Unemployment Insurance: Looking Back to Look Forward

October 5, 2021

Unemployment Insurance: Looking Back to Look Forward

COVID-19 has brought many changes and challenges to our everyday lives as individuals, employees, and employers. In order to move forward, it is important to understand how the unemployment system developed and responded during other times of crisis. 

Even though several states proposed unemployment laws as early as 1916, it wasn’t until the Social Security Act was passed in 1935 that mechanisms were established to help unemployed workers to replenish their lost income. The law required states to establish and manage State Unemployment Insurance Trust Funds that are financed through employer payroll taxes, also known as State Unemployment Tax Assessment (SUTA). States would now pay Unemployment Insurance (UI) and unemployment benefits to individuals that had lost their job through no fault of their own. The way these UI Trust Funds receive and distribute funds, the annual SUTA amounts employers pay, and the benefits awarded to individuals are all determined by each state. It is only through Federal Acts or Law changes that the Federal Government can affect change on UI Laws and Trust Funds. There have been several of these acts since the Great Depression, including: 

– The Temporary Unemployment Compensation Act of 1958:  created State Extended Benefits providing additional benefits over the standard weeks at times of high unemployment. 

– The Middle-Class Tax Relief and Job Creation Act of 2012:  established that individuals can only become eligible for benefits if they are currently seeking work, are able to work, and are available to accept any reasonable job offer.

Pre-COVID-19, employers could expect a certain amount of predictability within their state UI systems. I.e, unemployment benefits were typically only awarded to individuals who lost their job through no fault of their own and they had the ability to to protest claims in which they disagreed with the former employees’ eligibility to receive benefits. The shutdowns created chaos for UI systems with initial claims filed nationally reaching 77.5 million in a one-year period from March 21, 2020 through March 20, 2021. This was a huge increase from the 50.9 million initial claims filed during two years of the “Great Recession” from December 1, 2007 through November 28, 2009 (source www.doleta.gov). In addition to the delays this unprecedented volume of claims caused, employers were faced with states eliminating waiting weeks, work search requirements, ability and availability to work requirements, and the need for an individual to have become unemployed through no fault of their own. This all but eliminated the consistency employers had come to expect.   

Historically, most of the Acts that have impacted unemployment were driven by severe economic downturns or recessions. The economic impact of COVID-19 was no different with Congress providing safety nets for both businesses and individuals, resulting in the Coronavirus Aid, Relief, and Economic Security (CARES) Act 2020 and the American Rescue Plan Act (ARPA) of 2021. The sections of the CARES Act impacting unemployment provided additional benefit weeks, benefits to those that would normally not qualify (gig workers and self-employed), and, for the first time ever, additional benefits over and above state awarded benefit amounts. Initially, individuals received an additional $600 per week through the CARES Act. The additional weekly amount was reduced to $300 per week through American Rescue Plan Act (expired September 5th, 2021). 

Although UI Trust Funds and the employers paying SUTA are not directly liable for the additional benefits, they will still see the lasting impact of COVID-19 related closures. State Funds have been depleted and, in many cases, decimated by the unprecedented amount claims in such a short period of time. The historic number of individuals fully exhausting their standard unemployment benefits combined with the additional funds has resulted in most recipients at full wage replacement or receiving an income boost as benefits exceeded prior earnings. Employers paying SUTA can expect to see their taxes rise as states rebuild their Trust Funds to pre-COVID levels. Reimbursing (self-insured) employers’ concern will shift to secondary claims filed by the long term unemployed.   

As ARPA provisions come to an end, many employers are hopeful they will no longer compete with enhanced unemployment benefits to fill available positions. This coupled with an economic rebound are reasons to feel confident for the future, but there are approaching headwinds for employers. Reimbursing employers will start to see 100% claims liability as they did prior to COVID-19. All employers will face potential of higher costs with the proposed changes introduced through the Senate Finance Committee, Senator Ron Wyden, and Senator Michael F Bennet. (www.finance.senate.gov). A few of the proposed changes to the current UI System would require all States to offer at least 26 weeks of unemployment, thus changing the tiered systems found in several states, including Florida and North Carolina. It would also look to require a state to implement 75% wage replacement for all unemployed workers, cover part-time workers that quit their jobs with good cause, and pay workers for their first week of unemployment, “the waiting-week”. Again, such changes would impact benefit amounts that will eventually be passed on to the employers through SUTA or higher costs for reimbursing employers. 

As we move forward to 2022 and beyond, we remain hopeful that things get back to some semblance of normal. For those employers paying SUTA, be mindful that with recovery will come the need to prepare for rising costs as the state funds rebuild to pre-COVID levels. For reimbursing employers, secondary claims as well as the federal administration’s desire to drastically expand unemployment to near a full wage replacement program will be the two largest items to monitor. In doing so we best prepare for the future.


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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