InsuranceAverage Hours workedAverage FTE

Line 7Employer Contributions to employee retirement plans0Adam (owner)23,076.921,538.4660.001.00

Line 8Total amounts paid by borrower for state & local tax0Bob6,153.851,153.8530.000.75

David4,615.3811,538.4620.000.50

Compensation to Owners:Emily13,846.151,538.4645.001.00

Line 9lower of actual paid during covered period OR theFrank12,307.691,538.4645.001.00

eight week equivalent of the 2019 comp.7,692.31Grace6,153.851,538.4640.001.00

Total Payroll Costs66,153.8518,846.155.25

Line 10Add lines 1,4,6,7,8, & 969,615.38

TABLE 1:ABC

FTE Reduction Calculation:Employee:Average salary during covered periodAverage salary Q1Covered over Q1

Line 11Average FTE during Reference PeriodBob40,000.0060,000.0066.67%

FTEs 2/15/19 - 6/30/195.25David30,000.0030,000.00100.00%

FTEs 1/1/2020 - 2/29/20206.25Frank80,000.0080,000.00100.00%

Lower FTE5.25Grace40,000.0050,000.0080.00%


Line 13FTE Reduction QuotientWage reduction computation for Bob:

Per above0.8125% of Q1 salary15,000.00

If Safe Harbor met, 1.01.0Actual reduction20,000.00

Excess reduction5,000.00

Annualized769.23

STEP 3: Determine FTE Safe Harbor (if any) - From Worksheet AWage Reduction Safe Harbor for Bob:

Step 1:Salary 2/15/202060,000


FTEs 2/15/20 - 3/15/205.25assume 6 weeksStep 2:Average Salary for 2/15 - 4/26:

Average FTE 2/15/20 - 4/26/205.65Salary 2/15 - 3/1560,000*

Salary 3/16 - 4/2640,000**

Step 2FTEs on 2/15/206.25Average salary52,000

Step 3If Step 2 is greater than Step 1, proceeds to step 4* assume 6 weeks for 2/15 - 3/31



Step 4:Salary 6/30/202040,000


Because Step 4 is not equal to or greater than Step 1,
















Forgiveness Amount


outline

APPLICATION:

I. APPLICATION

A. GENERAL:

1. EIDL

2. COVERED PERIOD

3. ALTERNATIVE PAYROLL COVERED PERIOD

4. $2M

B. PAYROLL AND NONPAYROLL COSTS

1. Payroll Costs

a. Schedule A Worksheet

b. Schedule A

2. Business Mortgage interest payments

3. Business Utility Payments

C. ADJUSTMENTS FOR FTE AND SALARY REDUCTION

1. Salary/Hourly Reduction

2. FTE Reduction

D. 75% REQUIREMENT

NEW CONCEPTS:

Owner Employee Concept

No consideration for employees not paid during covered period

FTEs based on 40 hours

Alternative Covered Period

Paid and/or incurred

example

Alphabet, Inc.

COMPUTATIONS:FACTS:



a) Cash compesation "paid" during 8 week period2019 Gross Annual Comp2019 Health Insurance2019 Avg hours per week2019 FTE

b) Compute average FTE for each employeeAdamowner95,000.0010,000.0060.0095,000.00105,000.001

c) Determine Salary/Hourly Wage ReductionBob60,000.007,500.0030.0060,000.0067,500.000.75

c1) Average annual salary:Carla90,000.007,500.0040.0090,000.0097,500.001

c2) Average salary 1/1/20 - 3/31/20David30,000.007,500.0020.0030,000.0037,500.000.5

c3) Percentage of covd over Q1Emily110,000.0010,000.0045.00100,000.00110,000.001

c4) if less than 75%, tentave reductionFrank80,000.007,500.0045.0080,000.0087,500.001

75% of Q1 wages less actual average salary during coveredGrace- 0

Divide by 52 and multiply times 8

465,000.0050,000.00455,000.00505,000.005.25

c1c2c3c4105,208.33

Employee:Average salary coveredAverage salary Q1Covered over Q1Tentative Reduction (annual)

Bob40,000.0060,000.0066.67%5,000.00


Frank80,000.0080,000.00100.00%N/A


On March 31, Alphabet Inc cut the salaries of the following individuals:

d) Determine possible safe harbor exception for Bob:Bob40,000.00

d1) Annual salary as of 2/15/2020Emily90,000.00

d2) Average salary 2/15/20 - 4/26/2020Grace110,000.00



Average salary48,000.00On April 1, 2020, Carla was let go


On April 16, Alphabet Inc. received PPP Funds of $105,208 based on 2.5 times maximum payroll


d1d2d3

Employee:Salary 2/15/20Avg 2/15/20 - 4/26/20Avg at 6/30/20On April 1, Adam increased his compensation to $120,000

