PPP Loan Forgiveness Best Practices Thanks for joining
PPP Loan Forgiveness Best Practices Thanks for joining the webinar! We’ll get started at 11: 30 a. m. • • Ask questions via chat in Zoom. We’ll track them throughout the presentation and bring them up during the Q+A section. Make sure you’re muted. This helps everyone hear the presenters clearly. Click if joining audio by computer or dial *6 if joining audio by phone. This work is licensed under a Creative Commons Attribution-Non. Commercial-No. Derivatives 4. 0 International License.
PPP Loan Forgiveness Best Practices As of 6. 25. 20 This work is licensed under a Creative Commons Attribution-Non. Commercial-No. Derivatives 4. 0 International License.
Before we begin • During today’s presentation, we will be monitoring the questions that come through • If you are using Zoom, you will use the Q&A feature rather than chat • If you are using Facebook Live, you will simply comment to ask questions • Because this webinar is general in nature, we will not address questions that are extremely specific to an individual organization or require significant amounts of additional information. • For questions that we are not able to discuss during the webinar, we will release an FAQ. • For more in-depth support on PPP loan forgiveness, you may contact us using this form. We will also prompt you in the comments today if it seems that your question is too specific to be answered during our time.
Before we begin • If you have not done so already, visit our webpage on PPP Loan Forgiveness Guidance: • https: //www. 501 commons. org/resources/tools-and-bestpractices/cares-act-loan-forgiveness • Due to the short time-frame of this presentation and the volume of material, we plan to send out separate videos of how to use the forgiveness estimating documents we have created. • You can find the documents and additional resources on the page listed above.
Evan Bennett has worked at every level of nonprofits from the front-line to executive leadership. At 501 Commons Evan leads the bookkeeping and tax services team as well as financial consulting and training. Evan believes understanding the basics of accounting is critical to organizational success. Evan holds an accounting certificate from the University of Washington, an MBA from Drury University as well as degrees in music from Oberlin College and the Manhattan School of Music.
Eileen Moran, EA Eileen Moran, Senior Financial Services Associate, graduated cum laude in 1992 from Washington State University and directly put her new accounting degree to use in the private sector, progressively accumulating responsibility in both the for-profit and nonprofit sectors. She spent seven years as a Financial Manager in the nonprofit world, working in areas such as mental health counseling, Habitat for Humanity, a credit union, and economic development organizations. Having an affinity for tax, Eileen received a Master’s in Taxation from Golden Gate University and proceeded to become an enrolled agent. Currently, Eileen is one of the main preparers of 501 Commons’ 990 services and leads the team in keeping up to date with changes in regulation and tax laws that affect nonprofits.
Del Goehner, CPA, founded his own accounting firm, which he sold in 2001 after 33 years. He is a frequent speaker and has written many articles or presented many classes on topics such as taxes, accounting and auditing changes, financial planning, retirement and estate planning, and related subjects. Since moving to the Seattle area he has professionally consulted with several nonprofit organizations in various roles and capacities. He is a member of the American Institute of Certified Public Accountants, California Society of Certified Public Accountants, and the Washington State Society of Certified Public Accounts. He has served in various leadership capacities on numerous boards.
Stacey Krynsky has spent 15 years in the banking industry with a focus on nonprofit deposit and lending. She is a board member of Shunpike Arts Collective, Benefits Law Center, and a loan committee member for Business Impact Northwest. She works for Beneficial State Bank, which is a B Corp that is owned by a nonprofit foundation, Beneficial State Foundation.
PPP Loan Forgiveness Best Practices • As of 6. 25. 20, we still expect further guidance from the SBA on the PPP Flexibility Act that may materially alter information in this presentation. • The best recommendations we can make as of this writing are: • To follow the guidelines set forth so far by the US Department of Treasury and SBA • To keep a separate bank account for the PPP Loan • To prepare for the possibility of repaying a portion of the PPP Loan from the beginning • To document every PPP loan-related transaction Disclaimer: The recommendations that 501 Commons makes in this document are based on what we know as of 6. 25. 20. 501 Commons can make no guarantee that the information will not change, potentially materially, in the coming days as regulating bodies such as the SBA and U. S. Department of Treasury release guidance on the forgiveness of the PPP Loan. This information is intended solely to give our best recommendations as of the date of publication. Any decisions you and your organization make are at your own discretion.
