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A reduction in FTEs for any such employee does not reduce the Borrowers loan forgiveness

By 2022년 08월 09일No Comments

A reduction in FTEs for any such employee does not reduce the Borrowers loan forgiveness

Owner employees are excluded from the FTE calculation

The Borrower should not calculate FTEs for those individuals that are deemed owner-employees of the company. For S and C Corporations, to be deemed an owner, an employee must own at least 5% of the company stock. If an LLC is treated as an S-Corporation for tax purposes, the same 5% rule applies. See Anchin Alerts dated for additional owner-employee rules.

Where do you Report the FTEs for each employee for the Covered Period and the Reference Period

Borrowers should report each employees average FTEs for the Covered Period on Table 1 (for employees earning $100,000 or less per year or those who were not employed in 2019) and Table 2 (for those employees earning more than $100,000 per year) of PPP Schedule A Worksheet (Form 3508, p.4 see link at footnote 1). Then, add up each employees FTEs for Table 1 and Table 2. These totals are reported on PPP Schedule A Line 2 (from Table 1) and Line 5 (from Table 2), which are then totaled on Line 12 of PPP Schedule A (See Form 3508, p.3, see link at footnote 1).

Calculating the FTE Reduction Quotient This is calculated on Form 3508, Line 13, on page 3 by dividing FTEs during the Covered Period by FTEs during the chosen Reference Period. On page 1 of Form 3508, Line 8, Borrowers multiply the FTE Reduction Quotient by the sum of all eligible costs, which include payroll, rent, utilities, and mortgage interest reduced by any salary/hourly wage reduction amount. The product of these amounts multiplied by the FTE Reduction Quotient is referred to as the Modified Total.

FTE Reduction Exceptions (See Form 3508, page 5)

The FTE Reduction Exceptions apply on an employee by employee basis and if the employees (can be multiple employees who meet the exceptions) circumstances meet any of these exceptions. For example, if Employee A had an FTE of 1.0 during the Reference Period and this employee met one of the reduction exception criteria below, such as Employee A voluntarily resigned at some point before or during the Covered Period, the Borrower would include this employee as 1.0 FTE during the Covered Period.

(1) any positions for which the Borrower made a good-faith, written offer to rehire an individual who was an employee on , and the Borrower was unable to hire similarly qualified employees for unfilled positions on or before ;

(2) any positions for which the Borrower made a good-faith, written offer to restore any reduction in hours, at the same salary or wages, during the Covered or Alternative Covered Period, and the employee rejected the offer; and

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

FTE Reduction Safe Harbors

There are two FTE Reduction Safe Harbors, that if either is met, the Borrower is exempt from having to reduce the eligible costs by the FTE Reduction Quotient (assuming it is below 100%). If the Borrower meets either Safe Harbor, then the Borrower would skip reporting FTEs on PPP Schedule A, line 11 (FTE for chosen Reference Period) and line 12 (FTE for Covered Period), and report an FTE Reduction Quotient of 1.0 (or 100%) on line 13, FTE Reduction Quotient.

Safe Harbor #1 (See Form 3508 Instructions, page 5)

The Borrower is exempt from the reduction in loan forgiveness based on a reduction in FTEs described above if the Borrower, in good faith, is able to document that they were unable to operate between , and the end of the Covered Period at the same level of business activity as before , due to compliance with requirements established or guidance issued between , by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration, related to the maintenance of standards for sanitation, social distancing, or any other worker or customer safety requirement related to COVID-19. This Safe Harbor includes the reduction in business activity stemming from COVID Requirements or Guidance resulting from state and local government shutdown orders that are based in part on guidance from the three federal agencies.


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