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.
*
*
*
*
Ready to chat? Get in touch today to request a no-obligation savings evaluation.
PORT Health Services has had a great experience with the Unemployment Savings Program offered through First Nonprofit. Throughout the years we have been involved in the program, we have increased our reserve account significantly through this program and find the reporting we receive both timely and useful. We look forward to our continued involvement with this program and our connection with First Nonprofit for many years to come.
Job One was spending a lot of money on unemployment. Our insurance broker, Mark Simcosky, recommended that we switch over to First Nonprofit. We did just that! This switch has been a huge savings for us! This switch saved us over $10,000 in the first year. Their customer service is Superior! Any time we have a question, we get a response very quickly. Any time we send them a report and they have a question; they call rather than just assuming. They were very responsive during COVID, even when they were in crisis mode their selves. They also were always there when we needed during COVID and very helpful! We would 1,000% recommend First Nonprofit to anybody that could benefit from it!
My experience with FNP has always been positive. Every time I have had to contact them, I’m always put in contact with a friendly and knowledgeable person. If something is missing from our account, they reach out to us to request it. It’s nice to work with a company that makes sure our account is current. I would recommend them to any nonprofit looking to reduce their unemployment insurance costs.
We’ve saved tens of thousands of dollars PER YEAR by changing to become a reimbursing employer, freeing funds for much needed capital investment. FNP has been a valued partner in this process, providing assurance that we have stopgap coverage for extraordinary claims and keeping claims response painless and simple. It’s a huge Win/Win!
First Nonprofit gets an A+ in my book. You are so easy to work with & very knowledgeable! Whether it is my quarterly correspondence with Kim or my random interactions with Dawn about a bond … I am so pleased that I get to work with such a helpful company. Thank you!
When I first began in my position at my organization, I hadn’t had experience working with a company like FNP. The staff was so patient and helpful in helping to explain the benefits of First Nonprofit. Anytime I reach out with a question I receive a quick, clear, and thorough response. I’m so thankful that we decided to partner with FNP. Their excellence in customer service, coupled with their variety of packages frees us up to truly serve our staff and community with a peace of mind knowing that our organization is protected against unanticipated unemployment insurance expenses.
FNP is a great resource for Daniel Kids. To have a TPA that we can count on to take point on not only managing our unemployment claims, but to support and guide any protest hearing, is invaluable. All the professional support staff we have worked with have been excellent, very knowledgeable and responsive. We are grateful for the help and support, thank you.
Chicago Children’s Theatre has greatly benefited from our partnership with First Nonprofit, and I have always enjoyed working with the staff on our filings and any complicated questions. I would not hesitate to recommend First Nonprofit to fellow nonprofits. We’re very happy customers.