PPP Forgiveness Best Practices- Banking • While it is not a requirement for you to keep a separate bank account for the PPP Loan, we recommend it. • Why a separate bank account? : • Keeping a separate bank account allows you to more clearly see the loan funds and to match them directly to a tracking document, such as the 8 -Week PPP Loan Forgiveness Tracker. • Where possible, you should use your general account to pay all expenses as you normally would and then make a transfer of funds from the loan account to your general account to match your tracking document.
PPP Loan Forgiveness Best Practices- Guidelines • Guidelines from the U. S. Department of Treasury: • The following will reduce loan forgiveness: • Loan funds uses: Using the loan funds - during the 24 weeks* after getting the loan - for anything other than payroll costs, mortgage interest, rent, and utilities payments. • Percentage of non-payroll costs: Spending more than 40% of the loan - in the 24 weeks* after receiving the loan - on mortgage interest, rent, and utilities costs. • Number of staff: Decreasing your full-time employee headcount. • Level of payroll: Decreasing salaries and wages by more than 25% for any employee that made less than $100, 000 on an annualized basis in 2019. • Re-hiring: You have until December 31, 2020 to restore your full-time employment and salary levels if you made any changes between February 15, 2020 and April 26, 2020. • *If you already have a loan, you may opt for the original 8 -week period
Updates from the Paycheck Protection Program Flexibility Act • Extending the loan covered period from 8 weeks to 24 weeks or December 31, 2020 whichever comes first. If you already have a PPP Loan, you can use the original 8 -week period. • Extending the safe harbors for restoration of wages and full-time equivalent workers from June 30 to December 31, 2020 • Reducing the minimum required spending on payroll costs from 75% to 60%
Updates from the Paycheck Protection Program Flexibility Act • Creating new safe harbor provisions to remove the FTE reduction in forgiveness. To do so, borrowers would need to document: • The inability to rehire individuals who were employees on February 15, 2020 and the inability to rehire similarly qualified individuals on or before December 31, 2020, OR • The inability to return to the same level of business activity from February 15, 2020 due to compliance with guidance or requirements issued by government agencies (see the act for list) from March 1 December 31, 2020 relating to sanitation standards, social distancing or any other worker or customer safety requirement related to COVID-19
Updates from the Paycheck Protection Program Flexibility Act • Extending the loan maturity from 2 years to 5 years • If you received your PPP loan prior to June 5, 2020, the loan period continues to be 2 years, but you may negotiate for a longer term • Requiring borrowers to request forgiveness within 10 months of the last day of their covered period or payments would begin at that time • Deferring the principal and interest payments until the SBA remits the loan forgiveness amount to the lender
Updates from the Paycheck Protection Program: Applications • On June 16, the SBA released a revised version of the PPP Loan Forgiveness application • Additionally, the SBA created an EZ application • You may opt for the EZ application if you: • Are self-employed and have no employees; OR • Did not reduce the salaries or wages of your employees by more than 25%, and did not reduce the number or hours of your employees; OR • Experienced reductions in business activity as a result of health directives related to COVID-19, and did not reduce the salaries or wages of your employees by more than 25%. • If you opt for the EZ, be sure you can easily and thoroughly document that you are eligible
The Paycheck Protection Program Flexibility Act FAQ • Is there a period between 8 and 24 weeks? • The choice currently is between 8 or 24 weeks for borrowers who received their loans prior to 6. 5. 20. For everyone else, it is a 24 -week period. • However, the SBA released Revisions to the Interim Final Rule on Forgiveness on June 22, which outlines the possibility of applying forgiveness prior to the end of your CP or APCP provided that the funds you are applying for have been expended.
