Nonprofits may be unaware of cost-saving options regarding SUI tax obligations

December 9, 2013

Nonprofits may be unaware of cost-saving options regarding SUI tax obligations

First-time jobless claims fell by about 23,000 for the week ending Nov. 30, according to the U.S. Department of Labor. However, the largest increases in initial claims by state  for the prior week – the most recent data available – were in California. The state continues to be plagued by unemployment claims and the situation provides an ominous outlook for state unemployment insurance (SUI) systems.

Even for companies that are seeing jobless claims level out, the cost of unemployment insurance (UI) is still on the rise in many states. Employers pay UI tax to both federal and state governments to cover claims.

While unemployment is improving in some areas, state unemployment offices are still reeling from the setbacks that occurred during the Great Recession. State employers are experiencing cuts to federal unemployment tax credits, causing an increase in the cost per employee for federal UI taxes. 

Federal unemployment insurance tax credits will continue to go down in states where there are large outstanding loans to the federal government. In California, the debt is so high that it could still exist when the next recession hits, creating a very volatile funding situation.

To avoid increasing costs, nonprofits should exit SUI tax pools
While SUI tax rates do not increase under federal mandates, the struggling systems still require more money to operate and meet jobless claims. While nonprofits do not pay federal unemployment insurance taxes, they do have an obligation to state UI tax pools. State unemployment offices often overpay claims and employers in the systems are sometimes paying for the costs of other companies.

Nonprofits and government agencies have the unique option to exit state unemployment tax pools and become reimbursing employers. This allows them to reimburse the state only for actual UI claims paid out. If a reimbursing employer has no UI claims filed in a year, then they would owe nothing. However, if there is an unexpected increase they could owe more than an organization in a SUI pool if they have not examined all of their options for meeting the SUI tax obligation.

To fully understand all the options, risks and rewards surrounding the decision to self-reimburse, organizations should contact a nonprofit UI expert. Nonprofit consulting groups can help determine the safest and most cost-effective model for meeting their SUI tax obligation.

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.

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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