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”


Ready to chat?
Get in touch today to request a no-obligation savings evaluation.


First Nonprofit has saved us so much money over the state’s program. We had one little glitch with the state recently and we contacted FNP immediately. FNP staff called us back immediately and moved to remedy the problem.

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

First Nonprofit has been a great partner. They have helped us saved hundreds of thousands of dollars! They have awesome resources for our nonprofit organization. Thanks for the partnership.

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

Chicago Children’s Theatre has greatly benefited from our partnership with First Nonprofit, and I have always enjoyed working with the staff on our filings and any complicated questions. I would not hesitate to recommend First Nonprofit to fellow nonprofits. We’re very happy customers.

Chicago Children’s Theatre, Chicago, IL

FNP is a great resource for Daniel Kids. To have a TPA that we can count on to take point on not only managing our unemployment claims, but to support and guide any protest hearing, is invaluable. All the professional support staff we have worked with have been excellent, very knowledgeable and responsive. We are grateful for the help and support, thank you.

Daniel Kids, Jacksonville, FL

When I first began in my position at my organization, I hadn’t had experience working with a company like FNP. The staff was so patient and helpful in helping to explain the benefits of First Nonprofit. Anytime I reach out with a question I receive a quick, clear, and thorough response. I’m so thankful that we decided to partner with FNP. Their excellence in customer service, coupled with their variety of packages frees us up to truly serve our staff and community with a peace of mind knowing that our organization is protected against unanticipated unemployment insurance expenses.

Homes of Hope, Chicago, IL

First Nonprofit gets an A+ in my book. You are so easy to work with & very knowledgeable! Whether it is my quarterly correspondence with Kim or my random interactions with Dawn about a bond … I am so pleased that I get to work with such a helpful company. Thank you!

Women's Choice Network, Pittsburgh, PA