April 28, 2020
“The Labor Department issued late-night guidance to the states (UIPL 18-20) that can only be described as breathtakingly cruel in its impact on charitable nonprofits, their current employees, and the communities they serve. DOL guidance issued late on April 27 instructs states to bill certain tax-exempt employers immediately for 100 percent of the costs of unemployment benefits paid to employees laid off as a result of the COVID-19 pandemic. And worse, the guidance informs states that if they show compassion and forgive nonprofits of the burden of these crippling expenses, the federal government will shortchange the state for much of those costs – despite express language in the CARES Act to allow states to interpret their own unemployment compensation laws “in a manner that would provide maximum flexibility” to those nonprofit employers. The Labor Department’s draconian guidance declares that affected nonprofits must pay, they must pay now, and any state that cuts the nonprofits slack will be punished by the federal government. At a time when nonprofits are dealing with unprecedented levels of need in their communities, DOL decided to take even more money away from this vital work – and threaten more jobs in the process. Breathtakingly cruel, indeed.”
“Congress is spending trillions to keep people on the job and called on the Labor Secretary to provide the states “maximum flexibility” on the issue. Yet this misguided guidance from the Labor Department fixates on the word “reimbursing,” forcing an unnecessary and burdensome double-reverse reimbursement: First, nonprofits must divert funds from paying their current employees and conducting operations for their communities in order to reimburse the state for the full cost of benefits paid out. And then nonprofits must wait without crucial operating funds until overburdened state unemployment offices can find the time and money to reimburse the nonprofits half of that amount. This absurd guidance will force nonprofits to lay off even more employees to come up with initial funds to pay unemployment bills and curtail serving their communities. The White House and Congress must step in immediately to reverse course and enable America’s charitable organizations to serve their communities to the best of their abilities in these difficult times.”
Background
The DOL guidance applies to a category of tax-exempt entities known as “reimbursing employers,” those that are permitted by Congress to self-insure claims for unemployment benefits by paying back the state unemployment trust fund for unemployment benefits paid to their former employees. “Reimbursing employers” include nonprofits, state and local governments, and federally recognized Indian Tribes that follow the law by electing to make payments in lieu of contributions to state unemployment trust funds. The CARES Act enacted in March provides that the federal government will cover 50 percent of the cost of claims charged to reimbursing employers. To underscore its intent to provide wide latitude, Congress instructed that any interpretive guidance by DOL must give states “maximum flexibility” to interpret their own unemployment compensation laws regarding reimbursing employers as it relates to timely payment and assessment of penalties and interest. Instead, the DOL guidance takes already limited money from productive missions to run through an unproductive circuitous loop.
Under federal and state unemployment compensation laws, there are three types of employers: (1) the majority that pay an unemployment tax into the state trust fund, (2) reimbursing employers, and (3) exempt employers that pay nothing and their employees are not eligible for benefits. Recognizing that the unemployment insurance system never anticipated an economic impact as severe as the COVID-19 pandemic, the CARES Act holds harmless the employers paying into the state fund and extends benefits to uninsured individuals who, but for the emergency statute, would not be entitled to unemployment payments. Only the “reimbursing employers” have been singled out for immediate, adverse treatment by the new guidance from the Labor Department.
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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.
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.
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.
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.
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.
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!
First Nonprofit has been easy to work with and makes the administrative process easier and smoother. We enjoy working with you.
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.