The Paycheck Protection Program Flexibility Act FAQ • Is there any reason not to apply forgiveness prior to the end of the covered period? • Yes, if you reduced salaries by more than 25% for any one employee during your covered period, you will have to account for the reduction for the entire period. The Revisions to the Interim Final Rule on Forgiveness gives two clear examples: • An example of a 24 -week period: • "A borrower is using a 24 -week covered period. This borrower reduced a fulltime employee’s weekly salary from $1, 000 per week during the reference period to $700 per week during the covered period. The employee continued to work on a full-time basis during the covered period, with an FTE of 1. 0. In this case, the first $250 (25 percent of $1, 000) is exempted from the loan forgiveness reduction. The borrower seeking forgiveness would list $1, 200 as the salary/hourly wage reduction for that employee (the extra $50 weekly reduction multiplied by 24 weeks). If the borrower applies forgiveness before the end of the covered period, it must account for the salary reduction for the full 24 -week covered period (totaling $1, 200). "
The Paycheck Protection Program Flexibility Act FAQ • Is there any reason not to apply forgiveness prior to the end of the covered period? (continued) • An example of an 8 -week period: • "A borrower that received a PPP loan before June 5, 2020 has elected to use an eight-week covered period. This borrower reduced a full-time employee’s weekly salary from $1, 000 per week during the reference period to $700 per week during the covered period. The employee continued to work on a full-time basis during the covered period, with an FTE of 1. 0. In this case, the first $250 (25 percent of $1, 000) is exempted from the loan forgiveness reduction. The 19 borrower seeking forgiveness would list $400 as the salary/hourly wage reduction for that employee (the extra $50 weekly reduction multiplied by eight weeks). "
The Paycheck Protection Program Flexibility Act FAQ • Is there any reason not to apply forgiveness prior to the end of the covered period? (continued) • While this does now provided much needed and more welcome flexibility, you should consider ending your CP or APCP too early if the wage reduction applies to you as it could more negatively impact you than if you extended the CP/APCP. • It is also worth noting, that your lender has to have an application available for you to apply, so it may be that applying prior to the end of your CP/APCP is not an option. Consult your lender to see when they plan to have a PPP loan forgiveness application available.
The Paycheck Protection Program Flexibility Act FAQ • Do you have to maintain your FTE and salary levels now for the entire 24 weeks? • If you opt for the 24 -week period, it appears you will need to keep your salary levels and FTE count through to the application date forgiveness or 12. 31. 20, whichever comes first. However, you should also plan to review the new Safe Harbors included in the PPP Flexibility Act and see if this can offer some relief.
The Paycheck Protection Program Flexibility Act FAQ • Can you use the PPP Loan funds to extend more broadly over the 24 week period even if that means you cannot maintain the same level of FTE and salary from 2. 15. 20 and still seek forgiveness? • No, it currently looks to be the same guidelines as the 8 -week period, just extended. • Will individual employees still be limited to $15, 385 now that the period has shifted from 8 weeks to 24? • No, the limit per employee for a non-owner is now $46, 154. • How long will it be before we see an online application from our lender? • With the new, revised applications now available from the SBA, you should see the first drafts in the relatively near future. However, every bank will be different and there is hesitancy around releasing anything as there is still additional guidance needed from the SBA.
