Employers in some states will face increases to their UI costs in 2014

April 24, 2014

Employers in some states will face increases to their UI costs in 2014

Plenty of signs suggest the economy is continuing to improve as jobs and manufacturing in the U.S. have seen some comparatively comforting numbers. However, unemployment legislation is still volatile as the federal government and states continue to rebuild unemployment funding following the Great Recession.

The unemployed are following the Emergency Unemployment (EUC) Extension Act of 2014 to see if their benefits discontinued in December 2013 will be extended. At the same time, employers have also been left with plenty of questions and some concerns surrounding various states' abilities to satisfy the terms of their state unemployment agencies' Title XII loans (loans from the Federal Unemployment Account). The loans were needed to satisfy unemployment claims, which skyrocketed following the recession.

States must repay their loan balance and interest in full within two years or employers in those states will be at a risk of a federally mandated reduction to their federal unemployment tax (FUTA) credits. As of March 31, 2014, 15 states and the U.S. Virgin Islands are borrowing from the federal government to pay state UI claims. Seven states – Illinois, Texas, Michigan, Idaho, Colorado, Pennsylvania and Nevada – are using bonds to repay their federal loan debt.

While issuing bonds to repay the federal loan debt does prevent the mandatory reduction in FUTA credits, employers in those seven states could still see an increase in their state unemployment insurance (SUI) tax rates. Likewise, employers in states with current loan debt could face a reduction in FUTA credits in addition to SUI increases, as states look to rebuild exhausted funds and curb further spending. 

Protecting nonprofits from increases in SUI rates
Nonprofit organizations in all states are exempt from FUTA contributions, but must still satisfy their SUI obligations. However, nonprofits and governmental organizations do have the ability to opt out of SUI tax pools and satisfy their SUI obligations as a reimbursing employers. Under this designation, employers only reimburse the state for the actual amount of money paid out in UI claims to former employees.

Reimbursing employers will be provided an added benefit in states that owe interest on their Title XII loans in 2014. Connecticut, Indiana, New York, Rhode Island, North Carolina and the Virgin Islands will all be billing or implementing an interest surcharge on employers to pay the interest on the loans. With the exception of the U.S. Virgin Islands, reimbursing employers will be exempt from these charges.

Saving on SUI costs with less risk
While becoming a reimbursing employer exempts nonprofits from SUI tax pools, they also expose themselves to shared risk should the organization see a sudden spike in UI costs. With the help of nonprofit UI experts, organizations can select an unemployment program that allows them all of the benefits of being a reimbursing employer while also eliminating most of the risk. 

For information on how your organization can cost-effectively meet its unemployment insurance needs, contact First Nonprofit Group at FNCUI@firstnonprofit.com or visit www.firstnonprofitgroup.com.


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WI Council of Religious & Independent Schools (WCRIS), Madison, WI

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Community Care Inc., Milwaukee, WI

Life is certainly busy these days but having business partners like First Nonprofit has made some of the process hassle free. We have worked with this team for years. When we changed payroll systems, they outlined every step. I think this team is terrific and I know they get the job done! Thank you, Cruz, to all the team at FNP.

Gulfside Healthcare Services, New Port Richey, FL

FNP has helped our agency to save thousands of dollars every year on our unemployment coverage. The service is phenomenal, and we are thankful to their team as our partner. My experience working with Marshall on the advocacy around UE for nonprofits was also a highlight as someone who teaches advocacy and lobbying for nonprofits. Really, your whole team is top shelf, so thank YOU!

Advancing Academics, Turtle Creek, PA

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Chicago Children’s Theatre, Chicago, IL

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Women's Choice Network, Pittsburgh, PA