Food & Agriculture Quarterly June 2020 - Page 11

FOOD & AGRICULTURE QUARTERLY | JUNE 2020 might affect a borrower’s forgiveness using the steps provided in the Forgiveness Application. Example 1: 1. Determine if pay was reduced more than 25 percent a. Enter average annual salary or hourly wage during Covered Period or Alternative Payroll Covered Period b. Enter average annual salary or hourly wage between Jan. 1, 2020 and March 31, 2020 $10 $12 c. Divide the value entered in 1a by 1(b) 0.83 ∙ If 1(c) is 0.75 or more, then the forgiveness amount is not reduced as a result of the reduction in the employee’s pay. ANALYSIS: Here, the analysis would stop because the amount of decrease in this employee’s hourly wages was less than 25%. Thus, there would be no reduction to the forgiveness amount for this employee. Example 2: 1. Determine if pay was reduced more than 25 percent a. Enter average annual salary or hourly wage during Covered Period or Alternative Payroll Covered Period b. Enter average annual salary or hourly wage between Jan. 1, 2020 and March 31, 2020 $8 $12 c. Divide the value entered in 1(a) by 1(b) 0.67 ∙ Because the reduction is more than 25%, the borrower must proceed to Step 2. 2. Determine if the Salary/Hourly Wage Reduction Safe Harbor is met (a) (b) (c) Enter the annual salary or hourly wage as of Feb. 15, 2020 Enter the average annual salary or hourly wage between Feb. 15, 2020 and April 26, 2020 ∙ If 2(b) is equal to or greater than 2(a), skip to Step 3. Otherwise, proceed to 2(c). Enter the average annual salary or hourly wage as of June 30, 2020 ∙ If 2(c) is equal to or greater than 2(a), the Salary/Hourly Wage Reduction Safe Harbor has been met. Otherwise, the borrower must proceed to Step 3 (described in the next example). $12 $8 $12 ANALYSIS: Although there was more than a 25 percent decrease in this employee’s hourly wage, the borrower will not suffer any reduction to the forgiveness amount because the borrower was able to restore the employee’s hourly wage by June 30, 2020. Because the safe harbor was met, the analysis stops there, and the borrower does not have to proceed to step 3 for that employee. Example 3: 1. Determine if pay was reduced more than 25 percent. a. Enter average annual salary or hourly wage during Covered Period or Alternative Payroll Covered Period b. Enter average annual salary or hourly wage between Jan. 1, 2020 and March 31, 2020 $8 $12 c. Divide the value entered in 1(a) by (b) 0.67 ∙ Because the reduction is more than 25%, the borrower must proceed to Step 2. 2. Determine if the Salary/Hourly Wage Reduction Safe Harbor is met a. Enter the annual salary or hourly wage as of Feb. 15, 2020 b. Enter the average annual salary or hourly wage between Feb. 15, 2020 and April 26, 2020 ∙ If 2(b) is equal to or greater than 2(a), skip to Step 3. Otherwise, proceed to 2(c) c. Enter the average annual salary or hourly wage as of June 30, 2020 ∙ Because 2(c) is not equal to or greater than 2(a), the Salary/Hourly Wage Reduction Safe Harbor has not been met and the borrower must proceed to Step 3. 3. Determine the Salary/Hourly Wage Reduction a. Multiply the amount entered in 1(b) by 0.75 (12 x .75) b. Subtract the amount entered in 1(a) from 3(a) ( $9 - $8) ∙ If the employee is an hourly worker, compute the total dollar amount of the reduction that exceeds 25 percent as follows: c. Enter the average number of hours worked per week between Jan. 1, 2020 and March 31, 2020 d. Multiply the amount entered in 3(b) by the amount entered in 3.c (40 hours per week x $1 - $40). Multiply this amount by 8: $40 * 8 weeks $12 $8 $10 $9 1 40 $320 ANALYSIS: Here, there was a reduction in hourly wages of more than 25 percent and the borrower did not meet the safe harbor. Thus, its forgiveness amount would be reduced by the amount of the wage decrease (in this case $320) for this employee during the chosen covered period. FTE Reduction A borrower’s expected forgiveness amount (meaning the amount spent on eligible costs during the applicable forgiveness period) minus any Salary/Hourly Wage Reduction (discussed above) will be ratably reduced if its FTE employees during the covered period are less than its FTE employees in one of two Measurement Periods as chosen by the borrower: ∙ ∙ ∙ Feb. 15, 2019 to June 30 2019; OR Jan. 1, 2020 to Feb. 29, 2020; OR in the case of seasonal employers, either of the PAGE 11