PPP Loan Forgiveness: 8 or 24 Weeks? 8 weeks may benefit you more if: 24 weeks may benefit you more if: You were able to spend at least 60% of You need additional time to spend the loan on allowable payroll costs during loan funds and meet the required 60% on your 8 -week period allowable payroll costs You are unable to maintain your current FTE or salary levels for a full 24 weeks The PPP Loan helped offset the burden on your cash reserves and other revenue sources, but is not the sole factor in whether you maintain your FTEs and salary levels from 2. 15. 20 Your organization is not able to maintain the amount of tracking required in the long term The longer time period will allow you the opportunity for greater forgiveness
PPP Loan Forgiveness: 8 or 24 Weeks? • Remember that it was always possible to continue spending the PPP loan funds on allowable costs after the 8 -week period • So, consider whether it would be prudent to simply continue using the PPP loan funds after your original 8 -weeks even if this means that last portion may convert to a loan due in 2 years at 1% interest with the option to extend to 5 • Breathe: • Nothing is due in the immediate term and is unlikely to be • Given how the PPP has been, it is also likely to continue to change as additional guidance is released
PPP Loan Forgiveness: 8 or 24 Weeks? • If you are not able to expend all the funds during the 8 -week period, remember that you can still only use the funds on allowable costs: • Payroll • Rent • Utilities • Mortgage Interest • Though you will still be tied to these allowable costs, you will then have the freedom to use them on a timetable that makes sense for you
PPP Loan Forgiveness: 8 or 24 Weeks? • As an example: • You are an arts organization that received $1 M for your PPP Loan prior to June 5 and opt for the 8 -week period • Given the climate, you are certain you will not be able to hold performances again until at least the end of 2020 or even into 2021 • You used the PPP loan correctly during your 8 -weeks, but were only able to expend $800, 000 • Knowing that you would have to immediately furlough 50% of your staff if you do not have any additional funds, you decide to keep the remaining $200, 000 as a loan
PPP Loan Forgiveness: 8 or 24 Weeks? • Example continued: • You have to continue using the loan on allowable costs (such as payroll), but this allows you to maintain 70% of your staff for at least six months longer • The $800, 000 is forgiven with no interest due and the $200, 000 is due in 2 years with 1% interest accrued from the date of your loan disbursement • You can also negotiate with your lender to extend the terms to 5 years • We recommend reviewing our page on Emergency Financial Planning page as a good place to start when making this decision
PPP Loan Forgiveness Best Practices- Timing • The loan period begins upon the disbursement of funds from the lender to the organization’s bank account. (see Treasury guidance point 20 of the US Department of Treasury PPP FAQs as of 5. 19. 2020) • However, as of 5. 15. 20, you now have the option of choosing an Alternative Payroll Covered Period (APCP) starting on the first day of your regularly scheduled next payroll if you are on a bi-weekly schedule or sooner. This option relates to payroll covered costs only. • From the Application: Payroll costs are considered paid on the day that paychecks are distributed or you originate an ACH credit transaction. Payroll costs are considered incurred on the day that the employee’s pay is earned. Payroll costs incurred but not paid during the Borrower’s last pay period of the Covered Period (or Alternative Payroll Covered Period) are eligible forgiveness if paid on or before the next regular payroll date.
PPP Loan Forgiveness Best Practices. Paid and Incurred vs. Paid and/or Incurred • There has long been a great deal of debate regarding the timing of allowable expenses for the PPP • We approach this situation in terms of potential risk and will present options and their potential risks of not being forgivable depending on lender and/or SBA interpretation
PPP Loan Forgiveness Best Practices. Paid and Incurred vs. Paid and/or Incurred • Text from the CARES Act section 1106(b) states: • An eligible recipient shall be eligible forgiveness of indebtedness on a covered loan in an amount equal to the sum of the following costs incurred and payments made during the covered period: 1. Payroll costs. 2. Any payment of interest on any covered mortgage obligation (which shall not include any prepayment of or payment of principal on a covered mortgage obligation). 3. Any payment on any covered rent obligation. 4. Any covered utility payment.
PPP Loan Forgiveness Best Practices. Paid and Incurred vs. Paid and/or Incurred • The most conservative way to approach this question is by taking the law literally and assuming that the allowable expenses must both be incurred and paid during the 8 -week or 24 -week period. • Example: • Your 8 -week covered period starts on April 15 and you payroll the following day on April 16. Since the payroll was only paid and NOT incurred, this would not be allowable. • Analysis: • This interpretation is the most secure and conservative • We’ll outline this method, how it applies to the Alternative Payroll Covered Period, and the Covered Period • Additionally, we’ll talk in depth about later Interim Final Rules and discuss interpretive differences
PPP Loan Forgiveness Best Practices. Paid and Incurred vs. Paid and/or Incurred • To start, let’s review an example from the Interim Final Rule on loan forgiveness from May 22: • A borrower has a bi-weekly payroll schedule (every other week). • The borrower’s eight-week covered period begins on June 1 and ends on July 26. • The first day of the borrower’s first payroll cycle that starts in the covered period is June 7. • The borrower may elect an alternative payroll covered period for payroll cost purposes that starts on June 7 and ends 55 days later (for a total of 56 days) on August 1. • Payroll costs paid during this alternative payroll covered period are eligible forgiveness. • In addition, payroll costs incurred during this alternative payroll covered period are eligible forgiveness as long as they are paid on or before the first regular payroll date occurring after August 1. • Payroll costs that were both paid and incurred during the covered period (or alternative payroll covered period) may only be counted once.
