June 26, 2014
Texas has one of the lowest overall unemployment rates in recent years and has been held up by pundits and federal administrators as a good example of a state with high employment. However, the Lone Star state isn't without its problems when it comes to state unemployment insurance tax and payouts. While Texas has paid back the $1.4 billion dollar loan it took from the federal government to cover jobless claims during the Great Recession, it did so by floating a bond in the private market. The state still has to deal with compensation related to the bonds purchased and extra costs are being added to the state unemployment insurance (SUI) tax to cover debt service costs.
The low trust fund balance has led to a large, 131 percent per-employee cost increase to SUI tax from 2009 to 2013. In addition, a change to federal law could increase the unemployment wage base from $9,000 to $15,000 and bring about a change in SUI tax obligation for each employee from $266 to $443. These changes mean more spending for businesses and organizations in Texas, but nonprofits have an alternative option for their unemployment obligations.
Becoming a reimbursing employer
Instead of contributing to the SUI pool, 501(c)(3) employers and governmental groups in Texas can elect to reimburse employees directly for unemployment claims. This approach allows organizations to avoid the uncertainty of state taxes while still fulfilling all their legal obligations. However, this approach can also cause problems if eligible groups aren't prepared for any unexpected spike in overall unemployment or a contested claim from an ex-employee.
By using an Unemployment Savings Program, nonprofits can save money toward possible unemployment costs without simply forfeiting the money to a state fund. This money accrues interest and can be carried as an asset, providing far more benefits to the charitable group using it. Another possibility to consider is Excess Loss Insurance, which provides protection against major, unforeseen events, such as losing a grant and having to lay off staff members. Participants in this program make quarterly deposits and can even receive a credit advance up to the attachment point at which coverage begins.
For information on how your organization can cost-effectively meet its unemployment insurance needs, contact First Nonprofit Group at FNCUI@firstnonprofit.com or visit www.firstnonprofitgroup.com.
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.
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!
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!
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!
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!
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!
First Nonprofit has been easy to work with and makes the administrative process easier and smoother. We enjoy working with you.
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!