November 2, 2015
This article was originally posted in February 2015 as part of the “Financial Mechanics of Funding SUTA” series.
After the stock market crash in October 1929 and the subsequent Great Depression of the 1930’s, the national unemployment rate exceeded 25%. Simultaneously, throughout the world, industrialized nations began creating systems of insurance to support and compensate workers for wages lost during periods of unemployment. Nearly all of these nationalized systems became compulsory as each government enforced the coverage using laws, regulations and taxing powers to fund the growing financial liability.
The primary purpose of unemployment insurance is to deliver economic assistance and compensation to employees for wages lost during periods of economic decline and/or periods of involuntary unemployment. A secondary purpose, and one most relevant during the years that followed the Great Depression, is to keep the trained labor force in one location from dispersing to other locations where jobs are more plentiful.
The structure of unemployment compensation in the United States is a federal (FUTA, aka Federal Unemployment Tax Administration) and state (SUI, or state unemployment insurance, aka SUTA, State Unemployment Tax Administration) partnership that obligated states to comply with laws that occurred as a result of the Social Security Act of 1935. While the Act imposed a FUTA tax on all employers, a credit against federal taxes was provided if they paid state taxes to states with unemployment laws that met FUTA requirements and had solvent Unemployment Trust Funds. For example, employers in Massachusetts, Oregon and Tennessee were charged a 2014 FUTA tax rate of 0.6%, since their state unemployment agencies all have solvent Unemployment Trust Funds and meet FUTA requirements. Employers in Kentucky, North Carolina and Ohio had 2014 FUTA rate of 1.8%, since their Unemployment Trust Funds are insolvent and are therefore not eligible for a credit.
The Act gave states the autonomy to determine their preferred mechanisms of their own SUI programs. Consequently, the 50 state SUI programs and taxing procedures are all quite different and have contrasting impacts on employers. In the USA, as a matter of perspective, in 2014, the estimated 50 state average employer tax contribution as a percentage of gross wages ranges from a low of 0.36% (South Dakota) to a high of 1.71% (Washington), with a national average of 0.82%. Consequently, an employer with a $2,000,000 payroll would have a tax cost of as low as $7,200 in South Dakota and as high as $34,200 in Washington.
J Randall Stevenson, began his career as an employer advocate in the unemployment field in 1970. His SUI experience, knowledge and expertise in state and national SUI matters is varied and distinguished.
Source: First Nonprofit Group’s “Financial Mechanics of Funding SUTA” series
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Throughout our membership in the Unemployment Savings Program, First Nonprofit understood our demands, community dynamics, and the importance of seamless services; that allowed us to serve our constituents better.
Because INCS advocates for the operating conditions that allow charter public schools to provide high quality public education, partnering with First Nonprofit was an easy decision. First Nonprofit’s unemployment programs provide our member schools two operating elements crucial to their ability to provide high quality public education: savings and budget certainty. Capable, committed teachers are the key to student success. By participating in the unemployment insurance savings plan, charter public schools gain peace of mind and are able to invest more money in their teachers.
It has been our sincere pleasure to maintain a strong, vibrant business partnership with First Nonprofit. We greatly admire their strong industry knowledge, technical expertise, constant professionalism, knowledgeable and dedicated staff. They are always extremely responsive, personable and provide us with the necessary guidance and recommendations on a numerous variety of employment scenarios.
NYCON members who use First Nonprofit’s programs enjoy enduring savings and improved efficiency. Our association knows that success, because from the beginning, we achieved the same great benefits. Great savings, seamless technology, and responsive service. NYCON highly recommends First Nonprofit’s remarkable unemployment solutions.
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The Ensight Skills Center has enjoyed working with First Nonprofit for several years. We are enrolled in their Unemployment Savings Program and although we have not required a lot of intervention, there have been a few times. I know others have dealt with the same problem of unemployment fraud over the last year and in our case, a call to First Nonprofit (they actually answer their phones) cleared up the issue. They also sent us a letter to send to all our employees telling them what they needed to do to prevent this in the future and protect themselves. What a relief! Over the years if I have questions or concerns, they are happy to listen, advise and help if they can. Another BIG advantage of using First Nonprofit is that all the money that is paid into the Unemployment Savings Program lives on my balance sheet as an asset. The money continues to be Ensight’s not the governments. First Nonprofit has certainly given me peace of mind.