PPP Loan Forgiveness Best Practices. Paid and Incurred vs. Paid and/or Incurred 8 -Week CP Start: June 1 8 -Week CP End: July 26 8 -Week APCP End: August 1 8 -Week APCP Start: June 7 Payroll for June 7 -June 20, paid on June 26. Paid and fully incurred Payroll for June 21 -July 4, paid on July 10. Paid and fully incurred A portion counts towards forgiveness All of it counts towards forgiveness None of it counts towards forgiveness Payroll for July 5 July 18, paid on July 24. Paid and fully incurred Payroll for July 19 -August 1 paid on August 7. Fully incurred but not yet paid
PPP Loan Forgiveness Best Practices. Paid and Incurred vs. Paid and/or Incurred • Using the same period, but shifting to the covered period, you would still be able to include 8 weeks • You would only be able to include the portion incurred and paid at the front end and incurred but not yet paid at the end of the 8 weeks
PPP Loan Forgiveness Best Practices. Paid and Incurred vs. Paid and/or Incurred 8 -Week CP Start: June 1 Payroll for May 24 -June 6, paid on June 12. The portion incurred from June 1 onward would be included but not before 8 -Week CP End: July 26 Payroll for June 7 -June 20, paid on June 26. Paid and fully incurred Payroll for June 21 -July 4, paid on July 10. Paid and fully incurred Payroll for July 5 -July 18, paid on July 24. Paid and fully incurred Payroll for July 19 -August 1 paid on August 7. Incurred through July 26 and paid on the next normal pay date
PPP Loan Forgiveness Best Practices. Paid and Incurred vs. Paid and/or Incurred • However, the same Interim Final Rule, released on May 22 on loan forgiveness adds gray area and room for interpretation. • From the rule: • When must payroll costs be incurred and/or paid to be eligible forgiveness? • In general, payroll costs paid or incurred during the eight consecutive week (56 days) (now also 168 days) covered period are eligible forgiveness. Borrowers may seek forgiveness for payroll costs for the eight weeks beginning on either: • The date of disbursement of the borrower’s PPP loan proceeds from the Lender (i. e. , the start of the covered period); or • The first day of the first payroll cycle in the covered period (the ‘‘alternative payroll covered period’’).
PPP Loan Forgiveness Best Practices. Paid and Incurred vs. Paid and/or Incurred • Because this Interim Final Rule clearly states or rather than and it has become the subject of debate • We will now review the same covered period using the paid or incurred methodology • This methodology is less conservative and it is possible that later regulations will clarify its validity or otherwise • However, we believe it is valuable to show you all of the interpretations so that you can make educated decisions • You should contact your lender to discuss their current interpretation
PPP Loan Forgiveness Best Practices. Paid and Incurred vs. Paid and/or Incurred 8 -Week CP Start: June 1 Payroll for May 24 -June 6, paid on June 12. Partially incurred and paid 8 -Week CP End: July 26 Payroll for June 7 -June 20, paid on June 26. Paid and fully incurred Payroll for June 21 -July 4, paid on July 10. Paid and fully incurred Payroll for July 5 -July 18, paid on July 24. Paid and fully incurred Payroll for July 19 -August 1 paid on August 7. Incurred through July 26 and paid on the next normal pay date
PPP Loan Forgiveness Best Practices. Paid and Incurred vs. Paid and/or Incurred • Similarly, the same Interim Final Rule, added additional clarification for non-payroll costs. • A non-payroll cost is eligible forgiveness if it was: • Paid during the covered period; or • Incurred during the covered period and paid on or before the next regular billing date, even if the billing date is after the covered period.