Bob60,000.0048,000.0040,000.00

SAFE HARBOR DOES NOT APPLYFor period 4/16/2020 - 6/10/2020, Alphabet Inc incurred the following expenses:

FACTS:CompensationHealth InsuranceAverage Hours worked

Adamowner18,461.541,538.4660.00

TABLE 1:abBob6,153.851,153.8530.00

Employee nameEmployee IdentifiedCash CompensationAverage FTESalary/Hourly Wage ReductionCarla

BobB6,153.850.75769.23David4,615.3811,538.4620.00

DavidD4,615.380.5Emily13,846.151,538.4645.00

FrankF12,307.691Frank12,307.691,538.4645.00

GraceG15,385.001Grace16,923.081,538.4640.00

72,307.6918,846.15

38,461.923.25769.23

18,000.00R/E Rent


I. TABLE 2 - Employees who earned $100K or more during 2019- 0No Mortgage interest

a) Cash compesation "paid" during 8 week period5,200.00Utilties

b) Compute average FTE for each employee

June 20th, Alphabet Inc rehires Carla

TABLE 2:No increase in salary as of 6/30

Employee nameEmployee IdentifiedCash CompensationAverage FTE

EmilyE 13,846.151

13,846.151.00









Non-Cash Compensation Payroll Costs

Line 6Employer Contributions for Employee Health Ins.18,846.15



Compensation to Owners:


eight week equivalent of the 2019 comp.14,615.38

Total Payroll Costs

Line 10Add lines 1,4,6,7,8, & 985,769.62

FTE Reduction Calculation:

Line 11Average FTE during Reference Period

FTEs 2/15/19 - 6/30/195.25

FTEs 1/1/2020 - 2/29/20206.25

Lower FTE5.25


Line 13FTE Reduction Quotient

Per above0.81

If Safe Harbor met, 1.01.0




Average FTE 2/15/20 - 4/26/205.65



















Forgiveness Amount


25

FTE Reduction Exception

An FTE Reduction Exception applies if the borrower: • Made a good-faith, written offer to rehire an employee

during the Covered Period or the Alternative Payroll Covered Period which was rejected by the employee; and

• Any employees who during the Covered Period or the Alternative Payroll Covered Period:– (a) were fired for cause, – (b) voluntarily resigned, or – (c) voluntarily requested and received a reduction of their hours.

26

FTE Reduction Safe Harbor

The FTE Reduction Safe Harbor applies if both of the following conditions are met: 1. the Borrower reduced its FTE employee levels in the period

beginning February 15, 2020, and ending April 26, 2020; and

2. the Borrower then restored its FTE employee levels by not later than June 30, 2020 to its FTE employee levels in the Borrower’s pay period that included February 15, 2020.

27

Case Study

TO COMPUTE THE FTE REDUCTION SAFE HARBOR:• Step 1: Determine average FTE between February 15th and April 26th• Step 2: Determine total FTE in pay period that covers February 15th• Step 3: If Step 2 is NOT greater or equal to than Step 1, the safe harbor does not apply• Step 4: Determine total FTE as of June 30thIf Step 4 is NOT equal to or greater than Step 3, the safe harbor does not apply

FTE Reduction Safe Harbor

FTE Reduction Safe Harbor:

Step 1: Average FTE for 2/15 - 4/26:FTE 2/15/20 - 3/31/20 6.3 * FTEs 4/1/20 - 4/26/20 5.3 **Average FTE for period 5.9

* assume 6 weeks for 2/15 - 3/31


Step 2: Total FTE for pay period that includes 2/15 6.3

Step 4: Total FTE on 6/30 6.3


Employee: FTE 2019 FTE 2/15/2020 FTE 4/1/2020 FTE 6/30/2020Adam (owner) 1.0 1.0 1.0 1.0 Bob 0.8 0.8 0.8 0.8 Carla 1.0 1.0 - 1.0 David 0.5 0.5 0.5 0.5 Emily 1.0 1.0 1.0 1.0 Frank 1.0 1.0 1.0 1.0 Grace 1.0 1.0 1.0 Henry 1.0

6.3 6.3 5.3 6.3

ex

ppp loan forgiveness application · if step 2 is greater than step 1, the safe harbor does not...

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