In this Sereni Connection session, Ken Sereni sits down with Mike McClelay of 501(c) Services to unpack how nonprofits fund and manage unemployment insurance costs, and why so many organizations leave money on the table.
Mike breaks down the two main ways nonprofits can fund state unemployment (nonprofits are automatically exempt from federal unemployment): paying the standard state unemployment tax or becoming a “reimbursing” employer and paying claims directly, with options ranging from full self-funding to stop-loss insurance and hybrid models. He walks through how to evaluate whether reimbursing makes sense (comparing five-year claims history against tax costs), the size and stability thresholds where it tends to pay off (roughly $2M+ in payroll and 50+ employees, though exceptions exist), and the one-year “lag” that affects savings and switching timelines.
The conversation also covers:
- Why claims management matters regardless of funding method, including New York’s ~40% average employer win rate on contested claims versus 501(c) Services’ 90%+ rate
- The importance of documentation, progressive discipline, and exit interviews in contesting claims
- How “base period” claims can leave a former employer liable even after an employee has moved to a new job
- Why high turnover in direct-care roles quietly drives up unemployment tax costs, even without fault
- Rising cost pressures: a 37% jump in the taxable wage base from 2025 to 2026, and a 72% increase in maximum weekly benefits after the state fund paid off $7 billion in federal debt
- The ROI of proactive risk management — including outplacement services — in reducing claim size and overall liability
- Emerging pressure from AI-driven layoffs in the for-profit sector potentially straining the shared unemployment tax pool
Key takeaway: unemployment costs are not fixed or uncontrollable. With the right claims strategy, funding structure, and separation practices, nonprofits can meaningfully reduce liability and redirect savings back into their mission.
Speakers: Ken Cerini, Managing Partner, Cerini & Associations and Michael McClay, Senior Business Development Manager, 501(c) Services
This webinar is provided as general advice and information, and should not be construed as legal advice. Neither 501(c) Agencies Trust nor 501(c) Insurance Programs, Inc. (collectively 501) guarantees that the information herein is complete or correct, and 501 disclaims all liability with respect to actions taken or not taken based on the contents of this webinar or information given verbally or in written form. Please consult licensed legal counsel in the viewer’s state.
Image by: Mindandi