PPP Loan Forgiveness Best Practices. Paid and Incurred vs. Paid and/or Incurred • Example: • A borrower’s covered period begins on June 1 and ends on July 26. • The borrower pays its May and June electricity bill during the covered period and pays its July electricity bill on August 10, which is the next regular billing date. • The borrower may seek loan forgiveness for its May and June electricity bills, because they were paid during the covered period. • In addition, the borrower may seek loan forgiveness for the portion of its July electricity bill through July 26 (the end of the covered period), because it was incurred during the covered period and paid on the next regular billing date.
PPP Loan Forgiveness Best Practices. Paid and Incurred vs. Paid and/or Incurred 8 -Week CP Start: June 10 May Electricity Bill Paid on June 10. Paid but not incurred. July 10 June Electricity Bill Paid on July 10. Paid and fully incurred. 8 -Week CP End: July 26 July Electricity Bill paid on August 10. Incurred through July 26 and not paid August 10
PPP Loan Forgiveness Best Practices. Paid and Incurred vs. Paid and/or Incurred • Using the same example, we can look at the more conservative paid and incurred approach.
PPP Loan Forgiveness Best Practices. Paid and Incurred vs. Paid and/or Incurred 8 -Week CP Start: June 10 May Electricity Bill Paid on June 10. Paid but not incurred. July 10 June Electricity Bill Paid on July 10. Paid and fully incurred. 8 -Week CP End: July 26 August 10 July Electricity Bill paid on August 10. Incurred through July 26 and not paid • In this circumstance only the June billing would be included under paid and incurred.
PPP Forgiveness Best Practices- Double Dipping • If you are receiving other federal funds, you cannot "double dip, " meaning you cannot claim to the federal government you spent different federal funds on the same expenses. You should consider comparing your allowable expenses for the PPP vs. federal grants and contracts. There may be other allowable expenses that an organization’s other federal funding can cover. • On the subject of double-dipping: You may have received non-federal grants that pay for wages. We recommend that you contact your grantors about this topic for the loan period where wages are covered by PPP, especially if it’s a reimbursable grant (some grants give a monthly amount no matter how the funds are spent). • Many grantors do not specify when grant funds need to be expended. So, it is possible that you could utilize these grant funds after your covered period to avoid double dipping.
PPP Forgiveness Best Practices-Families First Coronavirus Relief Act Wages • Organizations cannot include wages paid underneath other provisions of the Families First Coronavirus Relief Act (Paid Sick Leave and the Expanded Family Medial Leave Act). • Please see this information from the National Council of Nonprofits for more information on the FFCRA provisions.
PPP Loan Forgiveness Formula Add Payroll Costs Subtract Wages for FFCRA, other tax credits or grants Add Non-Payroll Costs Subtract >25% Salary/Wage Reduction Multiply by FTE Quotient Equals Modified Total
PPP Forgiveness Best Practices- Applying for Forgiveness • You now have up to 10 months from the last day of your covered period to apply forgiveness. This period is now assumed to be 24 weeks unless you already had a PPP loan prior to June 5. You will apply forgiveness through their lender. • Though there will definitely be some variance, pages 6 and 7 of the instructions for the application give a good idea of what may be required: • https: //www. sba. gov/sites/default/files/202006/PPP%20 Loan%20 Forgiveness%20 Application%20 Instructions%20%28 Revised%206. 16. 2020%29 -508. pdf • The lenders we are working with, expect that it will still be some time before you can apply, so continue to stay in contact with your lender and be patient with them.
PPP Forgiveness Best Practices. Working with your Lender • When should you expect to see a forgiveness application from your lender? • What is the best way to keep in touch with your lender surrounding the changes with the PPP? • What are the do’s and don’ts of communication with your lender at this time?
Appendices The 25% Salary Reduction Test The FTE Quotient
>25% Salary Reduction Test • In the latest version of the application and instructions, this has not changed materially • On a per employee basis for employees who received compensation at an annualized rate of less than or equal to $100, 000 for all pay periods in 2019, or you did not employ at any point in 2019, calculate the following: • Compare average annual salary/hourly wage between your Covered Period (CP) or Alternative Payroll Covered Period (APCP) to the average annual salary/hourly wage from January 1 -March 31, 2020. • If the reduction is more than 25% you will compare the annual salary/hourly wage as of February 15, 2020 to the average annual salary/hourly wage between February 15 -April 26, 2020. • You will then compare the average annual salary/hourly wage from December 31, 2020 to the average annual salary/hourly wage from February 15, 2020. If the number from December 31 is equal to or greater than February 15, the safe harbor will have been met.
