Savvy Nonprofits Create a Solid Funding Strategy

March 30, 2015

Savvy Nonprofits Create a Solid Funding Strategy

The opportunity for nonprofit organizations, governmental entities, and tribal enterprises to save substantially by opting out of paying the state unemployment tax (SUTA) is very real and may initially seem like a windfall. But such action is not without its hazards.

Protecting these new savings dollars and carefully guarding against future losses requires:

• A clear understanding of the impending short and long-term liability and risk,

• a diligent, rigorous annual evaluation and subsequent re-evaluations, and

• a solid strategy that minimizes costs and is insured against prospective unexpected losses.

The election by a nonprofit to opt out of paying SUTA and “reimburse” the state for future unemployment benefit charges is essentially choosing to self-insure that risk. Once such a decision is made, going back to paying the tax is not difficult, except to do so may be cost prohibitive.

So the progressive nonprofit making the reimbursing election must thoughtfully consider their level of risk tolerance and choose a funding strategy that meets their budget capability while providing the highest level of downstream protection. Because all unemployment reimbursing costs are unknown, establishing a solid funding strategy requires:

1. Complete understanding and analysis of previous (normally three years history) unemployment losses matched against similar time-period employee populations and payroll,

2. Careful monitoring and cost management of the current year’s budget for unemployment activity, and

3. Thoughtful consideration of projected funding, budget constraints and risk tolerance in the next budget year.

Those who pay SUTA have no choice to make other than from what pot of money the funds for the fixed tax rate will be paid. To enjoy the privilege of lowering SUTA costs by reimbursing, proactive managers will explore what tools are available to establish the best funding strategy available for their organization. Nonprofit organizations should think of the reimbursing method as paying for SUTA as they go, and then remember how volatile and mutable their own funding can be.

Content presented by First Nonprofit Group, the leading provider of state unemployment insurance solutions for 501(c)(3) nonprofit employers.


Source: First Nonprofit Group’s “Financial Mechanics of Funding SUTA” series

Next article, Understanding SUI Risk Transfer”


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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