Employers in some states will face increases to their UI costs in 2014

April 24, 2014

Employers in some states will face increases to their UI costs in 2014

Plenty of signs suggest the economy is continuing to improve as jobs and manufacturing in the U.S. have seen some comparatively comforting numbers. However, unemployment legislation is still volatile as the federal government and states continue to rebuild unemployment funding following the Great Recession.

The unemployed are following the Emergency Unemployment (EUC) Extension Act of 2014 to see if their benefits discontinued in December 2013 will be extended. At the same time, employers have also been left with plenty of questions and some concerns surrounding various states' abilities to satisfy the terms of their state unemployment agencies' Title XII loans (loans from the Federal Unemployment Account). The loans were needed to satisfy unemployment claims, which skyrocketed following the recession.

States must repay their loan balance and interest in full within two years or employers in those states will be at a risk of a federally mandated reduction to their federal unemployment tax (FUTA) credits. As of March 31, 2014, 15 states and the U.S. Virgin Islands are borrowing from the federal government to pay state UI claims. Seven states – Illinois, Texas, Michigan, Idaho, Colorado, Pennsylvania and Nevada – are using bonds to repay their federal loan debt.

While issuing bonds to repay the federal loan debt does prevent the mandatory reduction in FUTA credits, employers in those seven states could still see an increase in their state unemployment insurance (SUI) tax rates. Likewise, employers in states with current loan debt could face a reduction in FUTA credits in addition to SUI increases, as states look to rebuild exhausted funds and curb further spending. 

Protecting nonprofits from increases in SUI rates
Nonprofit organizations in all states are exempt from FUTA contributions, but must still satisfy their SUI obligations. However, nonprofits and governmental organizations do have the ability to opt out of SUI tax pools and satisfy their SUI obligations as a reimbursing employers. Under this designation, employers only reimburse the state for the actual amount of money paid out in UI claims to former employees.

Reimbursing employers will be provided an added benefit in states that owe interest on their Title XII loans in 2014. Connecticut, Indiana, New York, Rhode Island, North Carolina and the Virgin Islands will all be billing or implementing an interest surcharge on employers to pay the interest on the loans. With the exception of the U.S. Virgin Islands, reimbursing employers will be exempt from these charges.

Saving on SUI costs with less risk
While becoming a reimbursing employer exempts nonprofits from SUI tax pools, they also expose themselves to shared risk should the organization see a sudden spike in UI costs. With the help of nonprofit UI experts, organizations can select an unemployment program that allows them all of the benefits of being a reimbursing employer while also eliminating most of the risk. 

For information on how your organization can cost-effectively meet its unemployment insurance needs, contact First Nonprofit Group at FNCUI@firstnonprofit.com or visit www.firstnonprofitgroup.com.


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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

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. We are impressed with the accuracy of their employment decisions, integrity of their employees and efficiency of their claim handling. We greatly respect and value the consistent, impressive cost savings from the utilization of their outstanding services.


Thresholds, 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

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.

Hugh Parry, Retired President of Prevent Blindness America