Paycheck Protection Program (PPP) Loan Forgiveness Application
On Friday, May 15th the SBA has released their forgiveness application with detailed instructions on how to complete the form. While the release promised further guidance on loan forgiveness, Innovative has received a lot of questions surrounding the calculation of Full Time Equivalent (FTE) Employees and payroll costs that employers must report on their application.
A few highlights relating to these questions are summarized below:
Payroll Cost Calculation
- The application advised there are options for borrowers to calculate payroll costs using an “alternate payroll covered period” that aligns with a borrower’s regular payroll. cycle. Employers will not have to change payroll dates to obtain maximum forgiveness.
- There is flexibility for employers to include eligible payroll and non-payroll expenses paid or incurred during the eight week period after receiving their PPP loan.
FTE Employee Calculation
- The Loan Forgiveness Application made clear that FTE employees are based on a 40 work week. It also made clear that 40 hours is the maximum amount of hours to be included in the calculation per week.
- The instructions provided employers with the ability to utilize a simplified method to calculate their FTE count. Employers seeking loan forgiveness should review the language below from the Loan Forgiveness Application regarding the FTE calculation.
- Average FTE: This calculates the average full-time equivalency (FTE) 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. A simplified method that 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.
The full text of the release and information is available here:
https://home.treasury.gov/news/press-releases/sm1010
https://home.treasury.gov/system/files/136/3245-0407-SBA-Form-3508-PPP-Forgiveness-Application.pdf
As additional guidance is issued, Innovative will continue to provide updates on the impact to employers. Innovative Benefit Planning is here to assist any employers with questions relating to the CARES Act, a PPP Loan, or any other COVID-19 related inquiries.