It comes as a relief for many nonprofits that were unaware of the potential savings that the law presents.
Santa Barbara, CA (PRWEB) February 10, 2012
Many nonprofit organizations find it difficult to make ends meet during recessionary periods not only because of cutbacks in government grants, but donors tend to be tight-pocketed in supporting programs – and even more so when it comes to helping with operating expenses. These days, organizations are researching every possible way to cut costs, so it’s no wonder why the Unemployment Services Trust (UST) added 70 new members in 2011, representing about 6,815 employees.
Nonprofit organizations holding 501(c)(3) status have the distinct opportunity to opt out of their respective state unemployment tax system and instead reimburse the state dollar-for-dollar when an unemployment claim is filed by a former employee. Even though this law was enacted in 1972, it still comes as a relief for many nonprofits that were unaware of the potential savings that the law presents. Businesses that pay into the state tax system typically pay in $2.00 for every $1.00 paid out in benefits in order to cover administrative fees incurred by the state, as well as subsidize other employers with high turnover rates.
For 2011, it was projected that State Unemployment Insurance (SUI) taxes would increase by an average of 16% across the United States. Increased demands for services from nonprofits across the nation, teamed with increased taxes and cuts to many government grants has left organizations scrambling to explore every option available to reduce expenses.
The Unemployment Services Trust offers one way to help curb the growing cost of unemployment for nonprofits. It helps organizations with 10 or more employees to opt out of the state unemployment tax system, and then set up a savings account into which the organization makes quarterly deposits. The organization owns and holds it as a working asset on their books.
When the organization experiences a layoff, the trust will pay the state out of the agency’s savings account, which will later be replenished through future quarterly deposits. If an agency’s claims are more than their account balance, the trust will still pay the claims and give them a year to cushion the expense and rebuild their account. On the flip side, if an agency has more in their account than is deemed necessary after a few years, they can receive a refund on a portion of their balance. The quarterly rate given to the organization is determined by an actuary, and is typically much less than the state unemployment tax rate because it is based only on their own claims. This can help nonprofits preserve funds that can be allocated according to the organization’s mission.
UST was founded by nonprofits for nonprofits and remains the largest of all national unemployment trusts. Consisting of more than 2,000 member organizations across the country, UST has been helping nonprofits reduce expenses since 1983. Its long-standing relationship with nonprofit organizations provides an average of more than $35 million in claims savings annually and has provided more than $33 million in refunds to trust members. For more information about the organization, visit http://www.ChooseUST.org or call (888) 249-4788.