Savvy Nonprofits Create a Solid Funding Strategy

March 30, 2015

Savvy Nonprofits Create a Solid Funding Strategy

The opportunity for nonprofit organizations, governmental entities, and tribal enterprises to save substantially by opting out of paying the state unemployment tax (SUTA) is very real and may initially seem like a windfall. But such action is not without its hazards.

Protecting these new savings dollars and carefully guarding against future losses requires:

• A clear understanding of the impending short and long-term liability and risk,

• a diligent, rigorous annual evaluation and subsequent re-evaluations, and

• a solid strategy that minimizes costs and is insured against prospective unexpected losses.

The election by a nonprofit to opt out of paying SUTA and “reimburse” the state for future unemployment benefit charges is essentially choosing to self-insure that risk. Once such a decision is made, going back to paying the tax is not difficult, except to do so may be cost prohibitive.

So the progressive nonprofit making the reimbursing election must thoughtfully consider their level of risk tolerance and choose a funding strategy that meets their budget capability while providing the highest level of downstream protection. Because all unemployment reimbursing costs are unknown, establishing a solid funding strategy requires:

1. Complete understanding and analysis of previous (normally three years history) unemployment losses matched against similar time-period employee populations and payroll,

2. Careful monitoring and cost management of the current year’s budget for unemployment activity, and

3. Thoughtful consideration of projected funding, budget constraints and risk tolerance in the next budget year.

Those who pay SUTA have no choice to make other than from what pot of money the funds for the fixed tax rate will be paid. To enjoy the privilege of lowering SUTA costs by reimbursing, proactive managers will explore what tools are available to establish the best funding strategy available for their organization. Nonprofit organizations should think of the reimbursing method as paying for SUTA as they go, and then remember how volatile and mutable their own funding can be.

Content presented by First Nonprofit Group, the leading provider of state unemployment insurance solutions for 501(c)(3) nonprofit employers.


Source: First Nonprofit Group’s “Financial Mechanics of Funding SUTA” series

Next article, Understanding SUI Risk Transfer”


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CCSCT was approached by First NonProfit to discuss its Unemployment Savings Program and ways the program could significantly reduce the amount of unemployment taxes we were paying. At the time, our agency was paying approximately $80,000 per year. First NonProfit conducted an analysis to determine if making the switch would be in our best interest, and it clearly was based on our circumstances. The first year on the program, CCSCT saw a 70% reduction in its unemployment costs and each year, continues to experience further reductions as a result of having minimal claims. Some additional benefits of the program including having a fixed annual cost, an interest-baring reserve account, professional unemployment claims management and representation at all unemployment hearings. This has been one of the best decisions we have made.

Community Council of South Central Texas, Inc., Seguin, TX

We first started using First Nonprofit’s Unemployment Savings Program when we were a small startup nonprofit.  We didn’t have an HR department and needed expertise in the event that an unemployment claim was made.  We knew we were eligible to be a reimbursing employer, but weren’t sure how to navigate that process.  They made it easy to set things up, plan for, and then manage claims when they came at a very reasonable cost. The amount of time and stress they’ve saved us dealing with all this has been worth way more than the cost.  We’ve now grown to a large nonprofit and do have an HR department but have no plans to stop using their services.  I highly recommend them to every nonprofit I come into contact with!


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.

Prevent Blindness America, Chicago, IL

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.

Illinois Network of Charter Schools, Chicago, IL

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.

Thresholds, Chicago, IL

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.

New York Council of Nonprofits, Albany, NY

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.

Visually Impaired Preschool Services, Louisville, KY

Luckily for us, our interactions regarding any issues with staffing has been very minimal! I can say that all other interactions with regards to billing, 941 reporting, etc. have been extremely pleasant, accommodating and easy to work with. Kim Ghanayem is always prompt, professional and friendly. Thank you so much!

Neurologic Music Therapy Services of Arizona, Phoenix, AZ