Nonprofits can take UI costs into their own hands

February 13, 2014

Nonprofits can take UI costs into their own hands

As part of an unemployment insurance reform bill that will be discussed by the Massachusetts senate later this month, legislators will revisit how employers are impacted by their obligation to finance the program. Senate President Therese Murray said in a statement that the system is currently not responsive enough to the record of employers and the proposed bill would seek to provide more predictability for company's budgets, according to MassLive.

The bill will attempt to balance the scale more evenly by leveraging higher rates against those organizations that use the system more and lowering the rate for the ones that use it less. The bill would also freeze the UI tax rate after this year at a new rate schedule to continue through 2017.

Employers across the country have seen massive increases to their UI tax obligations at both the federal and state level as the nation has combated high unemployment following The Great Recession. Many states had to borrow from the federal government to continuing paying UI claims and are now struggling to repay the loans. The cost of keeping state UI programs viable is often placed on the shoulders of employers in the form of mandated increases to federal UI taxes.

Nonprofits have not been immune to the rate increases either because while they are exempt from federal UI taxes, they must pay their obligation to the state pools. As unemployment rises, so do these rates. While the job market is leveling out now, there is no guarantee about the future risk of state UI pools.

Nonprofits don't need to wait for legislators to update systems
No matter how fair the systems become, employers will always run the risk of overpaying UI claims and covering the costs of organizations with high unemployment. While for-profits must simply wait and hope things improve, organizations in the nonprofit sector have a more cost-effective option.

Nonprofits have the option of opting of state UI tax pools and becoming self-reimbursing employers. Under this designation, an organization is responsible only for the amount actually paid out to former employees in UI claim benefits. The simplest explanation is that a nonprofit with no unemployment would have no costs for that year.

More protection against unemployment spikes
However, if unemployment at the organization rises, it could see increased costs if it has not taken advantage of financing programs designed specifically for nonprofits. Alternative methods offer organizations membership in a limited liability corporation or bonded service program. With these programs, nonprofits pay into a fund that they can carry on their books as an interest-bearing asset. The balance is also returned the organizations if they ever decide to leave the program.

Cost predictability is also greatly improved because nonprofits can pay their fees in quarterly installments. First Nonprofit Companies also provides self-reimbursing employers with stop-loss insurance that will limit the nonprofit's liability should a sudden spike in unemployment occur. The solutions are far and away the most affordable and safest option for most nonprofits to avoid costly state UI tax pools.

For information on how your organization can cost-effectively meet its unemployment insurance needs, contact First Nonprofit Companies at or visit


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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.

Lutheran Services Carolinas, Salisbury, NC

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!

Stone Valley Community Charter School, Huntingdon, PA

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!

Jewish Silicon Valley, Los Gatos, CA

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!

American Saddlebred Horse & Breeders Association, Inc., Lexington, KY

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!

Beardstown Community Unit School District 15, Beardstown, IL

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!

Innovative Services, Inc., Green Bay, WI

First Nonprofit has been easy to work with and makes the administrative process easier and smoother. We enjoy working with you.

Visually Impaired Preschool Services, Louisville, KY

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!

Neurologic Music Therapy Services of Arizona, Phoenix, AZ