SBA Releases Additional Forgiveness Guidance

By: Scott Borsack

As the late nightly newscasts were running through their copy one last time before going on the air Friday evening, the SBA released more guidance to start your holiday weekend. Most of it was helpful. Here are some of the highlights:

1. Where there is both a reduction in wages and reduction in FTEs, say because employees were terminated and not brought back, the forgiveness reduction in FTEs will apply but the salary reduction will not for the terminated employees. Salary reduction will apply only to employees who remain employed during the covered period.

To ensure that borrowers are not doubly penalized, the salary/wage reduction applies only to the portion of the decline in employee salary and wages that is not attributable to the FTE reduction. The Act does not address the intersection between the FTE employee reduction provision in section 1106(d)(2) and the salary/wage reduction provision in section 1106(d)(3). To help ensure uniformity across all borrowers in applying the FTE reduction provision and the salary/wage reduction provision, the Administrator, in consultation with the Secretary, has determined that the salary/wage reduction applies only to the portion of the decline in employee salary and wages that is not attributable to the FTE reduction. This approach will help ensure that borrowers are not doubly penalized for reductions.

As a result there is only a single penalty where an employee is terminated and not restored.

2. Where a borrower looks to utilize the rehire provision, it’s no longer enough to tell the employee they risk losing benefits. You must also inform state unemployment officials.

Specifically, in calculating the loan forgiveness amount, a borrower may exclude any reduction in full-time equivalent employee headcount that is attributable to an individual employee if

  1. the borrower made a good faith, written offer to rehire such employee (or, if applicable, restore the reduced hours of such employee) during the covered period or the alternative payroll covered period;
  2. the offer was for the same salary or wages and same number of hours as earned by such employee in the last pay period prior to the separation or reduction in hours;
  3. the offer was rejected by such employee;
  4. the borrower has maintained records documenting the offer and its rejection; and
  5. the borrower informed the applicable state unemployment insurance office of such employee’s rejected offer of reemployment within 30 days of the employee’s rejection of the offer.

Item 5 being the new information here. There is another affirmative duty to comply with.

3. Regarding hazard pay and bonus compensation, the SBA has decided to allow both:

The Administrator, in consultation with the Secretary, has also determined that, if an employee’s total compensation does not exceed $100,000 on an annualized basis, the employee’s hazard pay and bonuses are eligible for loan forgiveness because they constitute a supplement to salary or wages, and are thus a similar form of compensation.

Please note that the content of this blog is provided for information and education only. Nothing stated herein is intended to create an attorney client relationship or to constitute legal advice.

Scott Borsack is a partner with Szaferman Lakind and chair of the Business Department. To contact Scott please email him at or call 609.275.0400.