Many nonprofit organizations have questions about the differences between the Trust and paying State Unemployment taxes. Here are some of the most common questions.
Yes it is. In 1972, the Social Security Administration allowed 501(c)(3) nonprofit organizations to fund their unemployment benefits either as a taxpaying employer or as a reimbursing employer.
A reimbursing employer repays the State dollar for dollar for any unemployment claims charged to that employers account on a quarterly basis instead of paying the State unemployment tax.
There are a variety of reasons. Among them is the fact that the State Tax System is a subsidized system meaning that employers with lower claims on average, such as nonprofit organizations, end up subsidizing those employers who have much higher claims.
If we leave the State Unemployment Tax system and join the Trust, what happens to our reserve account with the State?
Unfortunately, your reserve account with the State cannot be accessed in any way other than by having unemployment claims. However, depending on your State, that account will remain active for a time and funds remaining in the account may be utilized for paying some claims even after you have become a reimbursing employer.
The Trust will send you quarterly deposit invoices. But you have great flexibility as to how and what you are invoiced for.
The State Unemployment Department makes all benefit payments to the claimant. The claimant will receive the same amount of money and in the same time frame as they would if the employer were paying the State tax. The State then sends quarterly invoices to the employer / Trust for reimbursement of any benefit payments they have made.
How does working with the Claims Administrator work differently than if we were paying the State Tax?
In most States, notice of a claim being filed is sent directly to the Claims Administrator instead of to the employer. The claims examiner then contacts the employer for their feedback and reaction to that claim and once the employer’s position has been determined, the claims administrator responds to the State. In addition, the claims administrator audits each and every claim filed against the employer to make sure the State has not charged the wrong account or paid an incorrect benefit amount to the claimant.
Oh yes! Overpayments have always been an issue but with Covid claims and rampant fraud, states have exceeded all previous levels of inaccurate or inappropriate payments, and you are charged for all those mistakes by the state.
The claims administrator notifies the State unemployment department of their mistake and depending on the state, your account is either credited on your quarterly statement, the state stops payments to the claimant, the state reduces future payments to the claimant, or the state requests a refund from the claimant.
You would notify the claims examiner of your decision, and they will prepare the protest and submit it to the State. The examiner will follow up on the claim until the state issues a decision. If the decision is ever appealed by either you or the claimant, you will be then provided with a free hearing representative to represent your interests at that hearing.
You, as the employer, have ultimate control as to what claims are contested or not. If you do not wish to contest a claim, that is your call, and it will not be contested without your permission.
Any funds deposited for claims that are not used for claims are owned 100% by the member agency. Any interest earned on those funds is also 100% owned by the member agency.
Yes, in a couple of different ways. The claims administrator can often assist from an unemployment management standpoint and our Human Resources Hotline can also provide sound advice on how to handle difficult situations both now and in the future.
Yes. Any time there is a possibility of separation of any kind whether it be one or several employees, please notify us at the Trust or your claims administrator to discuss how this decision might impact your unemployment account. It is possible that our advice and council may help to reduce or even avoid benefits charges made against your account.
Yes, you do. Again, depending on your State, there are several other reasons for reporting payroll such as determining payroll taxes, disability taxes, etc.