February 13, 2014
As part of an unemployment insurance reform bill that will be discussed by the Massachusetts senate later this month, legislators will revisit how employers are impacted by their obligation to finance the program. Senate President Therese Murray said in a statement that the system is currently not responsive enough to the record of employers and the proposed bill would seek to provide more predictability for company's budgets, according to MassLive.
The bill will attempt to balance the scale more evenly by leveraging higher rates against those organizations that use the system more and lowering the rate for the ones that use it less. The bill would also freeze the UI tax rate after this year at a new rate schedule to continue through 2017.
Employers across the country have seen massive increases to their UI tax obligations at both the federal and state level as the nation has combated high unemployment following The Great Recession. Many states had to borrow from the federal government to continuing paying UI claims and are now struggling to repay the loans. The cost of keeping state UI programs viable is often placed on the shoulders of employers in the form of mandated increases to federal UI taxes.
Nonprofits have not been immune to the rate increases either because while they are exempt from federal UI taxes, they must pay their obligation to the state pools. As unemployment rises, so do these rates. While the job market is leveling out now, there is no guarantee about the future risk of state UI pools.
Nonprofits don't need to wait for legislators to update systems
No matter how fair the systems become, employers will always run the risk of overpaying UI claims and covering the costs of organizations with high unemployment. While for-profits must simply wait and hope things improve, organizations in the nonprofit sector have a more cost-effective option.
Nonprofits have the option of opting of state UI tax pools and becoming self-reimbursing employers. Under this designation, an organization is responsible only for the amount actually paid out to former employees in UI claim benefits. The simplest explanation is that a nonprofit with no unemployment would have no costs for that year.
More protection against unemployment spikes
However, if unemployment at the organization rises, it could see increased costs if it has not taken advantage of financing programs designed specifically for nonprofits. Alternative methods offer organizations membership in a limited liability corporation or bonded service program. With these programs, nonprofits pay into a fund that they can carry on their books as an interest-bearing asset. The balance is also returned the organizations if they ever decide to leave the program.
Cost predictability is also greatly improved because nonprofits can pay their fees in quarterly installments. First Nonprofit Companies also provides self-reimbursing employers with stop-loss insurance that will limit the nonprofit's liability should a sudden spike in unemployment occur. The solutions are far and away the most affordable and safest option for most nonprofits to avoid costly state UI tax pools.
For information on how your organization can cost-effectively meet its unemployment insurance needs, contact First Nonprofit Companies at FNCUI@firstnonprofit.com or visit www.firstnonprofitcompanies.com.
Visually Impaired Preschool Services has been a client of First Non-Profit since it was first offered as a benefit of VisionServe Alliance. We completed a thorough evaluation of cash savings to our agency before taking advantage of this wonderful benefit and it has been a very wise decision. Our experience with the processes from accounting to claims have been professional, expeditious and easy.
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.
In addition to their money-saving purpose on behalf of nonprofit organizations like AHS, First Nonprofit’s Nonprofit Unemployment Fund streamlines the information we need to efficiently manage unemployment claims. Our relationship with NU Fund gave us access to such things as advice on planning for what’s ahead and how to analyze cost scenarios when unexpected events occurred. Both experiences were very helpful.
We have had a great experience with FNP. During Covid, when there was the chance that reimbursable nonprofits would have to pay 50% of the unemployment costs, FNP went to bat for us. We would receive weekly information on the Unemployment claim and how they were working to reduce the costs to reimbursable nonprofits. They have a great service also working with [our claims administrator] to make sure all the paperwork is completed correctly for any unemployment claim.
PORT Health Services has had a great experience with the Unemployment Savings Program offered through First Nonprofit. Throughout the years we have been involved in the program, we have increased our reserve account significantly through this program and find the reporting we receive both timely and useful. We look forward to our continued involvement with this program and our connection with First Nonprofit for many years to come.
Job One was spending a lot of money on unemployment. Our insurance broker, Mark Simcosky, recommended that we switch over to First Nonprofit. We did just that! This switch has been a huge savings for us! This switch saved us over $10,000 in the first year. Their customer service is Superior! Any time we have a question, we get a response very quickly. Any time we send them a report and they have a question; they call rather than just assuming. They were very responsive during COVID, even when they were in crisis mode their selves. They also were always there when we needed during COVID and very helpful! We would 1,000% recommend First Nonprofit to anybody that could benefit from it!
My experience with FNP has always been positive. Every time I have had to contact them, I’m always put in contact with a friendly and knowledgeable person. If something is missing from our account, they reach out to us to request it. It’s nice to work with a company that makes sure our account is current. I would recommend them to any nonprofit looking to reduce their unemployment insurance costs.
We’ve saved tens of thousands of dollars PER YEAR by changing to become a reimbursing employer, freeing funds for much needed capital investment. FNP has been a valued partner in this process, providing assurance that we have stopgap coverage for extraordinary claims and keeping claims response painless and simple. It’s a huge Win/Win!