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.”
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.
Working with Marshal Whittey at First Nonprofit has been a great experience. He handles our request as a priority and goes above and beyond to resolve any issues we have in a timely manner. Marshall follows through to the end and ensures our needs are met. He has been a great resource for LSC and our “go to” for any tax questions we may have. With LSC transitioning several facilities into one federal tax identification number, First Nonprofit was able to assist and provide guidance with best practices resolving claims to each entity. Additionally First Nonprofit provided knowledge (information materials) and one on one training to HRS group with best practices to handle claims state adjudicated, fraudulent claims, and appeals. And processing information in the First Nonprofit [unemployment claims] system allows for timely information can be collected.
My experience with FNP has been wonderful. Unemployment in general is quite confusing and FNP has simplified the process for us. Everyone we have reached out to or worked with has been very helpful and follows up to be sure we understand the information. I am so happy we made the switch to FNP!
First Nonprofit smoothed the unemployment perils for our organization during Covid. Without the ability to cap our UI exposure, we would not have been able to weather the storm. The program worked perfectly and we have come out of the pandemic ready to forge on. Thanks FNP!
My experience with the FNP has been fantastic. The idea of setting funds aside for the unemployment tax liability is a bedrock for nonprofit organizations like mine, namely ASHBA; what is even more advantageous is having the FNP as a custodian of those funds. 100% recommended!
I would like to comment on my experience with FNP….to date our District has saved $1,000’s of dollars by being enrolled in the First Nonprofit program. My only regret is that we did not know about this method of paying unemployment tax years ago….as I had figured about five years
ago, had we enrolled 15-20 years ago, we could have saved our small school district upwards of $500,000 in payments to IDES. Also we would have had a pretty hefty sum of money in our Reserve Account. Thankfully I attended a workshop hosted by First Nonprofit back in 2015 which got the ball rolling!
I have worked with the First Non-Profit Team for many years, and I appreciate the quick response and care that Cecilia and the team provides anytime I have questions. While there are other providers that may provide like services, First Nonprofit will always be my first choice! I appreciate you!
First Nonprofit has been easy to work with and makes the administrative process easier and smoother. We enjoy working with you.
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!