The U.S. Department of Labor Office of Unemployment Insurance Division of Fiscal and Actuarial Services has released its annual state Unemployment Insurance State Solvency Report. The annual report describes in great detail the current solvency of state unemployment insurance systems.
DOL reports that 22 states had trust funds below the department’s recommended minimums in 2020. Thirty-one states are meeting or exceeding the department’s recommendations. However, 22 states have borrowed money to meet the demand of pandemic-related unemployment claims.
As a result, the outstanding federal loan debt owed by the states and other U.S jurisdictions from the money they borrowed during the pandemic to be able to meet their legal obligations to unemployment claims filers stands at over $48 billion. At the height of the Great Recession, states owed over $40 billion in federal loans.
States historically repay these loans via surcharges on employer-paid state unemployment insurance (SUI) taxes. To date, 22 states have already increased the SUI-liability of employers.
(Additional reading: Will taxes increase on employers to repay massive unemployment spending?)
Nonprofits Have Other Options
The above applies to all employers except 501(c)(3) organizations. 501(c)(3)s do not have to pay state unemployment insurance taxes – high or low. Many nonprofits save more than 30 percent on their unemployment cost by opting out of the unemployment insurance tax system – an advantage provided to them by the IRS. Doing so affords nonprofits unique avenues that allow them to strategically handle unemployment claims administration and unemployment insurance taxes in ways that for-profits can only dream about.
Contact us today for more information concerning your nonprofit unemployment insurance tax advantages.