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By March 26, 2018No Comments

The Trump White House’s 2019 budget proposal would mandate unemployment insurance tax increases for states with insolvent unemployment insurance trust funds.

Source: The Department of Labor

At the end of 2017, only 24 states had sufficient unemployment reserves to survive another recession without borrowing from the federal government or other sources. The White House’s budget has plans to change that statistic. We have written about the state of unemployment insurance trust funds previously.

The proposed 2019 Budget would mandate that employers with employees in states with low unemployment insurance (UI) trust funds pay higher UI payroll taxes. The plan would raise a projected $22 billion by 2028 and shore-up most state unemployment insurance funds. The increases would be to federal unemployment insurance taxes (FUTA) and would come as a function of reductions in the offsets for state unemployment insurance taxes (SUI) payments against FUTA for employers in those states – meaning SUI taxes would increase as well.

The proposed tax increases would also still apply to employers who have solvent SUI balances but the state’s overall trust fund is insolvent.

It should be noted that state unemployment insurance trust fund solvency is based on a Department of Labor calculation. Often times, state lawmakers disagree with DOL about if there is enough money saved in a state’s federally mandated trust fund.

Related unemployment tax proposals

The White House budget proposal creates individual state paid family leave plans to new mothers and fathers, including adoptive parents, for a period of six weeks. The new federally mandated program would use a state’s unemployment insurance system as its foundation. The program would allow states to establish paid parental leave programs according to their needs and political desires – similar to the way states manage their unemployment insurance programs. The estimated cost of national paid parental leave is approximately $19 billion over 10 years. The new benefit would be offset by increases in state unemployment insurance taxes, improved integrity and reemployment services and reemployment and eligibility assessment services.

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 could save as much as 30 percent more 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.

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