SUI tax pools continue to face challenges

November 13, 2013

SUI tax pools continue to face challenges

The situation continues to erode for state unemployment insurance programs as they struggle to meet the demands placed on them since the Great Recession. A report by the National Employment Law Project explains why things are unlikely to improve anytime soon.

State unemployment insurance offices were dealt numerous blows during the past few years:

  1. Claims skyrocketed as workers lost their jobs in record numbers in industries across the board.
  2. Federal funding of state unemployment programs was reduced as the federal government battled its own budget problems during the recession.
  3. What money states did borrow from the federal government they have been unable to repay prior to a two-year deadline. This has led to mandated automatic federal unemployment tax increases for employers in those states.

According to the report, claims in 2010 were 294 percent higher than they were in 2007, but UI administrative funding only rose by 65 percent. In 2012, claims dropped to 155 percent of their 2007 levels, however, funding has also fallen 20 percent since 2010.

SUI offices rely on archaic systems to process claims.
The rise in claims also put added pressure on the outdated systems that many unemployment offices used to process claims. According to the report, the majority of UI operations are performed using software from the 1970s and '80s. As of 2009, Missouri was using a 46-year-old benefit system.

Some states recently attempted to update that software and ran into a new set of problems. Systems installed in Massachusetts and California both encountered glitches that delayed payments, and in some cases unemployed workers were erroneously sent bills instead of checks.

Nonprofit organizations can exit these unstable systems
The pressure on the SUI departments and their computer systems all contribute to a high level of overpaid claims by the state offices. For companies that must pay into SUI tax pools, there is no reimbursement for costs that exceed the employer's claims. Employers in SUI systems may also be covering the claims burden of other companies that did not pay enough UI tax or have gone out of business.

While most companies must put up with expensive SUI tax programs, nonprofits can exit and become reimbursing employers. As a reimbursing employer, nonprofits are only responsible for funding UI costs in the amount of their own claims. However, after opting out of state unemployment programs, options for reimbursement are not all the same. Self-insuring can expose a nonprofit's budget to large, unexpected liabilities if unemployment claims for the organization suddenly increase.

For many nonprofits, the safest option for UI reimbursement is through enrollment in an unemployment savings program or a bonded service program. First Nonprofit Group offers nonprofits membership in both of these programs, and also provides assistance with claims management. UI obligations for nonprofits can be complex and professional consultation can ensure that organizations are making the correct decision when they opt out of state UI tax pools.


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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