October 10, 2013
Nonprofits in most states are quickly approaching the deadline to opt out of their state unemployment insurance tax programs, which are becoming a financial drain on many employers. In California, where federal loan debts for UI have hovered around $9 billion in recent months, employers could see increases for years to come. Likewise, New York currently has an outstanding loan balance of around $2.7 billion, according to Investor's Business Daily.
While nonprofits and governmental organizations have long had the option to opt out of state UI systems, the Great Recession's unprecedented strain on the system makes now a more important time than ever before to do so. Even states like Illinois, where federal loan debt has been repaid with the issuance of municipal bonds, nonprofits can still save an average of 53 percent on UI costs.
Alternatives to state UI pools available
The savings for nonprofits and governmental organizations are the result of tax law that allows such entities to reimburse the state only for the amount specifically paid to former employees. In state UI pools, all employers pay in at a specified tax rate, which continues to increase in states with federal loan debt, and the contributions are not proactively reduced if a company's employees collect less than was paid into state funding pools.
The reimbursing financing method is an excellent tool for nonprofits and governmental organizations experiencing financial pressure following the Great Recession to cut avoidable costs. The written request to individual state unemployment agencies for most other states falls on Nov. 30 to elect to opt out of the state program for 2014. California, Illinois, Minnesota, New Hampshire, New York and Wisconsin all have until Dec.31. New Jersey, Oklahoma and Oregon have until Jan. 31, 2014; Tennessee nonprofits have until May 31, 2014.
Self-insuring to cover unemployment does come with risks and is not the right choice for all nonprofits and governmental organizations. Groups such as First Nonprofit offer savings programs for nonprofits that wish to take advantage of the self-reimbursement option and can help file the necessary paperwork with state agencies. First Nonprofit can help your organization decide if opting out of the state UI tax program is the right choice and manage future paperwork associated with UI claims.
For information on how your organization can cost-effectively meet its unemployment insurance needs, contact First Nonprofit Companies at FNCUI@firstnonprofit.com or visit www.firstnonprofitcompanies.com.
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!