FUTA stands for Federal Unemployment Tax Act and refers to the federal law requiring employers to pay a federal tax on employee wages to help fund unemployment benefits for individuals out of work. SUTA stands for State Unemployment Tax Act, and the SUTA definition refers to the law requiring employers to pay a state tax on employee wages to help fund unemployment benefits for individuals out of work.
501(c)(3) nonprofit, governmental, and tribal entities are all exempt from paying Federal Unemployment Taxes (FUTA), and First Nonprofit can help these organizations review their state unemployment tax (SUTA) options. See the question and answer below regarding SUTA exemptions.
Most employers must pay state unemployment taxes (SUTA), and only religious entities that operate exclusively for religious purposes are exempt from SUTA. However, organizations exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code, Native American Indian Tribes, and government entities have a unique savings option for paying SUTA. See the question and answer below.
The following organizations have a unique savings option for paying SUTA:
– Nonprofits: Organizations that are exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code
– Native American Indian tribes: Tribes and their wholly owned businesses
– Government entities: Government entities such as federal, state, and local government agencies
These entities can cover their mandatory unemployment costs in one of two ways: paying the state unemployment insurance tax (SUTA) or choosing reimbursement financing (self-insurance). The latter option is a legal right allowing these organizations to opt out of paying SUI taxes and to reimburse their state unemployment agency dollar-for-dollar for unemployment claims paid to former employees.
Though opting out of paying SUTA can save employers money in the short term, a well-thought-out strategic plan should accompany the decision to change unemployment financing and how to pay for future unemployment to limit claim liability. First Nonprofit (FNP) helps nonprofit employers utilize this option with their state unemployment agency, which can save organizations as much as 60% annually! Contact FNP to help determine eligibility for reimbursement financing. Click here to request a free, no-obligation savings evaluation on your organization’s unemployment costs.
SUTA tax rates vary widely by state and are determined based on several factors, such as industry, and state unemployment insurance fund balance. Each state also sets a wage base, the maximum portion of an employee’s wages subject to SUTA. The wage base varies from state to state. Click here to see your state’s SUTA cost factors.
SUTA rates vary widely by state, with many states announcing their 2025 SUTA cost factors in the last months of 2024. Click here for 2024 SUTA cost factors and for 2025 and 2026 updates as they are announced. Nonprofit, governmental, and tribal entities should examine what these changes could mean for their budget.
Several states require nonprofits, governmental entities, and tribal organizations employers to post collateral in the form of a surety bond with their state unemployment agency to qualify to reimburse. First Nonprofit provides competitive rates for unemployment surety bonds, but if you choose to participate in one of First Nonprofit’s unemployment programs, we provide these mandated bonds for you at no additional cost. Click here for a list of states that require unemployment surety bonds.
501(c)(3) nonprofit, governmental, and tribal entities are all exempt from paying Federal Unemployment Taxes (FUTA). However, most employers are required to pay state unemployment taxes (SUTA), with only religious entities that operate exclusively for religious purposes exempt from Illinois SUTA.
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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.
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.
In addition to their money-saving purpose on behalf of nonprofit organizations like AHS, First Nonprofit’s Nonprofit Unemployment Fund streamlines the information we need to efficiently manage unemployment claims. Our relationship with NU Fund gave us access to such things as advice on planning for what’s ahead and how to analyze cost scenarios when unexpected events occurred. Both experiences were very helpful.
We have had a great experience with FNP. During Covid, when there was the chance that reimbursable nonprofits would have to pay 50% of the unemployment costs, FNP went to bat for us. We would receive weekly information on the Unemployment claim and how they were working to reduce the costs to reimbursable nonprofits. They have a great service also working with [our claims administrator] to make sure all the paperwork is completed correctly for any unemployment claim.