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.
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.
We were introduced to First Nonprofit through another housing authority. In our analysis and comparison to what we were paying the State, our first year savings was $5,800 plus. We have been with them since the end of 2008 and I am glad we have been. I consider them an arm of our HR department.
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.
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.