>25% Salary Reduction Test • If the safe harbor is not met, you will calculate the reduction in your forgiveness amount. • As a baseline you’ll use the average annual salary/hourly wage from January 1 -March 31, 2020 and multiply it by. 75. • You’ll subtract this from the annual salary/hourly wage as of February 15, 2020. • For hourly workers, you’ll take the average hours from January 1 - March 31, 2020 and multiply it by the 75% amount you calculated and then multiply by 8. • For salaried workers, you’ll multiply your 75% amount by 8 and then divide by 52.
>25% Salary Reduction Test (Hourly Worker) 1 a. Average Hourly Wage CP/APCP $20 1 b. Average Hourly Wage from 1. 1. -3. 31 $30 1 c. (1 a. /1 b. >=75%)? 2 a. Annual Hourly Wage as of 2. 15 67% (NO- So, Safe Harbor Test Required) $30 2 b. Average Hourly Wage from 2. 15 -4. 26 $25 2 c. Average Hourly Wage as of 12. 31. 20 or the date of your application (>=2 a? ) 3 a. (1 b. x. 75) $25 (NO- Complete Salary Reduction Calculation) $22. 50 3 b. (3 a. -1 a. ) $2. 5 3 c. Average number of hours worked between 1. 1 40 -3. 31. 20 3 d. (3 b. x 3 c. x 8) $800
>25% Salary/Hourly Wage Reduction Tool • The >25% Salary/Hourly Wage Reduction Tool is now divided into 8 week and 24 -week versions. You should choose the tool that matches the period your organization chooses.
FTE Reduction Quotient • In the latest version of the application and instructions, this has not changed materially • You now have two ways of calculating FTE (remember this is NOT headcount, which you were asked about during the application) • You can now choose to use a standard FTE calculation out of 40 hours or • You can choose a simplified method where everyone working 40 hours and over is 1 and anyone working under this is. 5 • Don’t worry, you can utilize the FTE Quotient Estimator to help you see this more clearly!
FTE- Start with FTE for your CP or APCP Employee Average Paid Hours per Week during CP or APCP Average FTE Simplified Average FTE Employee A 40 1 1 Employee B 30 . 75 . 5 Employee C 20 . 5 2. 25 2 Total
FTE- Comparison Periods • You can choose between two comparison periods: • February 15 -June 30, 2019 or • January 1 -February 29, 2020 • You will want to choose the lower of the two numbers as it will compare best to your CP or APCP.
FTE- Comparison Periods Average FTE Simplified Average FTE CP/APCP 2. 25 2 January 1 -February 29, 2020 3. 25 3 4 3. 5 February 15 -June 30, 2019 • In both methods, the lower number comes from the January 1 February 29, 2020 period
FTE Quotient Calculation Average FTE Simplified Average FTE 2. 25 2 Chosen Reference Period (January 1 -February 3. 25 29, 2020) 3 Divide CP/APCP by Reference Period >75%? If NO, then Safe Harbor Test 67% or. 67 CP/APCP 69% or. 69 • Here we choose the higher of the two in order to maximize your forgivable amount
FTE Safe Harbor Test Average FTE Simplified Average FTE as from February 15 -April 26, 2020 2. 25 2 Total FTE during the pay period including February 15, 2020 3. 25 3 Is Row 2 Greater than Row 1? Yes Total FTE as of December 31, 2020 or date of 3. 25 the borrower’s application 3 If Row 4 is greater than Row 2, Safe Harbor test has been met and your quotient is 1 1 1
FTE Quotient Tool • The FTE Quotient tool has been updated • As always, there is a possibility of future changes to the program or guidance which may affect this. These tools are designed to estimate. Your lender will more than likely have their own built-in calculators in their version of the application
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