April 24, 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.
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!