October 16, 2013
Nonprofits are not exempt from paying state unemployment insurance taxes, but they do have alternative funding options, such as self-insuring or employing full or partially insured alternatives. Self-insuring removes nonprofits from unpredictable SUI tax pools, which have seen tax rates and taxable wage bases grow year after year due to high federal loan debt.
As states struggle to pay back UI debt owed to the federal government, UI tax credits for employers grow smaller each year. Nonprofits that opt out of SUI tax pools only need to reimburse the state for the actual number of claims paid to former employees. SUI tax rates rise regardless of individual employer habits. Many employers pay almost double in taxes the amount that is actually paid out to former employees as UI benefits, making self-insuring an alluring concept. With some states liable for debts of over a billion dollars, self-insuring or insured alternatives would appear to be best practice for most nonprofits.
However, self-insuring creates avoidable unprotected liabilities and can place pressure on an organization's annual fixed revenue. Nonprofits can also join unemployment trusts to mitigate some of the risk of self-insuring, but in many cases such a choice will take them right back to square one. UI group trusts often face many of the same funding challenges as state UI Trust Fund pools.
Drawbacks to group trusts
Private insurance options
Content presented by First Nonprofit Companies, the leading provider of a full-range of state unemployment insurance alternatives for 501(c)(3) nonprofit employers.
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.