Unemployment is far from a popular topic, but taking a proactive approach to understanding your unemployment taxes, also known as unemployment insurance (UI), is proven to lower the associated costs. These are the top 3 things every nonprofit should know about unemployment insurance taxes.
1. What is the state Unemployment Insurance (SUI) Tax? - The state Unemployment Insurance (SUI) tax is an insurance program that provides temporary, partial wage replacement to workers who have become unemployed through no fault of their own. The program is funded by Unemployment Taxes paid by employers. Each employer is assigned a tax rate, which is based on the amount of benefits charged to their account each year.
2. Is My Nonprofit Liable? - 501(c)(3) nonprofits are exempt from federal unemployment taxes, but may be liable for state unemployment taxes if they meet something called the “4 for 20” provision. This provision is triggered when four or more individuals are employed on the same day for 20 weeks in a calendar year, though not necessarily for consecutive weeks. Even for small nonprofits that are exempt from liability, it is encouraged that they pay into the unemployment tax system, or an alternate coverage plan, to protect their current employees from the ups and downs of employment.
3. Cost-Saving Alternatives - There are alternatives available to nonprofits with 10 or more employees who are interested in lowering the cost of unemployment. Unemployment Services Trust (UST) provides an alternative to paying into the state unemployment tax system. Through UST, agencies directly reimburse the state only for the claims of their former employees, dollar for dollar. This saves organizations an average $100 per employee upon joining UST.
Want to learn more? Visit www.chooseust.org/501c3-unemployment-alternatives/ or contact UST for help benchmarking your unemployment insurance costs today—but don’t wait long, Indiana has a state opt out deadline of December 1. Call us at: Phone: (888) 249- 4788 or email: info@ChooseUST.org.