February 13, 2014
As part of an unemployment insurance reform bill that will be discussed by the Massachusetts senate later this month, legislators will revisit how employers are impacted by their obligation to finance the program. Senate President Therese Murray said in a statement that the system is currently not responsive enough to the record of employers and the proposed bill would seek to provide more predictability for company's budgets, according to MassLive.
The bill will attempt to balance the scale more evenly by leveraging higher rates against those organizations that use the system more and lowering the rate for the ones that use it less. The bill would also freeze the UI tax rate after this year at a new rate schedule to continue through 2017.
Employers across the country have seen massive increases to their UI tax obligations at both the federal and state level as the nation has combated high unemployment following The Great Recession. Many states had to borrow from the federal government to continuing paying UI claims and are now struggling to repay the loans. The cost of keeping state UI programs viable is often placed on the shoulders of employers in the form of mandated increases to federal UI taxes.
Nonprofits have not been immune to the rate increases either because while they are exempt from federal UI taxes, they must pay their obligation to the state pools. As unemployment rises, so do these rates. While the job market is leveling out now, there is no guarantee about the future risk of state UI pools.
Nonprofits don't need to wait for legislators to update systems
No matter how fair the systems become, employers will always run the risk of overpaying UI claims and covering the costs of organizations with high unemployment. While for-profits must simply wait and hope things improve, organizations in the nonprofit sector have a more cost-effective option.
Nonprofits have the option of opting of state UI tax pools and becoming self-reimbursing employers. Under this designation, an organization is responsible only for the amount actually paid out to former employees in UI claim benefits. The simplest explanation is that a nonprofit with no unemployment would have no costs for that year.
More protection against unemployment spikes
However, if unemployment at the organization rises, it could see increased costs if it has not taken advantage of financing programs designed specifically for nonprofits. Alternative methods offer organizations membership in a limited liability corporation or bonded service program. With these programs, nonprofits pay into a fund that they can carry on their books as an interest-bearing asset. The balance is also returned the organizations if they ever decide to leave the program.
Cost predictability is also greatly improved because nonprofits can pay their fees in quarterly installments. First Nonprofit Companies also provides self-reimbursing employers with stop-loss insurance that will limit the nonprofit's liability should a sudden spike in unemployment occur. The solutions are far and away the most affordable and safest option for most nonprofits to avoid costly state UI tax pools.
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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We first started using First Nonprofit’s Unemployment Savings Program when we were a small startup nonprofit. We didn’t have an HR department and needed expertise in the event that an unemployment claim was made. We knew we were eligible to be a reimbursing employer, but weren’t sure how to navigate that process. They made it easy to set things up, plan for, and then manage claims when they came at a very reasonable cost. The amount of time and stress they’ve saved us dealing with all this has been worth way more than the cost. We’ve now grown to a large nonprofit and do have an HR department but have no plans to stop using their services. I highly recommend them to every nonprofit I come into contact with!
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.
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.
It has been our sincere pleasure to maintain a strong, vibrant business partnership with First Nonprofit. We greatly admire their strong industry knowledge, technical expertise, constant professionalism, knowledgeable and dedicated staff. They are always extremely responsive, personable and provide us with the necessary guidance and recommendations on a numerous variety of employment scenarios.
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.
Visually Impaired Preschool Services has been a client of First Non-Profit since it was first offered as a benefit of VisionServe Alliance. We completed a thorough evaluation of cash savings to our agency before taking advantage of this wonderful benefit and it has been a very wise decision. Our experience with the processes from accounting to claims have been professional, expeditious and easy.
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!
First Nonprofit has been easy to work with and makes the administrative process easier and smoother. We enjoy working with you.